By Harry S. Margolis
In Patricia A. Fournier vs. Secretary of the Exec. Office of Health & Human Services (SJC-13059, July 23, 2021), the Supreme Judicial Court finally puts to rest a MassHealth argument that property in an irrevocable trust may be countable if the grantor retains a limited power of appointment to charity. The SJC had left this question open in the prior case of Daley v. Secretary of the Exec. Office of Health & Human Servs., 477 Mass. 188, 203 (2017).
Many trusts created for purposes of sheltering homes of older individuals concerned about future need for nursing home care have included a limited power of appointment permitting the trust grantor during his or her life to appoint property—in other words, to direct a distribution—to non-profit organizations. The reason to include such provisions in these trusts is to make certain that if the home were sold during the grantor's life that it would qualify for the $250,000 exclusion on capital gains available to homeowners. (I won't go into the tax law reasons that this works.)
MassHealth has argued that this would permit the grantor of such trusts to direct trust assets to a non-profit nursing home for his or her care, rendering the trust assets available. The SJC explicitly left this as an open question in the Daley case. Fortunately, it answered the question here.
In 2002, Emily Misiaszek and her husband created an irrevocable trust to hold their home and named their daughter, Patricia Fournier, as trustee. (I note that the trust as described in the decision sounds very much like the form of trust we used at the time.) By May 2017, Ms. Misiaszek had moved to a skilled nursing facility and her application for MassHealth was denied because the trust "seemingly permitted Misiaszek to appoint the trust principal to a nonprofit nursing facility to pay for her long-term care."
Ms. Misiaszek appealed and won her case in superior court, but MassHealth appealed it, giving rise to this ultimate decision.
The Court summarizes MassHealth's argument as follows:
MassHealth argues that the plain language of article 2.2 of the Misiaszek trust "contains no language barring transfers of principal to or for the benefit of Misiaszek," and thus permits her to exercise her limited power accordingly. Its contention is that Misiaszek could "enter a nursing facility with an express promise to pay for her care through [her limited] power of appointment," or she could incur a debt to the facility and then subsequently appoint trust principal to the nursing facility to pay the debt.
The SJC disagrees, saying that "MassHealth's hypothesized appointment is not permitted under established principles of trust and property law." Citing prior cases, it finds that Ms. Misiaszek may not use the power of appointment for her own benefit. Further, the SJC looks at how the power of appointment fits into the entire trust:
Taken together, the terms of the Misiaszek trust only permit Misiaszek to live in the home during her lifetime, to receive payments of trust income, and to make charitable contributions to organizations in which she has no interest. She is not permitted to receive any distribution of trust principal from the trustee, and the termination of the trust is contingent on events beyond her control. We do not discern from the trust language any intent for Misiaszek to benefit personally from any distribution of the trust principal.
Finally, the Court finds that the power of appointment cannot be used to force the trustee to make payments on the grantor's behalf because to do so would force her to violate her fiduciary duty to the ultimate beneficiaries of the trust, Ms. Misiaszek's children.
Litigator Par Excellence
We note that this is one more MassHealth case successfully argued by Lisa M. Neeley of Mirick O'Connell. Both the Massachusetts Chapter of the National Academy of Elder Law Attorneys and the Massachusetts Bar Association submitted amicus curiae briefs in support of Ms. Misiaszek's trust.
While this case resolved an open legal question, we hope that after this string of losses that MassHealth will stop forcing litigation of trust cases based on arguments that are stretches at best. Of course, every trust is different and some trusts deserve to be challenged, but any challenge should be based on well-established trust law, not creative legal thinking.