Many clients have legitimate concerns about the use of an irrevocable trust in their estate plans. In short, the use of irrevocable trusts should be used only in those situations in which the client is prepared to give up control and access to the asset transferred to the trust.
A recent Massachusetts estate planning case dealing with such an irrevocable trust sheds new light on asset protection, long-term care planning and drafting income-only irrevocable trusts. The Appeals Court’s decision in Heyn v. Director of the Office of Medicaid (a.k.a. Roche), involved the use of an irrevocable trust. The case is significant and should help to ease client (and attorney) concerns on the use of irrevocable trusts in appropriate planning situations. Since Mass. cases influence all New England court’s in this area of law this case is valuable precedent in New Hampshire.
Factually, in the Roche case, Everlina Roche entered a skilled nursing facility on November 4, 2011. Ms. Roche had an income-only irrevocable trust prepared in 2003 and transferred her former residence to the trust. She retained a life estate in the property. Her daughter was the trustee. As part of a MassHealth asset verification check, the trust was reviewed; and assets in the trust were held to be countable assets which effectively disqualified Ms. Roche from MassHealth long term care benefits. The trust that was prepared by Ms. Roche’s attorneys included many clauses routinely used by estate planning attorneys in irrevocable trusts. the Mass. Health hearing officer concluded that the terms of the trust allowed Ms. Roche a back door through which to access the trust’s principle.
The Roche court upheld the majority of the trust’s clauses and rejected the Mass. Health hearing officer’s conclusions that the terms of the trust allowed Ms. Roche to access the trust’s principle. In summary, the court confirmed that so long as the person creating the trust (referred to as the “Grantor” ) has no ability to access the principle of the assets of trust and cannot control the access to the trust’s assets a properly drafted income only irrevocable trust is a viable estate planning option.
Author: Attorney John S. Polgrean
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