MassHealth administers Medicaid for Massachusetts residents. It has the advantage of offering coverage for long-term care needs such as nursing homes or assisted living. However, it is not easy to qualify for, due to its strict asset and income limits. In order to qualify, one approach is to create an irrevocable trust, so that the creator meets the income and asset limits. But what does MassHealth think of these trusts?
Countable or not countable?
When you apply for benefits under MassHealth, whether you qualify can turn on what is counted as income and what is not. An applicant may have placed assets into an irrevocable trust for the specific purpose preventing those assets from being counted, so that they can meet the necessary limits.
130 CMR 520.024 states the basic rules MassHealth will follow when it evaluates such a trust. If the assets or income of the trust must be distributed to the applicant, or their spouse, it will be counted. If payments are made from the principal, to the applicant or their spouse, it will be counted. These rules apply whether the trust was created by the applicant or by another individual.
MassHealth will go beyond the general rules, however, and use what is called the ‘any circumstances’ test. With this test, MassHealth may consider the trust countable if there are any circumstances under which the trust principal can be used for the applicant’s benefit. This can include situations where the applicant has too much control over the trust or the trustees can use the principal to buy financial products for the applicant.
Irrevocable trusts can be a very useful tool for meeting MassHealth’s income and asset limits, but they must be done correctly. If you think it may be an option, as part of your Medicaid planning, speak to a knowledgeable professional who is experienced with them and their legal requirements.