Massachusetts’ highest court ruled Monday that the residence and the other assets held in Medicaid applicants’ irrevocable income-only trusts were not available assets even though the applicants retained the right to use the house during their lifetimes. Daley v. Secretary of the Executive Office of Health and Human Services (Mass., No. SJC-12200, May 30, 2017) and Nadeau v. Director of the Office of Medicaid (Mass., No. SJC-12205, May 30, 2017).

NAELA (National Academy of Elder Law Attorneys) member Brian Barreira, CELA, represented Mary Daley, and NAELA member Lisa Neeley represented Lionel Nadeau. NAELA and the Massachusetts Chapter of NAELA submitted amicus briefs in support of the Nadeaus and Daleys, as did the Real Estate Bar Association of Massachusetts.

The Massachusetts Medicaid agency took the position that the right to use the property was a distribution of principal, and therefore the entire trust principal, at its fair market value, was an available resource to the Medicaid recipient. The agency prevailed before two administrative law judges and in superior court.

The facts were slightly different in Nadeau where the entire interest in the residence was conveyed to the trustees. InDaley, the future Medicaid applicant (since passed away) and his wife conveyed the remainder interest only to the trustee, retaining a bare life estate. The court ruled that in neither case did the right to use the property convert the home into an available asset. The key to its decision was recognizing that the federal Medicaid statute treats the availability of income and the availability of principal as distinct, and that income being available did not automatically render the principal available.