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MassHealth and Probate Estate Recovery
Aug 23, 2022

The Federal government mandates that if you receive Medicaid benefits after age 55, or if Medicaid pays for nursing home care for you at any time during your life, Medicaid/MassHealth must attempt to recover the cost of benefits paid on your behalf from your estate at your death. In Massachusetts, MassHealth can only recover from assets that pass through your probate estate. Probate assets are those assets you owned individually prior to your death and that did not have a named beneficiary.  At your death if your estate needs to be probated to pass your home and/or other assets to your heirs, it is then that MassHealth will make a claim against your Probate Estate in the probate court; that claim must then be paid prior to any distribution of your assets to your heirs. 


During the last few years, the use of Senior Care Options and PACE programs began expanding. These are programs designed to provide complete healthcare to seniors in the community. The goal is to allow healthy seniors to continue living at home longer. MassHealth pays premiums to private companies to provide these programs, making the programs much more affordable. However, seniors that are enrolled in these programs were often unaware that their estate may have to payback MassHealth upon the senior’s death. The premiums can total as much as $3,000 per month. Many seniors and their families were not notified about potential probate estate recovery when they enrolled in the program.  Upon the senior’s death, the probate estate could receive a large bill for the premiums paid by MassHealth. 


Elder Law firms in Massachusetts filed appeals in the Courts on behalf of several clients who received these unexpected bills. A ruling was obtained that stated MassHealth can only recover premiums from a decedent’s estate if MassHealth mailed written Notice to the senior and their families at the time of enrolling in these Senior Care Options and PACE programs.  The advance written notice must state that MassHealth has the right to recover premiums paid on behalf of the person enrolled in the program at the person’s death. Once this court ruling was obtained, MassHealth began mailing written notices to people beginning enrollment into these programs, thus allowing MassHealth the right to recover from a person’s probate estate at the person’s death. You may have received such a notice. If you did this means that you (or a loved one) are receiving or have received MassHealth benefits.


A Bill, crafted by Elder Law attorneys and advocates, is pending in the Massachusetts legislature proposing changes to make Estate Recovery fairer and limit Estate Recovery to only those assets that the Federal government mandates. As a result of this advocacy, MassHealth made revisions to the Estate Recovery rules.  Those revisions expanded exemptions and waivers allowing more people to avoid Estate Recovery. Therefore, presently no probate estate under $25,000 is subject to Estate Recovery. There are also expanded waivers of estate recovery for low-income heirs, heirs who cared for the ill person at home and financial hardship waivers.  If during the probate of a loved one’s estate, the Personal Representative (Executor) receives a MassHealth claim for estate recovery, you should check with an Elder Law Attorney immediately to see if any of the new waivers apply. There may be a very limited time to file for a waiver. 


If you or a loved one need or are receiving MassHealth benefits directly, or MassHealth is paying your premiums for the Senior Care Options program or the PACE program, you may want to consult an Elder Law Attorney to see how Estate Recovery impacts your family. If you ae considering to apply for Senior Care Options program or the PACE program, there may be things that can be done in advance to avoid Estate Recovery. You should also find out if any of the recently developed waivers apply in your situation. This article highlights the complexity of MassHealth benefits and why it can be beneficial to work with an Elder Law Attorney to apply for and manage such benefits.


DO NOT make decisions based upon information in this article. Every family is unique and legal advice can only be given after an individual consultation with an elder law attorney. Any decisions made without proper legal advice may cause significant legal and financial problems.

Using a Credit Card When You Have a Special Needs Trust

25 May, 2023
A special needs trust (SNT) allows you to meet your needs while receiving government benefits, such as Medicaid/MassHealth and Supplemental Security Income (SSI). When you have a special needs trust, you can use it to pay for goods and services government benefits do not cover, such as therapy, education,and housing. Since receiving income directly from your trust would jeopardize your eligibility for benefits, your trustee cannot give you cash from your SNT. When you use a credit card for permitted transactions, and your trustee pays off the balance with funds from your trust, these payments to a credit card company are not considered income. An SSI or Medicaid/MassHealth recipient who is capable of managing their own affairs can therefore use a credit card to make small purchases, and the trustee of the special needs trust need not micromanage every transaction. In the past, beneficiaries of SNTs sent their bills to their trustees for payment. Today, an individual with an SNT who qualifies for a personal credit card may find that using a credit card is more convenient. Credit cards have several benefits. Using a credit card to manage payments from your special needs trust allows you to maintain independence, gain access to some of the advantages of a credit card, and easily keep records while preserving your eligibility for Medicaid/MassHealth and SSI. Although credit cards can help people manage their special needs trusts, there are also several important restrictions and considerations to keep in mind. Consult with a special needs planner to ensure all transactions are acceptable under the trust's rules and comply with government regulations. The Benefits of Using Credit Cards When You Have a Special Needs Trust If you have a special needs trust, using a credit card has many benefits, including: Independence : Allowing you to maintain your independence. You can use your card to make qualifying purchases yourself. Your trustee does not have to make the transactions for you. Access to the Typical Advantages of a Credit Card : Using it responsibly can help you establish or build credit history, which may be important for your future financial needs. Record-Keeping : Credit cards provide easy record-keeping and a convenient way to monitor transactions from your special needs trust, which can also help special needs trustees fulfill their duty to maintain records. When you use your card, your trustee can observe your purchases and ensure that all expenses are allowable under the trust’s rules. Your statements can help your trustee keep track of funds leaving the trust. Benefits Eligibility : While adhering to Medicaid/MassHealth and SSI’s income and asset limits, you can access funds from your SNT. Credit cards can help prevent your trustee from accidentally providing you with cash payments that could affect your eligibility for government benefits. Considerations When Using a Credit Card for Your Special Needs Trust While you can use a credit card to access funds from your special needs trust for certain transactions , restrictions apply. If your trustee sees a charge on your card that could affect your benefits eligibility , they can flag it for review. You cannot use your credit card to pay for food and shelter, which SSI would cover. When administering your funds, your trustee must ensure that any expenditures are for your sole benefit if you have a first-party special needs trust. While using a credit card is appropriate, you should not use a debit card. Debit cards are considered cash income. Best Practices When using a credit card for a special needs trust fund, remember several best practices. Choose a card with low fees and interest rates. Set a clear budget and monitor transactions regularly. Keep thorough records and receipts of expenses. Consult with your special needs planning attorney. A special needs planning attorney can help you navigate the rules that apply to your trust and understand how to use a credit card to preserve your Medicaid/MassHealth and SSI eligibility. 

How an ILIT can help offset estate taxes

12 May, 2023
With the Federal estate tax exemption possibly about to be lowered, it may be time to think about steps you can take to keep your estate from being taxed. An irrevocable life insurance trust allows you to pass on money to your heirs while avoiding both the federal estate tax, as well as any applicable state estate tax which is currently $1 million in the Commonwealth of Massachusetts. Senate Democrats have proposed lowering the current estate tax exemption from $11.7 million for individuals and $23.4 million for couples to $3.5 million for individuals and $7 million for couples. While it is unclear if this proposal will pass, it is likely that some change to the estate tax is coming. Even if Congress does not take any action, the current rate will sunset in 2026 and essentially be cut in half, to about $6 million per individual. In the Commonwealth of Massachusetts, the current estate tax exemption is $1 million for individuals and is taxed at dollar $1.00. A proposal to raise it to $3 Million and the tax to start at $3 Million (not at $1.00) has been submitted in the legislature but has not yet been voted on or enacted. One way to make up for any estate tax your estate may have to pay is by setting up an irrevocable life insurance trust [ILIT]and funding it with a policy that has a death benefit that would pay your heirs some or all of the amount your estate will be taxed. If you purchased such a life insurance policy directly, it could end up being taxed as part of your estate. But if a trust owned the policy, it could pass outside your estate. While a life insurance trust can be highly beneficial, it is also complicated to set up and maintain properly. The following are some of the requirements: Trustee . If you are setting up the trust, you cannot also serve as a trustee. If you are the trustee, you have control of the trust, which could lead to the trust being included in your estate. You will need to name another trusted person or financial institution to act as trustee. Policy ownership . The trust must own the life insurance policy. If you transfer an existing policy to the trust and die within three years, the policy will still be considered a part of your estate. To avoid this risk, the trust can purchase a policy directly rather than receive an existing policy. Premiums . You need to transfer funds to the trust to pay the policy premiums, which creates an issue with gift taxes. A transfer to a trust is usually not subject to the $15,000 yearly gift tax exclusion. For a gift to qualify for the exclusion, the recipient must have a "present interest" in the money. Because a promise to give someone money later does not count as a present interest, most gifts to trusts aren't excluded from the gift tax. To avoid this, you can use something called a “Crummey” power which gives beneficiaries the right to withdraw the funds transferred to the trust for up to 30 days. As part of the process, the trustee needs to send them a letter, known as a Crummey letter, letting them know about the trust funding and their right to withdraw the funds. After the 30 days have passed, the trustee can use the funds to pay the annual insurance premium. You run the risk of the beneficiaries withdrawing the funds, but if they know that by allowing the money to stay in the trust they will receive more money later, it shouldn’t be a problem. Beneficiaries . The beneficiary of the life insurance policy is usually the trust. Once the funds are deposited in the trust, the trustee can distribute the assets to the beneficiaries in the way specified by the trust. For example, if your beneficiaries are minors, you can wait to have the trustee distribute the assets. Keeping the assets in the trust will also protect them from your beneficiaries’ creditors. The downside of an irrevocable life insurance trust is that you do not have the ability to change it once it is set up, although the policy would effectively be canceled if you stopped paying the premiums. If you are considering this type of trust, discuss it with your attorney.
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