Yesterday, you were alerted to the groundbreaking decision out of Minnesota that confirmed an irrevocable trust could be an exempt asset regarding Medicaid eligibility and struck down state law that contradicted federal law on the matter.

Now, let’s discuss a similar case out of Montana.

In this case, Marilyn owned a home. Her sister, Glenda, moved into it with her. In 2008, Marilyn sold to Glenda a one-half interest in the home. Thereafter, both sisters established an irrevocable trust and transferred their respective shares of the home into the trust. In 2016, Marilyn’s health was failing and she needed care. She entered a nursing home and applied for Medicaid the next year. Her application was denied because the state counted the trust property in her eligibility determination.

In a Minnesota appeals court decision, the court ruled that a Medicaid recipient’s irrevocable trust was not a countable asset and that Minnesota law on the matter is preempted by federal law. The decision turned long standing case law on its head, and gave the green light that an irrevocable trust can indeed be a non-countable asset for Medicaid eligibility purposes in Minnesota.

In this case, Geyen was the Grantor of two irrevocable trusts, which were identical except for their names. Her children were Trustees; her children and grandchildren were beneficiaries. Both trusts indicated their irrevocability and gave the Trustees “full power and authority to control” trust property. The trusts forbade the Trustees from loaning or gifting any assets to Geyen.

In 2003, Mary attempted to engage in elder law planning and executed a deed reserving a life estate for herself and giving her daughter, Carla, a remainder interest in the property. However, the wrong address was listed on the deed. In 1989, Mary, at age 65, began receiving Medicaid benefits through MassHealth. She continued receiving these benefits until her death in 2018. At Mary’s death, Carla noticed the mistaken deed and moved a Massachusetts court to reform the deed on the grounds of mutual mistake. Would the court oblige Carla? The court first theorized that it must decide if reforming the deed would impact the state’s estate recovery efforts.