Question:
Would someone that has long-term care insurance in Massachusetts need an irrevocable trust?
Response:
This is an interesting question, in large part because Massachusetts has a unique provision in its Medicaid rules. It exempts the houses of people who qualify for Medicaid (MassHealth in Massachusetts) from estate recovery after their deaths if they first used up their long-term care insurance benefits before qualifying for MassHealth. So, this would seem to eliminate one key purpose for putting a house into an irrevocable trust — to protect it from such estate recovery upon the owner’s death by keeping it outside of probate. If the person owns long-term care insurance, then in Massachusetts, an irrevocable trust would seem to be redundant for the purpose of avoiding MassHealth estate recovery.
However, another benefit of an irrevocable trust is that it permits the owner to sell the house and protect the proceeds of the sale from having to be spent down in order to qualify for MassHealth benefits. The long-term care insurance exemption does not help on the front end — qualifying for benefits — just the back end — avoiding estate recovery. So, if the house might be sold during the owner’s life, they still might want to use an irrevocable trust. They also might want to use it to protect assets other than the home since the insurance exemption only applies to the home.
