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This blog is written by Brian E. Barreira, an estate planning, probate and elder law attorney with offices at 118 Long Pond Road, Suite 206, Plymouth, Massachusetts, and 175 Derby Street, Unit 19, Hingham, Massachusetts. Brian was named a Massachusetts Super Lawyer® in Boston Magazine in 2009, 2010, 2011, 2012 and 2013 and is listed in The Martindale-Hubbell Bar Register of Preeminent Lawyers in the fields of Elder Law and Trusts & Estates, Wills & Probate. Brian's biographical website can be found at SouthShoreElderLaw.com

Nothing on this blog should be considered to be legal advice or tax advice.

How Does MassHealth Treat a Sale of a Life Estate in 2014?

March 7, 2014

by: Brian E. Barreira, Esq.

When a person who has a life estate wants to sell the real estate, the life tenant is legally entitled to a share of the proceeds.The amount of the proceeds that the life tenant is supposed to receive is based on his/her life expectancy and interest rates at the time of sale.

To calculate the value of the life estate, you must first determine what the applicable interest rate is.The interest rate in the month of the sale can be found at http://www.tigertables.com/7520.htm.Once you have this figure, you then go to IRS Book Aleph at http://www.unclefed.com/IRS-Forms/2001/p1457.pdf and look in Table S for the page displaying tables with that interest rate.Looking up the life tenant’s age on that page will get you the breakdown between the life tenant’s percentage interest in the proceeds and the other parties, who on that page are referred to as the “Remainder.”For further explanation, including an example, see MassHealth Eligibility Operations Memo 07-18.

Fortunately, interest rates have increased in the past year, so the process of calculating a life estate value is easier than it has been in the past couple of years.  If the interest rates required to be used are below 2.2, different IRS tables need to be looked at, so in that situation go to http://www.irs.gov/irb/2011-38_IRB/ar06.html.

The life tenant’s share of the proceeds can be eligible for the $250,000 capital gains exclusion under Internal Revenue Code Section 121, but often the persons receiving the remainder do not live there and their proceeds are subject to capital gains taxation without the ability to use that capital gains exclusion.Thus, it can often be advisable to wait until the life tenant’s death before selling real estate, so that the real estate will receive a step-up in basis under Internal Revenue Code Section 2036.

Note that the failure of the life tenant to receive the life tenant’s full share of the sale proceeds is considered a disqualifying transfer of assets under federal Medicaid law and MassHealth regulations, and is subject to the 5-year lookback period.

When Can Spouses Make Gifts to Each Other in 2014 without Causing a MassHealth or Federal Gift Tax Problem?

March 5, 2014

by:   Brian E. Barreira, Esq.

Under federal Medicaid law and MassHealth regulations, spouses have the right to transfer assets to each other at any time without causing a period of ineligibility from Medicaid, which is known as MassHealth in Massachusetts.  The purpose of the gift is not scrutinized by MassHealth, and the 5-year lookback period does not apply to cause a MassHealth disqualification period.  Gifts between spouses can even occur after a nursing home stay has begun and after a MassHealth application has been filed.

There is no Massachusetts gift tax.  For federal gift tax purposes, spouses who are both United States citizens can make gifts of any amount to each other at any time without causing any gift tax issue, and without even causing any need to file a federal gift tax return.  If one spouse is not a United States citizen, however, a federal gift tax problem can arise, since gifts made to a spouse who is not a U.S. citizen have their own annual exclusion amount, and are limited by federal tax law to $145,000 in 2014.

Any gift above $145,000 in 2014 to a spouse who is not a U.S. citizen would require the filing of a federal gift tax return by the spouse who makes the gift.  For most married couples, however, exceeding that amount would not pose any tax problem, since any gift in excess of $145,000 would not cause an immediate tax; rather, the amount of the gift in excess of $145,000 would merely use up some of the gift-giving spouse’s federal estate and gift tax exemption, which is $5,340,000 in 2014.

Protecting Assets and Maximum Income in 2014 When Applying for MassHealth to Help Pay for the Unhealthy Spouse’s Nursing Home Bills

January 28, 2014

One of the biggest mistakes that many community spouses (i.e., any spouse who is not in a nursing home) make when the other spouse enters a nursing home is not getting legal advice from an elder law attorney about Medicaid, known in Massachusetts as “MassHealth.” The “free” information that many community spouses and their families rely on can sometimes end up being quite costly to them.

There are different layers in MassHealth law.  Under the bottom layer, under 2014 law, just about everything other than the home and car are totaled, and the community spouse supposedly can keep only the first $117,240.00. (The rest of the assets are effectively owned by the spouse in the nursing home, and supposedly have to be spent on the nursing home bills of the institutionalized spouse; but note that I intentionally wrote the word “supposedly.”)  Fortunately, for community spouses, two other upper layers of the law effectively override the lower layer, and one upper layer is that the community spouse can enter into certain types of immediate annuity contracts with the spenddown (i.e., excess) assets.

Before even thinking about buying an annuity, the community spouse should note three things: (1) not every immediate annuity will work, where Massachusetts law makes most annuities assignable and the annuity purchased by the community spouse has to be irrevocable and nonassignable under federal Medicaid law and MassHealth regulations; (2) the published regulations and unpublished internal procedures and policies which now allow such a move can change with little advance notice, so it is often not advisable that an annuity be purchased until the institutionalized spouse’s nursing home stay has already begun; and most importantly (3) some community spouses can keep everything without needing an annuity, and are better off without an annuity, due to the other upper layer of MassHealth law that protects income for the community spouse.

At present, the community spouse has the absolute right to an income of at least 1,938.75 per month. (Further, if shelter expenses exceed 30% of this figure, or $581.62, or if a disabled child lives at home, the community spouse is often entitled to keep much more than $1,938.75 per month.) If the Social Security and pension payable in the name of the community spouse is less than the $1,938.75 figure, at the end of the MassHealth application process the community spouse is allowed to keep some or all of the institutionalized spouse’s income.  Because the monthly payment from an immediate annuity is considered to be the community spouse’s income, buying an annuity before the basic numbers have been analyzed by an elder law attorney could prevent the community spouse from receiving income from the institutionalized spouse. (That means the annuity payments in some cases would be simply replacing income that the community spouse was already entitled to have, and the annuity ends up not benefiting the community spouse.)

If the community spouse needs some income from the institutionalized spouse, there is a cap during the MassHealth application process of $2,931.00 per month. If the needs of the community spouse are greater than $2,931.00 per month, a higher amount of income can sometimes be preserved for the community spouse via the fair hearing appeal process, where the need to keep the other assets has to be proved to maintain the financial ability to remain in the community.  A common situation where need can be fairly easily proved is where the community spouse is living in an assisted living facility and needs to be there due to frailty, medical condition or other special needs.   Once the need to be in assisted living is established, the appeal is primarily about numbers and prevailing CD and money market interest rates, so the community spouse need not go to the hearing, and the elder law attorney can often handle it alone.

Another option to retain greater income for the community spouse is a Probate Court procedure known as separate support.  Since both spouses need legal representation in court, it is important that the institutionalized spouse have a durable power of attorney that allows the appointed person to hire a lawyer to represent the interests of the institutionalized spouse.

When spenddown and appeal options are determined by an elder law attorney as potentially unsuccessful, the community spouse can often purchase certain types of immediate annuities, which should always be the last resort due to the manner in which the institutionalized spouse’s income ca be allocated to the community spouse for MassHealth purposes.

A warning to the trusting and the gullible:  There are elder law “attorneys” and MassHealth application services who make a big chunk of their profit from selling annuities, so it is important to have the entire picture reviewed, and often to get a second opinion, before rushing into purchasing an immediate annuity from somebody who is selling it.

A final note:  Maintaining the maximum retroactivity of the original MassHealth application is vital to preserve assets for the community spouse and to ensure that the nursing home will be paid by MassHealth, so the MassHealth fair hearing appeal process should never be overlooked if any type of notice of denial is ever received along the way.  A community spouse can be successfully sued by the nursing home if timely MassHealth benefits are not obtained; see Are You Personally Responsible for Your Spouse’s Nursing Home Bills in Massachusetts?

An Analysis of the Tax and Medicaid Aspects of Various Types of Transfers of the Home

August 9, 2013

Different types of gifts and transfers of assets have very different results for tax and Medicaid purposes. The following is an analysis of the tax results of some basic types of transfers of a person’s home.

(A) Upon a transfer of a person’s home into a revocable trust…:

(1) Is there any gift tax? A completed gift has not been made, so a gift tax return would not be due.

(2) Will there be any capital gains tax upon a sale during the person’s lifetime? The $250,000.00 (or, for a married couple, $500,000.00) capital gains exclusion under Internal Revenue Code (“IRC”) Section 121 previously allowed to the person is preserved, assuming the person lived there for two (2) out of the past five (5) years.

(3) Will the home be included in the person’s gross estate? Pursuant to IRC Section 2038, the home is included in the person’s gross estate. Whether or not an estate tax will occur is based on the total of the gross estate for estate tax purposes.

(4) Upon the person’s death, what is the tax impact of the transfer on the heirs? The tax results are the same as if the person had kept the home in the person’s own name. A stepped-up basis as of the date of death will be obtained by the heirs.

(5) Is this type of transfer advisable in the Medicaid planning context? Extremely rarely, and never if nursing home costs are an issue. A home is a revocable trust often leaves a person worse off than if nothing had been done, since Medicaid law requires its sale if it remains in a revocable trust at the time of applying for Medicaid. This type of transfer could only work in a community Medicaid context, where the goal would be to avoid probate if the state looks solely to the person’s probate estate for estate recovery.

(B) Upon a transfer of the home which adds two (2) other persons as joint tenants with right of survivorship…:

(1) Is there any gift tax? A completed gift has been made of two-thirds (2/3) of the fair market value of the home, and a gift tax return should be filed.

(2) Will there be any capital gains tax upon a sale by the transferee during the person’s lifetime? If a transferee does not live in the home for two (2) years, there will be a capital gains tax. Whenever a transferee does not meet the IRC Section 121 requirements described in (A)(2) above, a capital gains tax will be imposed upon that person’s portion of the sale proceeds.

(3) Will the home be included in the giver’s gross estate? Under IRC Section 2040, financial contribution towards the purchase of the home must be traced, and since the recipients did not contribute towards the purchase, the fair market value of the home as of the giver’s death will be included in the giver’s gross estate.

(4) Upon the person’s death, what is the tax impact of the transfer on the heirs? Since the home would be fully included in the giver’s gross estate, the heirs would receive a stepped-up basis, and no capital gains tax would then result upon a sale which is made after the giver’s death.

(5) Is this type of transfer advisable in the Medicaid planning context? Sometimes, although the creditors and spouses of all joint tenants can eventually become involved in the ownership and decisions of when to sell the home. In states that have adopted the expanded estate recovery provisions of the federal Medicaid law, the giver’s reserved one-third of the home would be subject to an estate recovery claim.

(C) Upon a transfer of the home from one person to other(s) with a reserved life estate…:

(1) Is there any gift tax? A completed gift has been made of the remainder interest, but due to Chapter 14 of the Internal Revenue Code the amount of the gift to be reported on the federal gift tax return is the fair market value of the entire home on the date of the gift.

(2) Will there be any capital gains tax upon a sale during the person’s lifetime? The person’s life estate would be accorded an actuarial value at the time of the sale, and the person would be entitled to use the IRC Section 121 exclusion only to the extent of that value. Since the heirs received the remainder interest, they would be liable for capital gains tax on their share of the proceeds, unless they also met the IRC Section 121 requirements.

(3) Will the fair market value of the home be included in the giver’s gross estate? Pursuant to IRC Section 2036, the fair market value of the home would be included in the giver’s gross estate. Thus, while the giver has made a completed gift of the remainder interest, the full value of the home ends up being includable in the giver’s gross estate anyway. This result points out the practical reason that federal gift tax returns are often not filed in these cases. Another point which should be noted here is that, pursuant to IRC Section 2035, the release of a life estate is not effective for estate tax (and accompanying step-up or step-down in basis) purposes until 3 years after the date of the release; thus, for a person who wishes to make an outright gift, it may be better for estate tax purposes to reserve a life estate then later release it.

(4) Upon the giver’s death, what is the tax impact of the transfer on the heirs? The tax results are the same as if the person had kept the home in the person’s own name. A stepped-up basis will be obtained by the heirs.

(5) Is this type of transfer advisable in the Medicaid planning context? Often, as Medicaid law considers only the remainder interest to be a gift. In states that have adopted the expanded estate recovery provisions of the federal Medicaid law, the giver’s reserved life estate in the home, accorded an actuarial value as of the date of death,  would be subject to an estate recovery claim.

(D) Upon a transfer of the home to other(s) with joint (spousal) reserved life estates …:

(1) Is there any gift tax? The answer is the same as in (C)(1) above. Assuming the spouses co-owned the home prior to the transfer, the gift tax ramifications would be divided one-half (1/2) as to each spouse.

(2) Will there be any capital gains tax upon a sale during the persons’ lifetime? The answer is the same as in (C)(2) above, except that each spouse would be treated as if the spouse had been the owner of one-half (1/2) of the home prior to the transfer. If a sale occurred after the death of one of the spouses, the one-half (1/2) share of the decedent would be sold with a stepped-up basis.

(3) Will the fair market value of the home be included in either person’s gross estate? The answer is the same as in (C)(3) above, except that each spouse would be treated as if the spouse had been the owner of one-half (1/2) of the home prior to the transfer. Thus, only one-half (1/2) of the fair market value of the home would be includable in each spouse’s gross estate. (The total estate taxes due from both spouses could end up being minimized by this maneuver, since the full value of the home would not end up being includable in the surviving spouse’s gross estate.)

(4) Upon the death of both persons, what is the tax impact of the transfer on the heirs? The tax results are the same as if each person had kept one-half (1/2) of the home in the person’s own name. Upon the death of the surviving spouse, if the one-half (1/2) share of the predeceased spouse has appreciated in value, upon a sale the heirs would then have to pay a capital gains tax on that amount of appreciation.

(5) Is this type of transfer advisable in the Medicaid planning context? Often, as Medicaid law considers only the remainder interest to be a gift.  In states that have adopted the expanded estate recovery provisions of the federal Medicaid law, the giver’s reserved life estate in the home, accorded an actuarial value as of the date of death, would be subject to an estate recovery claim.

(E) Upon an outright gift of the home…:

(1) Is there any gift tax? A completed gift has been made. For gifts to persons other than the person’s spouse, a gift tax return should be filed. In most cases no gift tax would be due.

(2) Will there be any capital gains tax upon a sale by the transferee during the person’s lifetime? Unless the transferee meets the requirements described in (A)(2) above, a capital gains tax will be imposed upon the entire sale proceeds.

(3) Will the home be included in the person’s gross estate? Generally, a gifted asset is not subject to estate tax, but if the person continues to live in the home without paying fair market rent, the Internal Revenue Service (IRS) often takes the position that the full fair market value of the home is includable in the person’s gross estate as a “retained” life estate pursuant to IRC Section 2036. (See, e.g., Revenue Rulings 70-155 and 78-409.) The position of the IRS is based on an inferred agreement, understanding or assumption, as of the date of the gift, that the person would continue to live there.

(4) Upon the person’s death, what is the tax impact of the transfer on the heirs? The heirs would not have received a stepped-up basis, and a capital gains tax may then result upon a sale that is made after the person’s death. In cases where the federal and state estate and inheritance taxes would be less than the federal and state capital gains taxes, the heirs should attempt to use to their own advantage the position of the IRS described in (3) above, so as to cause inclusion of the fair market value of the home in the person’s gross estate and to receive a step-up in basis.

(5) Is this type of transfer advisable in the Medicaid planning context? Rarely, as there are often better choices for Medicaid and tax reasons.

(F) Upon a transfer of the home from one person to other(s) with a reserved special power of appointment (SPA)…:

(1) Is there any gift tax? An incomplete gift has been made, but the reporting of the gift on a federal gift tax return is required.

(2) Will there be any capital gains tax upon a sale during the person’s lifetime? At least one commentator has suggested that the retention of a SPA allows the person to be entitled to use the IRC Section 121 exclusion on the entire sale proceeds. The idea is untested, so an irrevocable grantor trust is a far safer choice if a sale is possible.

(3) Will the fair market value of the home be included in the giver’s gross estate? Pursuant to IRC Section 2038, the fair market value of the home would be included in the giver’s gross estate. Thus, while the giver has made a transfer for Medicaid purposes, the full value of the home ends up being includable in the giver’s gross estate anyway. Similar to the release of a life estate, pursuant to IRC Section 2035, the release of a SPA is not effective for estate tax (and accompanying step-up or step-down in basis) purposes until three (3) years after the date of the release; thus, for a person who wishes to make an outright gift, it may be better for estate tax purposes to reserve a SPA then later release it.

(4) Upon the person’s death, what is the tax impact of the transfer on the heirs? The tax results are the same as if the person had kept the home in the person’s own name. A stepped-up basis will be obtained by the heirs.

(5) Is this type of transfer advisable in the Medicaid planning context? Sometimes, in conjunction with a reserved life estate, although an irrevocable grantor trust can often be a better choice.

(G) Upon a transfer of the home to a Qualified Personal Residence Trust (QPRT)…:

(1) Is there any gift tax? The more valuable the home, the younger the person deeding the home into the QPRT, and the shorter the period that is selected to live there, the more likely there may be a gift tax, but a usage period can be selected to require no gift tax.

(2) Will there be any capital gains tax upon a sale during the person’s lifetime? The capital gain on a sale during the person’s selected usage period rebounds to the person if the grantor trust rules are applicable to the trust. After the selected usage period, any sale will trigger a capital gains tax.

(3) Will the fair market value of the home be included in the giver’s gross estate? Yes if the giver dies during the selected usage period. No if the person dies after the selected usage period and fulfills an appropriate rental agreement. Accordingly, shorter usage periods are usually favorable.

(4) Upon the death of the person, what is the tax impact of the transfer on the heirs? The heirs would receive a step-up in basis to the date-of-death fair market value of the home if the giver dies during the selected usage period or if the giver does not afterwards pay fair market rent. A carryover basis would apply if the person dies after the selected usage period and pays fair market rent.

(5) Is this type of transfer advisable in the Medicaid planning context? Rarely, as QPRTs are primarily done to minimize federal estate and gift taxes.

(H) Upon a transfer of the home into an irrevocable trust other than a QPRT…:

The answer to just about any tax question posed regarding an irrevocable trust is “it depends on the provisions of the trust,” but it should be noted here an irrevocable trust can be drafted to be a grantor trust and allow usage of the capital gains exclusion under IRC Section 121, as well as to allow the heirs to receive a step-up in basis under IRC Section 2036 or 2038, all while preserving the home from being treated as the person’s asset on a Medicaid application.

For detailed articles on some of the issues in this post, see the following:

Proper Medicaid Planning May Permit Keeping the Home in the Family

In Medicaid Planning, Some Trusts Can Put Elderly Persons in a Worse Position Than If They Had Taken No Action At All

Jointly-Held Assets in Massachusetts: The Good, the Bad and the Ugly

Life Estate Can Be “Retained” for Estate Tax Purposes under Internal Revenue Code Section 2036 without Being Reserved in Deed

Problems with Outright Gifts in the Medicaid Planning Context

Using Reserved Special Powers of Appointment in Medicaid Planning

A Primer for Elder Law Attorneys on Avoiding the Inadvertent Creation of General Powers of Appointment in Durable Powers of Attorney and Trusts

Doherty Case Should Cause Some Concern about Irrevocable Medicaid Trusts in Massachusetts

Massachusetts Appeals Court Case of Kaptchuk v. Director of the Office of Medicaid Shows That MassHealth Fair Hearing Appeals Should Not Be Treated Lightly

July 24, 2013

In the 2013 Massachusetts Appeals Court case of Kaptchuk v. Director of Office of Medicaid, a MassHealth denial was upheld.  An application for MassHealth benefits for Nina Kaptchuk had been denied due to “disqualifying transfers.”   A “fair hearing” had been requested, and the denial was not overturned.  A so-called 30A appeal was filed with the Superior Court under Massachusetts General Laws, Chapter 30A, Section 14, and the judge there did not overturn the denial.  On this further appeal to the Massachusetts Appeals Court, the MassHealth denial remained in effect.

The Superior Court and the Massachusetts Appeals Court only reviewed the facts presented at the fair hearing to see if the hearing officer analyzed the facts fairly. Unfortunately, new or better facts cannot be presented after a fair hearing. The Massachusetts Appeals Court suggested that the preparation for the fair hearing was inadequate. Transfers to or for the benefit of a disabled person can be treated as non-disqualifying, but the lawyer handling the appeal apparently did not introduce sufficient evidence proving the mental illness of the daughter who received amounts of money from Nina Kaptchuk.

Even though MassHealth regulations do not state what the MassHealth appellant’s burden of proof is, this Massachusetts Appeals Court decision states that the burden was on the MassHealth appellant to produce “convincing” evidence.

The point that should be taken from this case:  Do not treat any fair hearing lightly. Any point you want to make should be proven from every possible angle, and do not presume common sense. Most especially, do not assume that you will get another chance to explain the facts as you see them.

The decision is pasted below:

Appeals Court of Massachusetts. Nina KAPTCHUK v. DIRECTOR OF the OFFICE OF MEDICAID & another.FN1

FN1. Office of Medicaid Board of Hearings.

No. 12–P–1279. June 4, 2013.

By the Court (RUBIN, FECTEAU & HINES, JJ.).

MEMORANDUM AND ORDER PURSUANT TO RULE 1:28 *1 Plaintiff Nina Kaptchuk appeals from a judgment of the Superior Court that affirmed a decision of the Office of Medicaid Board of Hearings (board). In connection with Kaptchuk’s application for long-term nursing care benefits under the State Medicaid program, commonly known as MassHealth, the board disallowed approximately $64,800 as “disqualifying transfers” made during the five year “look-back” period prior to Kapchuk’s admission to the nursing home. See 130 Code Mass. Regs. §§ 520.019(B)(2), 520.019(C) (2009). Consequently, the board determined that Kaptchuk did not qualify for Medicaid benefits from September 13, 2010, through May 6, 2011.

The board found the verbal assertions made on Kaptchuk’s behalf by her counsel insufficient to carry Kaptchuk’s burden of establishing that the transfers at issue, allegedly made to cover the cost of Kaptchuk’s adult daughter’s monthly rental payments, did not constitute “disqualifying transfers” because they were made “exclusively for a purpose other than to qualify for MassHealth” benefits. 130 Code Mass. Regs. § 520.019(F)(1) (2009). On appeal, Kaptchuk avers that the board’s decision is unsupported by substantial evidence, as well as based on an error of law and is arbitrary and capricious. See G.L. c. 30A, §§ 14(7), 1(6); Forman v. Director of the Office of Medicaid, 79 Mass.App.Ct. 218, 221 (2011) (“reasonable interpretations by an agency of its governing law, which are supported by substantial evidence, must be respected”). In essence, Kaptchuk argues that it cannot fairly be inferred that she intended the transfers to qualify her for Medicaid benefits because: those transfers were commenced roughly four years before she was admitted to the nursing home; the transfers were made to assist her mentally ill daughter; and the transfers were monthly payments of a relatively nominal amount. The board found that Kaptchuk was admitted to a nursing home in April, 2010. During the previous sixty months, Kaptchuk made payments totaling $59,800, apparently to her adult daughter. Counsel for Kaptchuk represented to the board that those payments were to cover Kaptchuk’s adult daughter’s rent (about $1,150 per month).FN2 Particularly, Kaptchuk’s counsel represented that the daughter was mentally ill and that Kaptchuk’s intent was simply “to pay the daughter’s rent.” Kaptchuk did not introduce any evidence supporting counsel’s assertion that the daughter was, in fact, mentally ill, although the board found that guardianship proceedings at one time had been initiated but subsequently withdrawn and there were at least some unauthenticated documents before the board from doctors describing the daughter as schizophrenic. Moreover, it is undisputed that the daughter has never received Social Security disability income benefits or any other form of public assistance.

FN2. In addition, Kaptchuk transferred $5,000 in 2006 to her son and concedes that this payment constitutes a disqualifying transfer.

We agree with the judge’s conclusion that the board’s decision was not in error. Kaptchuk bore the burden to prove by convincing evidence that the money was transferred for an exclusive purpose other than to qualify for Medicaid, and verbal assurances, such as those from her attorney, to the effect that Kaptchuk was not considering Medicaid at the time of the transfers and that the transfers were to benefit Kaptchuk’s adult daughter were insufficient to satisfy that burden. See Gauthier v. Director of the Office of Medicaid, 80 Mass.App.Ct. 777, 785 (2011). The judge found significant the lack of any evidence that these monthly payments were, indeed, rental payments, that the daughter was not able to afford these payments without her mother’s financial assistance, and that the daughter was permanently or substantially disabled.

*2 As the judge noted, while there is some logic to Kaptchuk’s argument, it lacks an evidentiary basis. Given that the burden of persuasion is on Kaptchuk and she, based on the above, failed to meet this burden, the board’s decision is supported by substantial evidence. See G.L. c. 30A, § 14(7).

Additionally, Kaptchuk claims that the board clearly erred by concluding that the rental payments were not for “fair market value,” relying on Gauthier v. Director of the Office of Medicaid, supra at 786–787. See 130 Code Mass. Regs. § 520.019(F)(2) (2009). Her reliance is misplaced, however. While there was no evidence to indicate that the daughter did not receive fair market value for her rental, there was no evidence, unlike in Gauthier, establishing that Kaptchuk received a tangible benefit equivalent to the rental payments she made to her daughter. See id. at 784.

Judgment affirmed.

Massachusetts Case of Contested Will of Alice R. Sharis Shows Why Estate Planning Attorneys Need to Meet Alone with Their Clients

July 8, 2013

The contested will in the 2013 Massachusetts case of In the Matter of the Estate of Alice R. Sharis shows why lawyers need to meet alone with their clients.  When undue influence is alleged in an attempt to contest a will, the drafting lawyer’s actions can be on trial.  In my estate planning practice, I always insist on meeting alone with my elderly and disabled clients for at least part (and often all) of the initial conference, and if the lawyers involved in preparing the will of Alice R. Sharis had done so, it is possible that this will contest would not have been succcessful.

In this case, the grandson Richard had lived with his grandmother Alice and her husband Peter for over 9 years before their deaths.  At some point, the mental capacity of Alice and Peter began to decline, and Richard began to take over their finances, first by signing their checks without apparent legal authority, then later through use of a durable power of attorney that he prepared himself. Richard later had a meeting with a lawyer and asked him to prepare Alice’s will. The lawyer and his associate appear to have treated Richard as the client, where they communicated mostly with him, never met Alice, and merely had two brief telephone conversations with her; Richard even took care of the process of getting Alice’s will executed.

After Peter and Alice had both died, one of Alice’s children objected to her will, and there was a trial where the burden of proof was on Richard under Massachusetts law because he had a fiduciary relationship with Alice at the time the will was executed. The Probate Court judge hearing this will contest case made a finding that Alice lacked the advice of independent counsel. That was a significant finding, as the lawyers who prepared the will could have helped shield the will from legal attack. Since Richard had been too involved in getting the will prepared and executed, the Court turned its attention to other evidence proving that Alice’s actions were subject to the undue influence of Richard, and ruled against him.

On appeal, the Massachusetts Appeals Court pointed out that “the burden to prove the transaction was fair is generally met if the fiduciary shows that the principal made the request … with the advice of independent legal counsel.”  The Court also wrote:  “One of the functions of independent counsel is to provide documentation that the making and execution of a will is voluntary and knowing, thus lending transparency and credibility to the bequest.”

The point to take away from this case is:  Too much involvement in somebody else’s financial affairs can sometimes lead to your gift or inheritance being contested, so if a lawyer insists on meeting alone with a relative or friend of yours who is doing estate planning (including a will, trust or deed) and keeps you out of the room during the meeting, you may not like it but that lawyer might actually be doing you a favor.

Minimum Monthly Maintenance Needs Allowance for Nursing Home Resident’s Spouse Increased to $1,939 during 7/1/2013-6/30/2014

July 1, 2013

When one spouse is living in a nursing home and the other spouse is living anywhere else, the spouse who is not living in the nursing home (known under Medicaid and MassHealth law as the “community spouse”) is allowed by Medicaid or MassHealth to keep some (or sometimes all) of the nursing home resident’s income through an income allowance known as the Minimum Monthly Maintenance Needs Allowance (MMMNA).  Every July 1st, this figure changes based on federal poverty level guidelines.  The MMMNA was $1,891 from July 1, 2012 until June 30, 2013, and it will increase from $1,891 to $1,939 from July 1, 2013 through June 30, 2014.

If certain basic household expenses are more than 30% of the MMMNA, which is $582 from July 1, 2013 until June 30, 2014, the community spouse is entitled to keep extra income, known as the Excess Shelter Amount (“ESA”).  Between the MMMNA and the ESA, the community spouse can now be entitled to as keep as much as $2,898 of the married couple’s total income.  If even more income is needed, such as where the community spouse is living in an assisted living facility, the community spouse can request a fair hearing and attempt to prove the need for more than $2,898 of the married couple’s total income.

Utilizing the MMMNA provisions in Medicaid/MassHealth law is always better than purchasing an immediate annuity, since all payments from the annuity are treated as income, and taking that step ends up reducing the amount of the married couple’s retirement income that the community spouse could otherwise keep.  Unfortunately, due to the asset rules under Medicaid/MassHealth, in many situations the community spouse has no choice but to purchase an immediate annuity with excess assets.  See Protecting Assets and Maximum Income for the Community Spouse When Applying for MassHealth in 2013 to Help Pay for the Unhealthy Spouse’s Nursing Home Bills in Massachusetts.

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