For MassHealth, Will Home in Trust Become Non-countable if Sold?
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Question:
MassHealth regulation 520.024 seems to me to state that any non-principal residence in a trust — even one created by will and where the trustee has no requirements regarding distribution — is countable, whereas something like $2 billion in cash would not be. Is this correct?
If so, is it because the beneficiary is benefiting from the use the home, by definition, but not necessarily from the $2 billion? I would think that just like vacation expenses paid from the $2 billion counts as income (but the $2 billion does not count as an asset), the non-primary residence would be countable as income (to the tune of fair market rent) rather than as an asset. Can a denial on the basis of a non-primary home be cured by selling it from within the trust and converting it to cash within the trust, or does 520.024(C) mean it can only be cured, post-denial, by removing it from the trust and transferring it to the beneficiary? Would it cause a period of ineligibility to do the former? And what does all this mean for community-based individuals vs. nursing home residents? 520.024(B) talks about community-based individuals and their non-primary homes, but then 520.024(C) talks about curing such things by returning the home “to the nursing-facility resident” and it is very confusing.
Response:
Yes, the MassHealth regulations are very confusing. (For any readers not in Massachusetts, “MassHealth” is what we call the Massachusetts Medicaid program.) And, no, your interpretation is not how it works.
We must read regulation 130 CMR 520.024 as a whole. Subsection (A) applies to irrevocable trusts and distinguishes between those created by the applicant for MassHealth or his or her spouse and those created by others. It does not distinguish between the type of assets, whether real estate, the applicant’s home, or investment assets. If the trust was created by the applicant for benefits or his or her spouse, the funds in trust will be available to the extent the trust may make distributions to either. If the trust was created by anyone else, the funds will be available to the extent they must be distributed or are distributed to the applicant or spouse. Though it doesn’t say it explicitly, paragraph (C) only applies to homes in revocable trusts. Under the MassHealth rules, nursing home residents may keep their homes (within certain equity limits) and still receive MassHealth benefits. But MassHealth denies this exemption if the home is held in a revocable trust. This paragraph says that in such cases, if the home is removed from the trust it will then qualify for the exemption.
With that background, to answer your specific question, no, the denial of benefits due to a non-primary resident being in the trust must be due to the terms of the trust. Converting it to cash would not change the terms of the trust or the countability of the asset for purposes of determining eligibility for benefits. If the applicant for benefits is living in the house rather than in a nursing home, depending on her age and the type of benefits sought, her assets might not be an issue. But the treatment of trusts will be the same as for applicants in nursing homes.
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