“Thought for the Day” #762 – by Stephen R. Elville, J.D., LL.M.

July 18, 2016

When using a Medicaid “Income Only Trust” for asset protection in the long-term care context, care must be taken in the design, implementation, and on-going management of the trust.  Recently New Hampshire’s highest court has ruled that a Medicaid applicant’s irrevocable trust is an available asset even though the applicant was not a beneficiary of the trust because the applicant retained a degree of discretionary authority over the trust assets. Petition of Estate of Thea Braiterman (N.H., No. 2015-0395, July 12, 2016).  Thea Braiterman created an irrevocable trust in 1994, naming herself and her son as trustees and her children as beneficiaries.  In 2008, Ms. Braiterman resigned as trustee, but the trust authorized her to appoint additional and successor trustees, including appointing herself.  The trust also gave Ms. Braiterman the ability to appoint any part of the income of the trust to any of the beneficiaries and did not limit her ability to impose conditions on the appointment of principal to the beneficiaries.  Ms. Braiterman entered a nursing home and applied for Medicaid.  The state determined that the trust, which was valued at $156,000, was an available asset and denied her benefits.  After a hearing, Ms. Braiterman appealed the state’s decision to court.  The New Hampshire Supreme Court affirmed the denial of benefits, holding that the trust was an available asset because Ms. Braiterman retained a degree of discretionary authority over the trust.  According to the court, an irrevocable trust is a countable asset even when the applicant is not a beneficiary if there are any circumstances in which payment can be made to the applicant.  The court ruled that there was nothing in the trust “to preclude [Ms. Braiterman] from requiring her children, as a condition of their receipt of the Trust principal, to use those funds for her benefit.”