Margaret Hession sought legal assistance to protect her house in the event she might need Medicaid benefits. As part of the Medicaid planning, she executed a deed transferring her house to her children. The deed reserved a life estate for her and granted her a special power of appointment that allowed her to appoint the property to any person except herself, her creditors, her estate, or her estate’s creditors. Ms. Hession decided her daughter Deaven Skye should inherit less than her other children. She wrote a will that exercised her power of appointment and reduced Ms. Skye’s interest in the property from one-third to 5 percent.

After Ms. Hession died, Ms. Skye objected to the will and argued that the power of appointment was void. The trial court dismissed Ms. Skye’s objection and admitted the will to probate. Ms. Skye appealed, arguing that the provisions in the deed granting the remainder interests and reserving a power of appointment are irreconcilably repugnant to each other.

The Massachusetts Court of Appeals, rules that the reservation of the power of appointment is consistent with the other provisions of the deed. According to the court, “because of the reservation of the life estate, the deed conveyed not present possessory estates but rather remainder interests; and, because of the reservation of the power, the remainder interests were defined, in part, by this limitation.” The court specifically does not express a “view on the effect of the reserved power of appointment on [Ms. Hession’s] strategy of avoiding MassHealth look-back period regulations.”

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Martin Fagan was injured in a motorcycle crash and entered a nursing home. In 2012, he began receiving Medicaid benefits. In 2015, he received a $2 million personal injury settlement, and the state discontinued his Medicaid benefits. Mr. Fagan transferred $879,453.32 of the settlement proceeds to his wife in two chunks. When Mr. Fagan reapplied for Medicaid, the state determined that he transferred assets for less than market value and imposed a transfer penalty.

Mr. Fagan appealed, arguing that because the transfers to his wife were pre-eligibility transfers, he could transfer an unlimited amount to her without incurring a penalty. The state upheld the penalty period, and Mr. Fagan sued for injunctive relief in federal court. The state and Mr. Fagan filed motions for summary judgment.

The U.S. District Court, District of Connecticut, grants summary judgment to the state, holding that the penalty period is appropriate. The court rules that any transfer to a community spouse made after the institutionalized spouse is Medicaid eligible is prohibited if it happens during the same period of institutionalization. According to the court, there is no reason why statutory language “should be interpreted to give an institutionalized individual, found ineligible for benefits upon redetermination, a second opportunity to make transfers to his spouse prohibited at the time of his initial eligibility determination when the coverage relates to the same period of institutionalization.” 

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