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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 has been named a Massachusetts Super Lawyer® in Boston Magazine in 2009-2018, is listed in The Martindale-Hubbell Bar Register of Preeminent Lawyers in the fields of Elder Law and Trusts & Estates, Wills & Probate, and is the Editor of Massachusetts Continuing Legal Education's 3-volume Estate Planning for the Aging or Incapacitated Client in Massachusetts. Brian's biographical website can be found at

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

An Analysis of the Newly-Discovered “Law Review Form for Trusts” Utilized by MassHealth Lawyers

September 13, 2019

The newly-discovered “Law Review Form for Trusts” that is apparently utilized by MassHealth lawyers in their war on trusts gives us insight into what types of provisions in irrevocable trusts they deem attackable. It also shows us how unwilling they are to respect the law as ruled on by Massachusetts appellate courts. Let’s analyze what the MassHealth lawyers are telling us in their form, and look at their recent actions. (By the way, the abbreviation “A/S” used throughout the checklist apparently means Applicant/Spouse.)

____ The Trust is revocable. 130 CMR 520.023(C) or 130 CMR 520.022(A).

This checklist item may seem innocuous, but MassHealth lawyers have long taken positions that indicate they don’t seem to know or care what the word revocable means. See When Is a Trust Considered “Revocable” under Massachusetts Law, and Is It Unethical for a Governmental Lawyer Representing a State Agency to Misrepresent This Basic Information at a Fair Hearing? and also see Do the Lawyers Representing the Office of Medicaid in Massachusetts Know What a Revocable Trust Is?

Recently, MassHealth lawyers have been arguing that every nominee trust is a revocable trust, in part because a typical nominee trust states that “[a]ny trustee may without impropriety become a beneficiary hereunder” and also states that any beneficiary can cause termination of the trust. Apparently, in the minds of the MassHealth lawyers the termination of a trust by distributions to the beneficiaries somehow makes it revocable by the grantor, who may not even have any beneficial interest. Under this flawed analysis, the vested owners of any nominee trust could make any MassHealth applicant a beneficiary at any time, and that something already owned by somebody else is a countable asset because it can be given back to the MassHealth applicant, but under the analysis in Heyn v. Director of the Office of Medicaid, 89 Mass. App. Ct. 312 (2016), which was not appealed by the agency and is binding on the agency, the MassHealth agency cannot make that stretch: “[F]or purposes of computing countable assets, Medicaid does not consider assets held by other family members who might, by reason of love but without legal obligation, voluntarily contribute monies toward the grantor’s support.” Heyn at 318-319.

The Trust is irrevocable but there are circumstances under which Trust principal could be paid to, or for the benefit of A/S, including the following:

____ Under Section _____, Trust principal can be paid to or for the benefit of the A/S. 130 CMR 520.023(C) or 130 CM R 520.022(B)

The focus on this checklist item is on the phrase “for the benefit of.” Great creativity is exercised by MassHealth lawyers to concoct ways through which distributions can be made for the benefit of the MassHealth applicant, but Hearing Officer Susan Burgess-Cox recently blasted these lawyers for doing so; see page 6 of the fair hearing posted at

The ruling in Daley v. Secretary of the Executive Office of Health and Human Services,  477 Mass. 188 (2017) states that the Trustee must have the legal authority to make a distribution, and is binding on the agency: “As the United States Supreme Court has declared, “the principle of actual availability . . . has served primarily to prevent the States from conjuring fictional sources of income and resources by imputing financial support from persons who have no obligation to furnish it or by overvaluing assets in a manner that attributes nonexistent resources to recipients.” Heckler v. Turner, 470 U.S. 184, 200 (1985). The “any circumstances” test for trusts requires an additional layer of analysis, but it does not depart from this fundamental purpose. See Guerriero, 433 Mass. at 634 (trust assets not available to applicant where trustee did not have “any legal discretion” to pay any part of trust principal to her).”

The Trust is irrevocable but there are circumstances under which Trust principal could be paid to, or for the benefit of, A/S including the following:

____ Under Section _____, the A/S can appoint direct payment of Trust principal to anyone on any conditions. 130 CMR 520.023(C) or 130 CMR 520.022(B)

This seems to be the two-step type of distribution already dismissed in the case of Heyn. As already mentioned above:  “[F]or purposes of computing countable assets, Medicaid does not consider assets held by other family members who might, by reason of love but without legal obligation, voluntarily contribute monies toward the grantor’s support.” Heyn at 318-319.

The Trust is irrevocable but there are circumstances under which Trust principal could be paid to, or for the benefit of A/S, including the following:

____ Under Section _____, the A/S can appoint direct payment of Trust principal to charitable or nonprofit organizations including nursing facilities to pay for their care. 130 CMR 520.023(C) or 130 CMR 520.022(8)

____ Under Section _____, the A/S can add charitable or nonprofit organizations including nursing facilities to pay for their care. 130 CMR 520.023(C) or 130 CMR 520.022(B)

These two denial reasons come from the remand issue in the Nadeau portion of the case of Daley, with the basic argument being that if you have the power to make a gift from the trust to charitable or non-profit organizations, then you can collude with a non-profit nursing home to apply the gift to your nursing home bill. MassHealth lawyers keep referring to the issue as having been ruled on in Daley, when there would have been no need for a remand if the SJC had actually ruled on the issue; during the Daley case, the Office of the Attorney General (representing the MassHealth agency) even wrote a letter to the SJC stating that the issue needed to be remanded so it could be ruled on by the agency before there was a judicial determination. On remand, the hearing officer approved the MassHealth application for Nadeau, and since that time numerous hearing decisions have reached the same conclusion. See the fair hearings posted at

The Trust is irrevocable but there are circumstances under which Trust principal could be paid to, or for the benefit of A/S, including the following:

____ Under Section _____, the A/S can serve as Trustee and receive Trustee compensation. 130 CMR 520.023(C) or 130 CMR 520.022(B)

This issue has not been ruled on by an appellate court in Massachusetts, but there are several reasons that it should not be problematic. First, there would have to be actual services for which the Trustee would need to issue an invoice, and it would not be reasonable for a Trustee to charge unlimited fees to drain a trust.

Second, if there ever were any such Trustee compensation, it would constitute taxable wages, and be “earned income,” falling under 130 CMR 520.009(C), a regulation that the MassHealth lawyers fail to mention in their legal briefs filed during fair hearings. To be compensated for services is not the same as being a beneficiary. If the grantor of a trust were an electrician and were hired to do some re-wiring at a house owned by the trust, that compensation would similarly be earned income, not a distribution of principal from the trust.

Third, federal Medicaid trust law defers to state law for trust interpretation. Under federal Medicaid trust law, whether a payment from a trust can be made is determined under state law. There are many reported Massachusetts cases where a beneficiary has served as a Trustee or a co-Trustee, and there is no Massachusetts case where compensation to a Trustee was even argued to be a potential asset. One might think that such an argument would have been made in a heated divorce if any lawyer thought the argument was not frivolous, or one might think a Chapter 7 Bankruptcy Trustee, whose role is to reel in as many assets as possible into the debtor’s estate for the benefit of creditors, would also have made such an argument if that lawyer thought the argument was not frivolous, but no such case exists.

Fourth, the MassHealth agency cannot utilize a methodology that is more restrictive than that used by SSI. See Lewis v. Alexander, 685 F.3d 325 (3d Cir. 2012), 42 U.S.C. § 1396a(r)(2) and 42 U.S.C. § 1396a(a)(10)(C)(i)(III). The MassHealth fact-finding process and trust law interpretation in this case is more restrictive than Supplemental Security Income (SSI) Program procedures and federal law interpretation in the Program Operations Manual System (“POMS”) of the Social Security Administration. The POMS contains extensive sections regarding trusts that are meant to give guidance on how trusts should be treated for SSI (and, concomitantly, Medicaid or MassHealth) purposes, and there is not even the slightest hint anywhere in the POMS that potential Trustee compensation should be treated as a countable asset of the grantor.

Several hearing officer have reached the conclusion that the Trustee compensation issue was not a reason to treat a trust as a countable asset. In fact, in one fair hearing, the MassHealth lawyer even waived the argument after the agency had raised it on the MassHealth denial notice. See the fair hearing posted at  Where the MassHealth agency’s lawyer intentionally waived the issue there, it seems to be a violation of due process, administrative consistency and basic fairness for the agency to try to enforce that same position against other MassHealth applicants.

The Trust is irrevocable but there are circumstances under which Trust principal could be paid to, or for the benefit of A/S, including the following:

____ Under Section _____, the Trustee can use Trust principal to buy annuity, life insurance, long-term care insurance or other similar products for the benefit of the A/S. 130 CMR 520.023(C) or 130 CMR 520.022(B)

To the extent that annuities are mentioned here, and that was the very issue already ruled against in the case of Heyn v. Director of the Office of Medicaid, 89 Mass. App. Ct. 312 (2016), it does not appear that MassHealth lawyers have any respect for case law. “The analysis misapprehends the nature of annuity payments. Annuity payments are comprised of distinct constituent parts. One part is a return of a portion of the principal investment in the annuity itself; the other part is a portion of the investment income earned on the principal investment. … Out of each annuity payment, only the investment income portion would be available for distribution to the grantor from the trust; that portion of each payment representing a return of capital would be required by the trust instrument to be retained in the trust. The income portion available for distribution in such circumstances would be no different in character than interest earned on a certificate of deposit, dividends from stocks purchased and held by the trust, or other income earned on any trust assets. In all events, the trust principal is preserved in the trust, and is not available for distribution to the grantor under the governing provisions of the trust. … In particular, the allocation of annuity payments as between principal and income is governed by G. L. c. 203D, § 18(a), which creates a statutory presumption that any amount received by the trust, not expressly characterized as dividend or interest income, shall be allocated to principal. See also Restatement (Third) of Trusts § 110 (2011).” Heyn at 317-318.

The Trust is irrevocable but there are circumstances under which Trust principal could be paid to, or for the benefit of, A/S including the following:

____ Under Section _____, the Trustee can lend Trust principal to the A/S without adequate interest or security, 130 CMR 520.023(C) or 130 CMR520.022(B)

If the Trustee can make a loan, the Trustee has a fiduciary duty to make sure it can and will be repaid. The MassHealth lawyers are apparently arguing that if a Trustee can make a loan, the Trustee is presumed to have the legal authority to potentially cause great damage to the trust by giving money to the grantor and calling it a loan, yet there is nothing in Medicaid trust law that says Trustees can be presumed to act in foolish ways.

____ The Trust principal has been paid to, or for the benefit of, A/S. 130 CMR 520.023(C) or 130 CMR 520.022(B)

The foolish MassHealth argument often made in this regard is that if a Trustee messes up and makes an incorrect distribution to or for the MassHealth applicant, which would mean that the Trustee would incur liability to the trust beneficiaries for breach of fiduciary duty, the Trustee must continue doing so and incur further liability. This argument has already been shot down at fair hearings. See the fair hearings posted at

We will eventually come to a point, if we are not already there, where the continuation of many of these legal arguments is unethical governmental lawyering.

Are Lawyers Who Represent the MassHealth Agency Complicit in Hiding Secret Trust Regulations?

August 7, 2019

The attacks by MassHealth lawyers on irrevocable trusts in recent years have been relentless, yet the united elder law bar has fought back most of the more agonizingly repetitive challenges. The MassHealth lawyers seem to make the same legal arguments over and over at fair hearings in the hope that some hearing officer will eventually buy into the argument, then they hope a Superior Court judge (most of whom were trial lawyers who barely know anything about MassHealth or trust law) will rubberstamp the fair hearing decision. The MassHealth lawyers tend to cite the cases they win, and ignore the ones they lost.

Where MassHealth lawyers claim that fair hearing decisions and Superior Court decisions have no precedential value, they seem to believe they can continue to make the same arguments at future hearings and not even mention those decisions where they were on the losing end. Those actions may well be unethical, as under M.G.L. c. 118E, s. 48, a fair hearing decision is the agency’s final decision, and a MassHealth lawyer cannot withhold that information at future hearings:

If a lawyer deliberately omits adverse authority, there is risk that neither opposing counsel nor the court will discover the governing law and an erroneous decision (that could have been avoided) will result. … Rule 3.3(a)(3) refers to “legal authority,” which should be understood to include not only case law precedents, but also statutes, ordinances, regulations, and administrative rulings.  Indeed, the duty to reveal the latter kinds of authority is of greater practical significance, precisely because they are less likely to be discovered by the tribunal itself.   Geoffrey C. Hazard, Jr. & W. William Hodes, The Law of Lawyering, s. 29.11, at 29-16 (3rd ed. 2000).

We now have found that the MassHealth lawyers have systematized their trust denial system, and have boiled down their main trust attacks into a checklist. Attached is the Law Review Form for Trusts that MassHealth eligibility workers apparently send to MassHealth lawyers during MassHealth applications and redeterminations to obtain directions on whether a trust should be treated as a countable asset. As you can see, there are some specific issues on the checklist that the MassHealth lawyers don’t seem to want to let go of despite their countless losses (many of which are available at

The existence of this Law Review Form for Trusts suggests that the MassHealth agency has an unpublished intention on going after trusts that have those particular characteristics. That means there effectively are illegal, unwritten trust regulations, and the lawyers through their usage of this Law Review Form for Trusts are therefore complicit in violating Massachusetts General Laws, Chapter 30A, which requires that an agency go through a transparent process in issuing regulations.  If the positions in this Law Review Form for Trusts were in regulation form, as they should be, citizens could challenge them through a declaratory judgment under Massachusetts General Laws, Chapter 30A, Section 7, but where the lawyers are hiding these de facto regulations behind the specious claim of “attorney-client privilege,” many citizens are forced to fight the agency on a case-by-case basis and don’t even have any way to know whether the same argument was struck down in earlier cases.

At some point (if not now), it may be unethical for MassHealth lawyers to continue to “advise” the MassHealth eligibility workers to deny MassHealth applicants through the usage of the Law Review Form for Trusts checklist instead of having the agency officially revise MassHealth regulations to give the agency’s official position to the public on these issues found in the checklist.


Does the Lifetime Lien Placed on Real Estate by the MassHealth Agency Terminate Upon the MassHealth Recipient’s Death?

January 28, 2019

Federal Medicaid law allows states to place a lien on real estate that is not sold during the Medicaid application process. The state Medicaid agency has the right to recoup what it spent on the Medicaid recipient if the real estate is sold during the Medicaid recipient’s lifetime, and that is the point of the lien. Even if a person applying for MassHealth in Massachusetts has a less than full ownership interest, such as a life estate, the MassHealth agency can place a lien on that ownership interest, with the understanding that, under Section (d) of Massachusetts General Laws, Chapter 118E, Section 31, the agency can collect what is owed to it as of the date of sale. After the MassHealth recipient’s death, however, the provisions of Sections (b) and (c) apply, and the agency is required to file an estate recovery claim against the decedent’s probate estate in order to collect this debt. The actual procedures for making the estate recovery claim are laid out in great detail in Massachusetts General Laws, Chapter 118E, Section 32, and no reference is even made to the lifetime lien.

It is my understanding that the MassHealth agency has recently claimed in court cases that the lien survives the Medicaid recipient’s death, but has glossed over the distinction between the lifetime lien and the post-death creditor claim which is filed against the deceased Medicaid recipient’s probate estate.

The MassHealth agency, which is part of the Executive Office of Health and Human Services of the Commonwealth of Massachusetts, is required to implement federal Medicaid law, and is answerable to the federal government under the funding scheme of Medicaid known as cooperative federalism. The federal agency that directly oversees the MassHealth agency in the federal-state structure, the Centers for Medicare and Medicaid Services, is a part of the U.S. Department of Health and Human Services. As the “single state agency” designated to deal with the federal government, the MassHealth agency is charged with ensuring that all federal laws that govern the Medicaid program are followed. The state agency cannot do anything that is contrary to the directions it has received from the federal government, and cannot take any actions that go beyond the Massachusetts laws that have implemented federal Medicaid law. Thus, in determining whether the lifetime lien survives the death of the Medicaid recipient, we need to look first and foremost at federal law, regulations and guidance, followed by state law establishing the MassHealth agency’s powers and duties, followed last by MassHealth regulations.

In memoranda of law filed at fair hearings, the MassHealth agency has often acknowledged its proper role in the federal-state hierarchy. For example, in the MassHealth memorandum filed in Appeal 1408932, the agency wrote:

[T]he Agency is bound by federal Medicaid law and its sub-regulatory guidance reflected in MassHealth regulations, and relevant Medicaid case law. Medicaid is a statutory program and not a program in equity. See generally Nissan Motor Corp. v. Comm ‘r of Revenue, 407 Mass. 153, 162 (1990) (there is no equity where a statute expresses a clear rule of law) … The state Medicaid statute and regulations are to be construed as showing a primary intent that the MassHealth agency comply with federal law in order to receive federal financial reimbursement. Youville Hospital v. Commonwealth, 416 Mass. 142, 146 (1993); Cruz v. Commissioner of Public Welfare, 395 Mass. 107, 112 (1985); see also G.L. c. 118E, § 11; 130 CMR 515.002(B). The MassHealth regulations themselves make this point. “These regulations are intended to conform to all applicable federal and state laws and will be interpreted accordingly.” 130 CMR 515.002(B). See also 130 CMR 520.018; 130 CMR 520.021. In particular, federal law provides that the federal agency administering Medicaid can deny some of the federal funding to a state if the state commits eligibility errors that exceed a specified threshold. 42 U.S.C. §1396b(u). As the single state agency, MassHealth is charged with ensuring that all federal and state laws that govern the Medicaid program are followed. See generally … G.L. c. 6A, § 16 (designating the Agency as the state Medicaid entity charged with developing policies and programs to implement shared federal-state program); G.L. c. 118E, §§ 1, 2, 7(g), 7(h).

Before reviewing federal and state law on the issue of whether a lifetime lien terminates upon the MassHealth recipient’s death, it is important to note that the U.S. Department of Health and Human Services commissioned and published a 2005 report entitled Medicaid Liens and Estate Recovery in Massachusetts. Here is some of what the 2005 federal report found about our Massachusetts lifetime lien and estate recovery laws and procedures:

Passage of the Tax Equity and Fiscal Responsibility Act (TEFRA 1982) gave states the option of placing a TEFRA or pre-death lien on the real property of permanently institutionalized Medicaid recipients to prevent them from giving away a home in which they no longer reside before the equity in that home can be used to offset long-term care expenses paid on their behalf. In Massachusetts, TEFRA liens are referred to as living liens because they cannot be placed on the property of a MassHealth member once he or she has died. They give the State authority to recover Medicaid payments for a member’s long-term care expenses if his or her property is sold while the member is alive. … The lien gives the State authority to recover Medicaid payments that have been made if the property is sold while the member is alive.

It is important to note that, although Medicaid gives states authority to place post-death liens, in Massachusetts a lien is only filed while the member is still alive. A lien is never placed on any kind of property – real or personal – once the member has died. After the member’s death, the Estate Recovery Unit will recover MassHealth costs from the member’s probate estate. A probate estate includes property that a person possesses at the time of death and that descends to the heirs (with or without a will) subject to the payment of debts and claims. The probate estate may include real property on which a living lien was filed. However, the lien is no longer valid after the member’s death and must be released upon the request of the administrator/executor.

Massachusetts uses the living lien to prevent MassHealth members from giving away the home in which they no longer reside before its equity can be used to offset long-term care expenses paid on their behalf.

Upon payment, both the claim and any living lien that had been placed on the member’s real property are released. If there was a living lien on the member’s real property, the Estate Recovery Unit must release it after they have received notification of the member’s death and a copy of the death certificate. Generally the lien and the Notice of Claim are released at the same time. If an attorney representing the member’s estate requests release of the lien prior to settlement of the estate, the Estate Recovery Unit releases it, since a living lien is no longer valid when the member is deceased. However, in the absence of such a request, the lien is not released until the Estate Recovery Unit determines whether the member’s estate will be probated. If the estate is not probated within 1 year after the member’s death, the Estate Recovery Unit will forward a request to probate the estate to the Public Administrator in the county where the deceased member lived.

Since the time of the 2005 report, there was one change in federal estate recovery law, where estate recovery against annuities became mandatory rather than a state option, but otherwise there have been no federal Medicaid changes affecting estate recovery. If this report was not brought to the attention of the judges that the MassHealth agency was arguing before in recent cases, that seems like a significant omission, especially where the agency has the twin duties of candor to tribunals and administrative consistency, and this was a federal report not only about what Massachusetts law is but also how Massachusetts has implemented the federal law.

The MassHealth agency cannot go beyond what the Massachusetts legislature has specifically authorized the agency to do. Where there are specific provisions in Massachusetts General Laws, Chapter 118E, Sections 31 and 32 governing estate recovery, the agency is limited to these provisions of law. One provision in Section 31 explains that the point of the lifetime lien is to allow recovery during the MassHealth recipient’s lifetime, and no provision anywhere states that the lien is meant to survive the MassHealth recipient’s death. In fact, Section (f) of Massachusetts General Laws, Chapter 190B, Section 3-803 (part of the Massachusetts Uniform Probate Code), the most recent Massachusetts legislation that makes reference to estate recovery, may make the point even clearer that the estate recovery claim against the probate estate is the exclusive method for estate recovery by the MassHealth agency after a MassHealth recipient’s death:

If a deceased received medical assistance under chapter 118E when such deceased was 55 years of age or older or while an inpatient in a nursing facility or other medical institution, section 32 of chapter 118E shall govern the notice to be given to the division of medical assistance and such division’s claim for recovery under section 31 of said chapter 118E if the division so chooses.

The lifetime lien on real estate of a MassHealth recipient is the creature of a narrowly-drawn statute with a narrow purpose, and where there are specific provisions detailing what the agency must do after the MassHealth recipient’s death, the MassHealth agency has no authority to enforce the lien unless such action is taken during MassHealth recipient’s lifetime.

Update on the Maas/Hirvi Litigation, Requiring the MassHealth Agency to Issue Proper Denial Notices and Act with Reasonable Promptness

January 25, 2019

At this time last year, when a MassHealth application included a trust, the application was usually denied, yet the applicant was not provided with any clue as to the reasons why until the administrative fair hearing appeal had actually begun. Obviously, without knowing what was supposedly wrong with the trust, the denied MassHealth applicant was unable to prepare for the hearing. The MassHealth eligibility worker who had issued the denial would often state that the reasons were protected by attorney-client privilege until the time of the hearing. At the hearing, the secret was unleashed; either a MassHealth lawyer would appear to argue or a pre-prepared memorandum written by a lawyer would be entered by the MassHealth eligibility worker into the hearing record. Despite protests from the elder law bar, the Director of the Board of Hearings and all of the hearing officers allowed this unfair process to take place. In some cases, the hearing officer just closed the record on the day of the hearing.

On January 16, 2018, I filed a lawsuit against the MassHealth agency to attempt to obtain judicial action to stop some of its intentional due process failures, then on February 6, 2018, I filed an amended complaint that added a class action count. On March 16, 2018, Attorney Nicholas Kaltsas filed a similar lawsuit that was quickly consolidated with my case. On June 22, 2018, Justice Douglas Wilkins of the Suffolk Superior Court issued a Declaratory Judgment that the denial notices issued by the MassHealth agency in trust cases did not comply with the federal Medicaid law requirement at 42 C.F.R. § 431.210 to provide “a clear statement of the specific reasons” for the denial.

They fail … to give any “reason” – let alone a clear statement of a specific reason — for the most essential determination of all: why the Office deemed the asset (trust) countable. Even less does the Office’s notice give a “clear statement” or “specific reasons” for counting a trust’s assets as the applicant’s assets for Medicaid purposes. Stating what, but not why, falls short of 42 C.F.R. § 431.210 requirements. Without the notice required by the regulation, an applicant lacks the information required “to permit adequate preparation of the case.” 130 Code Mass. Regs. 610.046(A).

42 C.F.R. § 431.210 specifically applies to the notice that the agency must give the applicant “[a]t at the time the agency denies an individual’s claim for eligibility, benefits or services …” 42 C.F.R. § 431.206(c)(2). Notice given at a later time falls outside that clear command. Moreover, 42 C.F.R. § 431.210 requires that the notice itself contain the clear statement of the specific reasons for agency action. Information provided outside the notice, at a much later time, violates that command.

For one thing, a clear statement of specific reasons promotes the statutory requirement that Medicaid applications be handled “with reasonable promptness.” 42 U.S.C. § 1396a(a)(8). See G.L. c. 118E, § 48 (“the referee shall render and issue a decision without forty-five days after the date of filing of said appeal”). It reduces the prospect of delays and continuances attributable to the applicant’s efforts to learn the Office’s specific reasons. 42 C.F.R. § 431.210(b). These kinds of time-consuming efforts are precisely what the Office suggests in response to uncertainties inherent in an inadequate notice. Def. Mem. at 12-13 (suggesting clarification of the issues through prehearing conference, pre-hearing briefing or keeping the record open, all of which take time), citing 130 Code Mass. Regs. § 610.065(B)(3), (11). Since the agency knows (or should know) the reasons for its staff’s decision, delay caused by the Office’s proposal to give notice through subsequent iterative processes is not “reasonable.” The subsequent cure argument assumes that delay caused by delay in learning the agency’s reasons, is of no consequence under Medicaid law. That is not so. Unnecessary delay – ­attributable to efforts to discover what the agency already knows — is exactly what the law seeks to avoid. See 42 U.S.C. § 1396a(a)(8); G.L. c. 118E, § 48.

While delay in itself is an incurable detriment, the financial, resource and psychic burden placed upon the applicant — and any family members or others who may be devoting their own limited time and resources to help the applicant — during the delay are also problematic and irreparable. A clear and specific statement of reasons allows the applicant to save time and expense researching, investigating and preparing for arguments upon which the agency might have, but did not, rely. Self-represented persons undoubtedly benefit from an ability to focus upon and understand what actually led to the agency’s decision, not to mention the reduction in anxiety that uncertainty can cause. Applicants represented by counsel may save significant resources. Moneys spent trying to discern the agency’s reasons cannot be recovered by suing the agency. In any case, focus upon the agency’s real and stated reasons allows a better opportunity to prepare, without wasting money or diluting the applicant’s efforts. That is why 130 Code Mass. Regs. 610.046(A) requires sufficient notice “to permit adequate preparation of the case.”

Ironically, the Office will actually save resources if a clear statement of specific reasons actually convinces the applicant or counsel that the denial was correct. In such cases, there is no need to request a fair hearing and expend agency resources on an unnecessary appeal. Only if the initial determination is wrong or debatable would public resources be expended on an administrative hearing if the initial notice is sufficient. Giving adequate notice that will avoid protective appeals, filed to preserve rights until the Office’s reasons are known, thus operates “in a manner consistent with simplicity of administration and the best interests of the recipients.” 42 U.S.C. § 1396a(a)(l9); 42 C.F.R. 435.902; G.L. c. 118E, § 12.

The Court DECLARES that, in cases where the defendants count trust assets for Medicaid eligibility purposes, the defendants’ standard notices of denial of eligibility violate 42 C.F .R. § 431.210(b) by failing to provide a clear statement of the specific reasons supporting the intended action.

Justice Wilkins left the door open to expand the Declaratory Judgment in the future to non-trust issues, writing on page 15:

The court … exercises its discretion to declare the parties’ rights only with respect to notices that treat trusts as countable assets for MassHealth purposes. That is not to say that the Office’s obligation to provide a clear statement of specific reasons is limited to the trust situation. Obviously, it is not. The Office may well adopt a solution for trusts that affects other contexts as well. If not, the court may need to consider a broader declaration.

Justice Wilkins denied our motion for a class action against the agency. He laid out in his decision that just about all of the grounds had been met, but felt that the Declaratory Judgment should take care of the issue moving forward. He slammed the agency for its ongoing tactics against MassHealth applicants and its illegal inconsistency, writing:

[T]he regulations prevent the agency from using its superior knowledge to the detriment of the citizen. Having reviewed the application at the staff level, the Office undoubtedly knows the clear and specific reasons why it denied the application. There is no reason why it should withhold this information, except for unfair tactical advantage. Whether intentional or not, this tactic also operates as leverage in forcing a vulnerable applicant to negotiate a quick resolution even if the Office is in the wrong. The regulation prevents the government from disadvantaging its citizens in these ways. It also serves the interest of transparency. The regulation dictates that the Office, as a government agency supported by public funds and serving the Commonwealth’s citizens, must not proceed in secret or with indecipherable code, but owes a fair explanation of its decisions to the applicants whose lives it affects, often at a time when the applicant is in a very vulnerable position.

[T]he regulation provides discipline, structures agency decision making and promotes compliance with the law. It is easy to deny an application with an opaque explanation and leave matters for an appeal. On the other hand, to give a clear and specific statement of reasons, the staff must review the application with some care. In many contexts, the courts have acknowledged the discipline that a statement of reasons imposes upon decision-making, which ensures adherence to the law and checks arbitrariness. See generally Motor Vehicle Mfrs. Assn. of United States, Inc. v. State Farm Mut. Automobile Ins. Co., 463 U.S. 29, 48-49 (1983) and cases cited. McDonough, Administrative Law and Procedure, 38 Mass. Practice Series,§ 10.37, pp. 607-608 (2016 Ed.) (“In addition to facilitating and effectuating the function of judicial review, a statement of reasons constitutes a substantial check upon the misuse of agency power because a final decision based upon a statement of reasons is far less likely than otherwise to be the product of arbitrary, capricious or unreasonable agency consideration.”). That goal is particularly important in a trust assets case like this one, where “Medicaid law is ‘almost unintelligible to the uninitiated,'” and the Office has taken many inconsistent and sometimes contradictory positions on treatment of trusts for purposes of calculating assets under the Medicaid laws. The regulation leaves less room for hidden inconsistency and whim by requiring the Office to state its reasons for denying an application clearly and specifically.

In case they are of interest or help to someone, here are the Plaintiffs’ brief  along with Exhibits A-F and Exhibits H-N and Exhibits O-P. Exhibit G contained affidavits from many elder law attorneys, and I again thank all of them for their support. In addition, here is the MassHealth agency’s brief, written and filed by the Office of the Attorney General.

As should have been expected after the Declaratory Judgment was issued, the MassHealth agency’s lawyers who had concocted this rigged process in the first place then proceeded to do the absolute bare minimum to take care of the due process problems for which Justice Wilkins had severely criticized them. The agency did absolutely nothing to provide better and more informative denial notices on non-trust issues such as disqualifying transfers and missing verifications. (As we had pointed out to Justice Wilkins, my office has been told by MassHealth eligibility workers, who are the MassHealth agency employees who actually issue the denial notices, that they are provided with no space at all to provide the denied MassHealth applicant with any specifics about the reasons for the denial.) In the only non-trust lawsuit that I know of that was filed after the Maas/Hirvi Declaratory Judgment, the agency quickly backed down and issued a new denial notice providing the reasons for the denial to Attorney Kaltsas in a missing verifications case, so the Declaratory Judgment issued by Justice Wilkins may well have broad applicability.

In trust cases, the agency now provides an extra notice that provides reasons, but the notices almost always seem to state that the denial was issued for reasons that “include but are not limited to” the stated reasons. It was the agency’s attitude immediately after the Declaratory Judgment that the agency did not need to provide all of the reasons for the denial on the denial notice, and that the agency could even get away with providing only one reason. This Clarification of the Declaratory Judgment requested by Attorney Kaltsas and issued by Justice Wilkins on October 11, 2018 took care of that excuse for the agency’s new attempts to deny due process to MassHealth applicants; he wrote:

Because the Office must set forth “a clear statement of the specific reasons supporting the intended action,” a violation of both the regulation and this court’s declaration has occurred if the Office only provides an incomplete statement, but not all of the “reasons” “supporting the intended action.” The plain meaning of the phrase, “the specific reasons” – in the plural – is inclusive. It does not mean “some of the reasons.” Where more than one reason exists, providing a single reason squarely violates the regulatory choice to use the plural. While it might technically be possible to argue that providing two reasons satisfies the use of the plural even if three or more reasons exist, the defendants wisely do not make such an argument. That construction would non-sensical. There is no linguistic or regulatory-policy reason to construe the regulation as imposing an “at least two reasons” minimum. Indeed, withholding any of the “reasons supporting the intended action” would squarely defeat the regulatory purposes, discussed on pp. 8-12 of the June Order. The only reasonable interpretation of the regulation’s plain language is that the Office’s notice of denial must include each of the “specific reasons supporting the intended action,” at least when based upon including of trust assets.

Clarification of this point is particularly important, because there appears to be some residual confusion. In particular, the defendants … assert that “once MassHealth identifies in its denial notice a single circumstance (or circumstances) under which trust assets may be payable to or for the benefit of the applicant, it has explained why the assets are countable.” One reason may well be enough to support a denial. But if that is the reason why the Office includes the “but not limited to” language in the notice, then it is a non-sequitur. The fact that the Office’s notice identifies “a single circumstance (or circumstances)” warranting denial does not mean that it has given a “statement of the specific reasons supporting the intended action” if it also relies upon unstated reasons to support its denial (Emphasis added). Supplying one or two reasons among many is not the same as stating “the reasons.” The defendants do not explain how their “single circumstance” argument can be squared with the use of the plural. If a reason “support[s] the intended action” it must be included in the notice. The court so clarifies the Declaration.

At this point, it seems that all MassHealth denials involving trusts are receiving the extra notice that provides reasons for the denial, yet the game-playing against Massachusetts citizens by MassHealth lawyers continue. Even though Justice Wilkins had cited “the statutory requirement that Medicaid applications be handled “with reasonable promptness.” 42 U.S.C. § 1396a(a)(8),” and had pointed out that “[u]nnecessary delay­ … is exactly what the law seeks to avoid,” the MassHealth lawyers now appear at the fair hearing to make their arguments, then request a month or so to write their brief (which then means that the appellant’s lawyer needs time after finally seeing it to file a written response). Where the agency is required to provide all of the reasons for the denial on the denial notice, there seems to be no good reason for the MassHealth lawyer to be unprepared at the time of the fair hearing, and intentionally creating procedural delays seems unreasonable.

As I see it, if the Board of Hearings is actually independent and doing its job, these MassHealth lawyers should not be allowed to get away with creating a new procedure that is not part of the law or regulations, and every appellant should appear at the fair hearing with the appellant’s written memorandum in response to the reasons provided on the denial notice, then demand that the record be closed on that day. After all, having MassHealth lawyers behave that way intentionally slows down the hearing process, and they and the Board of Hearings undoubtedly are aware of the requirement not only in the fourth paragraph of Massachusetts General Laws, Chapter 118E, Section 48, but also in the Board of Hearings’ own regulation at 130 CMR 610.015(D)(1)(a), that a written decision be issued within forty-five (45) days after the Board of Hearings receives the denied MassHealth applicant’s request for a fair hearing.

If the Board of Hearings cares about being independent and prompt, it will reject the MassHealth lawyers’ latest scheme to stretch out the fair hearing appeal process when trusts are involved. That, however, may be wishful thinking, since if the Board of Hearings were actually independent and fulfilling its proper role, the Maas and Hirvi cases would not have even been needed for MassHealth appellants to receive due process.

Update on Spousal Refusal for MassHealth Purposes

June 4, 2018

Having recommended the idea of spousal refusal more and more, I researched the topic again the last time I was at the Board of Hearing searching for new trust decisions.  I have found three more fair hearing decisions regarding spousal refusal:  1709521, 1713783 and 1800448. In all three cases, the spouse at home refused to cooperate financially with the MassHealth application of the institutionalized spouse, and was allowed to keep assets without even having to disclose them. (Other fair hearing decisions on this issue can be seen at Must Both Spouses Always Cooperate When There Is a MassHealth Application for One of Them?)

Spousal refusal may in some cases be a better move than purchasing a single premium immediate annuity, especially where there is a chance that Congress will change the federal Medicaid law that allows such annuity payouts to belong completely to the community spouse and instead begin treating one-half of the annuity as the institutionalized spouse’s income.

Ongoing Due Process Violations by the Office of Medicaid Are Highlighted in the Affidavits of Dozens of Lawyers

May 30, 2018

In a Suffolk Superior Court case that I filed in January, 2018, which later was consolidated with a similar case filed Attorney Nicholas G. Kaltsas in March of 2018, we have attempted to stop ongoing due process violations by the Office of Medicaid, which is part of the Executive Office of Health and Human Services. To show the Court that we are not alone in our concerns about what the agency has been doing for years, we asked for help from the elder law bar, and we thank the following persons (almost all of whom are Massachusetts lawyers) for the following affidavits, all of which have been filed with the Court.

Affidavit of Edward Adamsky

Affidavit of Matthew Albanese

Affidavit of Paula Almgren

Affidavit of Michael Baker

Affidavit of Carol Barton

Affidavit of Michelle Beneski

Affidavit of Rebecca Benson

Affidavit of Margot Birke

Affidavit of Jeffrey Bloom

Affidavit of Cynthia Bourget

Affidavit of Elaine Breslow

Affidavit of Lucy Budman

Affidavit of Joe Cataldo

Affidavit of Steve Cohen

Affidavit of Patrick Curley

Affidavit of Hyman Darling, Gina Barry and Todd Ratner

Affidavit of Nicholas Daviau

Affidavit of Kate Downes

Affidavit of Judy Flynn

Affidavit of Bob Ford

Affidavit of Andrew Gallant

Affidavit of Pam Greenfield

Second Affidavit of Pam Greenfield

Affidavit of Annette Hines

Affidavit of Karen Johnson

Affidavit of Ron Kearns

Affidavit of Carol Klyman

Affidavit of Stephanie Konarski

Affidavit of Tenney Lantz

Affidavit of Alexis Levitt

Affidavit of Holly Lewis

Affidavit of Tim Loff

Affidavit of Laura McDowell-May

Affidavit of Dennis McHugh

Affidavit of Alex Moschella

Affidavit of Tom Mullen

Affidavit of Phil Murphy

Affidavit of Kathy Nealon

Affidavit of Tim Nealon

Affidavit of Erin Shea

Affidavit of Paul Silvia

Affidavit of Fran Small

Affidavit of Susan Smith

Affidavit of William Stephan

Affidavit of Jane Sullivan

Second Affidavit of Jane Sullivan

Affidavit of Cathleen Summers

Affidavit of Ron Surabian

Affidavit of Dan Surprenant

Affidavit of Paul Thornhill

Affidavit of Laura Traiger

Affidavit of Stephanie Tymula

Affidavit of Mark Veglia

Affidavit of Kristina Vickstrom

Affidavit of Jackie Voss Lees

Affidavit of John Welch

Second Affidavit of John Welch

Affidavit of Mark Worthington

Affidavit of Vivian Youngberg

Affidavit of Liane Zeitz

Using Reserved Special Powers of Appointment in Deeds and/or Irrevocable Trusts in MassHealth Planning

November 28, 2017

Due to their concerns about possible impact of nursing home costs on their assets, many aging clients feel under pressure to make transfers of their assets earlier than may otherwise be advisable. One relatively simple way to make such a transfer more palatable to a client is to suggest that the client reserve a non-general power of appointment, also known as a limited or special power of appointment (“SPA”), in a deed or irrevocable trust.

What is an SPA?

An SPA is a power which allows someone at a later date to alter the disposition planned under the original instrument of conveyance. This power can be reserved by the client in the original instrument making the transfer, or granted to somebody else. In 2017, the Massachusetts Appeals Court ruled that such a SPA in a deed is a valid transfer; see Reservation of Special Power of Appointment in Deed Is Approved by Massachusetts Appeals Court in 2017 Case of Skye v. Hession. 

By use of the SPA, each remainderperson (the persons inheriting the remainder of an irrevocable trust, or the persons to whom real estate was deeded) would have a vested remainder subject to divestment.  If the SPA is never exercised, however, the property will eventually be owned by the persons or entities (and in the proportions) originally planned.

The possible alternate recipients of the property named or described in the SPA can be any person or entity, but for tax and MassHealth reasons, the SPA should exclude the client, the client’s creditors, the client’s estate, and the creditors of the client’s estate. (If the SPA limits the appointment power to a group, under settled law the power automatically excludes the client’s creditors, the client’s estate, and the creditors of the client’s estate.) A power which includes any of this group could be treated as a general power of appointment under Internal Revenue Code sections 2041 and 2514 and saddle the holder of the power with unintended MassHealth consequences. For MassHealth purposes, the client’s spouse should also be excluded.

Why does a reserved SPA work in MassHealth planning?

Two key elements in MassHealth planning are that the property not be reachable by a creditor (such as the state MassHealth program), either (1) during the client’s lifetime or (2) after the client’s death. A transfer which is subject to a reserved SPA can meet both of these tests. As long as the property is vested, albeit defeasibly, in entities or persons other than the client and the client’s spouse, and as long as neither of them have any power to revest the property in themselves, the property should be deemed transferred for purposes of beginning the running of the MassHealth disqualification period. If nursing home care is not needed during the MassHealth disqualification period, the property is protected in case the need for nursing home care should subsequently arise (unless, of course, federal Medicaid laws change retroactively, an occurrence which is always a risk in MassHealth planning).

Since the MassHealth disqualification period would begin to run upon the original transfer, any later exercise of the SPA should not cause any additional period of MassHealth disqualification.

Tax benefits of reserved SPA to the client

The control afforded by the SPA has tax ramifications. Internal Revenue Code section 2038 will treat the transferred assets as if they had not been transferred, and the full fair market value of the assets as of the client’s date of death will be includible in the client’s federal gross estate. If the assets had appreciated in value during the time of the client’s ownership, this result will often be advantageous to the transferees, as Internal Revenue Code section 1014 then gives each asset a “stepped-up basis.” This means that the value at which each asset is includible in the client’s federal gross estate will then become the asset’s new basis (i.e., the figure above which federal capital gains taxes would later be assessed upon a sale of the asset).

The SPA prevents a completed gift from being made for gift tax and capital gains tax purposes.  Under Treasury Regulation Section 25.2511-2(b), the funding of an irrevocable trust or deeding of real estate with an SPA would be considered an incomplete gift.

In an irrevocable trust, a reserved SPA which allows the client and/or the client’s spouse to make lifetime gifts out of the trust fund invokes the grantor trust rules (found in Internal Revenue Code sections 671 through 679). Upon a future sale of the home, the use of the client’s $250,000.00 capital gains exclusion under Internal Revenue Code section 121 may thus be preserved. Since a gifting aspect of the SPA may be required in order to activate the grantor trust rules as to principal, the client could reserve an SPA which allows him to make unlimited lifetime gifts to charitable organizations. Under this approach the client should not be deemed to have even indirect access to the trust fund, but be leery of the Supreme Judicial Court’s shockingly ignorant comment in the 2017 Daley case about a power of appointment that allowed gifts to nonprofit organizations. Because the SJC’s dicta will undoubtedly be considered to be an educated comment (although the issue had not been briefed or even mentioned by the parties), it may be advisable in drafting to take pains to specify that the powerholder cannot make a gift to pay a debt; somehow the SJC justices did not seem to consider that basic concept  when issuing its kneejerk comment.

It should be noted here that, despite the opinion of one legal commentator, an SPA in a deed does not necessarily allow the transferor to make full use of the transferor’s $250,000.00 capital gains exclusion under Internal Revenue Code section 121. If the transferor wishes to move in the future to a smaller, less expensive home, the drafting lawyer should consider placing the home into an irrevocable grantor trust in order to preserve this exclusion.

Example of use of reserved SPA in a deed

Consider the following use of a reserved SPA in a deed: “John Smith hereby grants to his daughters, Mary Smith, Jeanne Smith, and Cheryl Jones, as joint tenants with right of survivorship, the following premises……John Smith reserves the power, exercisable as often as he may choose, by an instrument recorded at this registry of deeds during his lifetime, to appoint these premises, outright or upon trusts, conditions or limitations, to any one or more of his issue or their then current or surviving spouses.”

If Mary, Jeanne or Cheryl are sued, file for bankruptcy, file for divorce, marry a man for whom John feels little affection, become disabled or incompetent, have a falling out with John, or undergo some other change in circumstances or character, John can eliminate the daughter’s interest, can set it up in trust for the daughter and/or her husband, widower or issue, or can make it subject to a right of first refusal.

The SPA may also be of great utility if a daughter predeceases John. By exercising the SPA he could eliminate her interest and the need for probate of her estate. If in the absence of the exercise of the SPA he were to inherit her share of the home, however, a new MassHealth disqualification period may thus begin to run. If this gift had been made to the daughters as tenants in common, upon a daughter’s death John could be revested with the daughter’s share, and an exercise of the SPA could thus begin the running of a new MassHealth disqualification period.

In the above example of a gift to Mary, Jeanne or Cheryl as joint tenants with a reserved SPA in John, the deed could be recorded and the running of the MassHealth disqualification period could begin without time being spent in reviewing or altering the estate plans of John’s daughters. Upon a daughter’s death where the daughters hold title as joint tenants, and upon John’s later exercise of his SPA, he would not begin the running of a new MassHealth disqualification period because he would not have inherited any interest. (If his testamentary wish were per stirpes, however, the possibility of his later becoming incompetent to exercise the SPA makes this maneuver risky, even if it were meant to be temporary.)

Example of use of reserved SPA in an irrevocable trust

Consider the following use of a reserved SPA in an irrevocable trust: “John Smith reserves the power, exercisable during his lifetime as often as he may choose, to appoint any part or all of the principal and income of the trust fund, outright or upon trusts, conditions, or limitations, to any one or more of his issue or their then current or surviving spouses, or to charitable organizations.”

Much of the above discussion regarding deeds also applies here, except that in a trust the remainder interest would not become vested until John’s death, so that a per stirpes testamentary disposition can be initially established without concern for any daughter’s estate plan, or lack thereof.

Should an SPA have self-destructing language?

A future complication could be caused by use of a simple SPA, for a meticulous conveyancing lawyer may require proof that the SPA was not exercised by will. In such a case the transferor’s will may have to be probated, perhaps solely for this reason. This complication can be eliminated by language in the deed or trust which causes a conclusion presumption of the failure to exercise the power by will or codicil if notice of the establishment of probate proceedings is not recorded in the chain of title within a certain time frame after the transferor’s death.

Is the insertion of a life estate and/or an SPA in a deed a better overall move than the establishment of an irrevocable trust?

Irrevocable trusts have for a few years now been under attack from lawyers at the Office of Medicaid, and as one elder law attorney once said to me, no client wants to be a test case. The inclusion of an irrevocable trust in a MassHealth application right now is practically a guaranteed denial, and the outcome of the fair hearing appeal is often based on which hearing officer is assigned to your case.  See for over 200 recent fair hearing appeals regarding irrevocable trusts, with the Office of Medicaid Board of Hearing’s appalling lack of knowledge of trust law and utter disregard for administrative consistency being the main points one can take from a close reading of the hearing decisions.

The combination of a life estate and a SPA usually has the same estate tax result as an irrevocable trust, with a step-up in basis received by the remainderpersons, but does not have the same capital gains tax result upon a lifetime sale, where an irrevocable trust would often not be subject to capital gains taxes but the remainderpersons would be subject to them. These lifetime capital gains tax issues, centralized management and the fiduciary duties of a trustee may be the main advantages of an irrevocable trust, but other issues may be of greater importance to the client.

The nonexistence of fiduciary duties on the part of the remainderpersons in a deed with a life estate and/or SPA would prevent the deed from being treated as a trust under Medicaid law. Further, an SPA reserved by the client should not be subject to a lifetime lien or post-death estate recovery because it is not a property interest.  (See Restatement 3rd Property (Wills and Donative Transfers) §22.1 Comment a (“a nongeneral power of appointment is not an ownership-equivalent power.” Also, see Restatement 2nd (Donative Transfers) 13.6, Comment b (“Where a non-general power has been created, the donee is not in the position of an owner either as a matter of common law doctrine or the practicalities of the situation.) )  Still, proposed regulations issued but he Office of Medicaid in November of 2016 treated a deed with both a life estate and an SPA as a trust, so it is probably best for long-term planning purposes not to have both of them in the same deed.

Besides the capital gains tax ramifications for a sale during the client’s lifetime, there are significant reasons that an irrevocable trust may not be the better move. An irrevocable trust is set in stone, whereas persons to whom the real estate is transferred could choose to adapt to changing circumstances.  For example, an irrevocable trust could not ever participate in a reverse annuity mortgage due to the prohibition of principal to its settlor, but the remainderpersons in a deed could someday choose to expose their own established personal financial interests in order to obtain such a mortgage. In addition, for the first 5 years after a transfer, a life estate or an SPA would actually be better than an irrevocable trust, because the remainderpersons could choose to transfer the real estate back to the client and cure the disqualifying transfer, whereas the funding of an irrevocable trust would doom the client to the consequences of waiting 5 years and a day before applying for MassHealth.

Under the Rule 1.4(b) of the Massachusetts Rules of Professional Conduct, a “lawyer shall explain a matter to the extent reasonably necessary to permit the client to make informed decisions regarding the representation.”  Under Rule 1.0(f), the term “informed consent” is defined as “the agreement by a person to a proposed course of conduct after the lawyer has communicated adequate information and explanation about the material risks of and reasonably available alternatives to the proposed course of conduct.”  The recommendation of an irrevocable trust to a client when there are other, simpler ways to accomplish the client’s primary goals may fall short of that standard.

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