In Guilfoil v. Sudders, the SJC Approved the Use of Nominee Trusts in MassHealth Planning

In Guilfoil v. Sudders, 486 Mass. 788 (2021), the Supreme Judicial Court of Massachusetts (“SJC”) has for the first time tackled the issue of how nominee trusts should be treated under federal Medicaid trust law. In this case, the MassHealth applicant had a life estate listed on the nominee trust’s Schedule of Beneficiaries, and her children owned vested remainder interests. Among the MassHealth agency’s arguments were that the trust was revocable because any beneficiary could require termination, and that the vested remainder beneficiaries could amend the trust to make the MassHealth applicant the sole beneficiary (thereby creating a “circumstance” whereby principal could be made available to the applicant).

Previous SJC decisions in the non-MassHealth context had generally treated nominee trusts as principal-agency relationships instead of trusts. Relying on existing Massachusetts case law, the SJC shot down all the MassHealth agency’s arguments. Although the SJC could possibly have ruled that the actuarial value of the life estate was a countable trust asset until deeded out to the life tenant, the SJC ruled definitively that a life estate in a nominee trust is not a countable asset for MassHealth purposes.

In dismissing the agency’s argument that the beneficiaries could amend the trust to return the real estate to the MassHealth applicant, the SJC stated that such an event would involve an independent act by those beneficiaries. By reiterating language from the 2016 Heyn case in the Massachusetts Appeals Court that had nixed a two-step transfer analysis, the SJC adopted the exact same reasoning:

This “gifting” would constitute an action outside the termination and is not a scenario contemplated within the four corners of the trust document. “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 v. Director of the Office of Medicaid, 89 Mass. App. Ct. 312, 318-319 (2016). Guilfoil at 798.

Given that a nominee trust has now received the SJC’s approval as a MassHealth planning device, Massachusetts elder law attorneys who wish to use such “trusts” should not open the door to challenges by the MassHealth agency by changing the basic language seen by the SJC; perhaps the nominee trust form approved by the Real Estate Bar Association of Massachusetts should be utilized.