We are often asked whether a trust will help a client obtain Medicaid eligibility.  Assets may be conveyed to an irrevocable trust so that those assets will not be counted for a later Medicaid application.  However, as this recent case reveals, such a trust must be drafted carefully and administered properly to be effective.
Thea Braiterman was determined ineligible for Medicaid-Old Age Assistance (Medicaid-OAA) benefits because her assets exceeded the eligibility threshold.  She contended that the Medicaid agency erroneously found that the Thea G. Braiterman Irrevocable Trust (the Trust) was includable as an asset for the purpose of determining her eligibility for Medicaid.
Thea created the Trust in 1994, naming herself and her son, David J. Braiterman, as trustees. Thea resigned as a trustee in 2008.  However, the Trust authorized her to appoint additional and successor trustees, and she acknowledged that she could have resumed service as a trustee by appointing herself as an additional or successor trustee.
When the Trust was created, Thea granted it all of her real property interests, her personal property interests, and $1.00.  The real property included the furnished home in which she and her husband lived rent-free until he died in 2004.  Later, she moved into an assisted living facility, and the home was sold and the sale proceeds were transferred to an investment account. Between 2009 (when Thea entered assisted living) and 2012, regular disbursements from the Trust were made to undisclosed recipients for undisclosed reasons. It was unclear as to whether either David or Marta Braiterman used any of the disbursements from the Trust to fund their mother’s expenses.  In February 2014, she applied for Medicaid-OAA.  In March 2014, the Medicaid agency denied her application on the ground that her assets included the Trust (then valued at $156,000) and were “more than the limit set for” Medicaid-OAA.  Following a hearing, the hearing judge agreed that the Trust was includable as an asset for the purpose of assessing whether Thea was eligible for Medicaid.
The court agreed that the Trust was countable as Thea’s asset based on the following provisions of the trust.  Clause 3 reserved to Thea:  the right “to alter the order and number of the successor Trustees . . . or to name additional Trustees or successor Trustees”;  the power to appoint any part of the income or principal of the Trust Fund to any one or more of her children, including “the power to make lifetime gifts”;  and the power to require the Trustee to accumulate any or all of the income of the Trust Fund.”  Clause 3.8 provides that the applicant did not reserve any power or authority to revoke or amend any provision” of the Trust Agreement.  Clause 4.1 provided that if, at any time during Thea’s lifetime she may lose eligibility for benefits or other services based on the existence of the Trust, the Trustee should consider terminating the trust and  using trust funds to help Thea.
The court noted that §1396p(d)(3)(B) of the federal Medicaid law governs trusts and provides in part: “(i) if there are any circumstances under which payment from the trust could be made to or for the benefit of the individual [applying for Medicaid benefits], the portion of the corpus from which, or the income on the corpus from which, payment to the individual could be made shall be considered resources available to the individual. . . . Thus, under the current law, “if there are any circumstances under which payment from the trust could be made to or for the benefit of the” applicant, then the irrevocable trust is deemed countable for the purpose of determining her eligibility for Medicaid.”  The court held that it could not definitively conclude that there are no circumstances under which payments from the trust could be made for the benefit of Braiterman in contravention of §1396p(d)(3)(B).  The court said the trust was structured in a way to provide Braiterman with a degree of discretionary authority, including the power to change trustees, terminate the trust, and appoint income to one or more legatees. Accordingly, the Department’s conclusion that the trust was a countable asset was correct.
Estate of Braiterman, 2016 WL 3749032 (N.H. July 12, 2016)
We are experts at drafting trusts for Medicaid and many other purposes.  Contact us or call us at 601-987-3000 today if we can assist you.