According to a recent article published by ABC News, Americans “are living longer, in more comfort and in better health than ever before.” With a longer life expectancy, early financial planning has become even more critical to ensure that you will be comfortable and taken care of in your retirement. Also, although Americans seem to be healthier than we once were, nursing homes are full of residents and patients.
Throughout the Commonwealth of Massachusetts there are over 400 nursing homes, with some of the highest ranked facilities here in the North Shore, including the towns of Reading, Saugus, Lynnfield and Peabody. Care at these facilities is expensive and can quickly drain your finances. A 2016 survey by Genworth Financial estimated the median annual cost for a semi-private room in a nursing home in Massachusetts to be more than $135,000.
Most seniors in need of long term healthcare are not able to afford the high costs without assistance. According to a study by the Massachusetts Medicaid Policy Institute, over 60% of residents of nursing facilities rely on MassHealth (the Massachusetts state Medicaid program) benefits to help them pay for long term healthcare.
Eligibility for long term healthcare benefits from MassHealth is governed by numerous statutes and regulations. Early planning done right can help to protect your assets and ensure you receive the care you require. The decision in a recent case Daley v. Secretary of the Executive Office of Health and Human Services, et al and Nadeau v. Director of the Office of Medicaid (two cases consolidated for appeal) highlights the importance of proper planning.
Daley involved the applications of two seniors to MassHealth for long term health care benefits. The first senior had transferred his primary residence into a trust thirteen years prior to applying to MassHealth. According to the terms of the trust, the first senior retained the right to reside in the residence that was held by the trust. The second senior had transferred her primary residence into a trust six years prior to applying to MassHealth. The second senior retained a life estate in the property.
Under 130 C.M.R. § 520.003(A)(1), the total value of countable assets owned by or available to individuals applying for MassHealth assistance may not exceed $2,000. MassHealth denied both applications based on its finding that the total equity of the seniors’ respective homes qualified as “countable assets” making them ineligible for benefits. The question at issue in the case was whether or not MassHealth correctly found that the right to reside in the homes qualified the properties as “countable assets”.
MassHealth contended that the entire fair market value of the homes were countable assets because the seniors’ right to reside in the homes meant the homes were “available” to the applicants under 130 C.M.R. § 520.023(C)(1)(d) . In the 30 page decision, the Massachusetts Supreme Judicial Court rejected MassHealth’s position and concluded:
“that neither the grant in an irrevocable trust of a right of use and occupancy in a primary residence to an applicant nor the retention by an applicant of a life estate in his or her primary residence makes the equity in the home owned by the trust a countable asset for the purpose of determining Medicaid eligibility for long-term care benefits.”
It is noteworthy that the SJC distinguished that although the right to reside in property held by a trust does not affect the eligibility of the applicant for MassHealth long term care benefits, it may affect how much the applicant is required to contribute to the payment for the care.
The case gives clarity to the statutes and regulations governing an applicant’s eligibility for long-term care benefits and highlights the role of trusts as effective planning tools for the future.