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Health Law

: Connecticut Medicaid & Estate Planning

Another Lost Asset Protection Opportunity

By Richard Shea


Apparently there is a lot of bad asset protection planning for Connecticut Medicaid Title 19 benefits going on out there. Asset protection can be very tricky. The wrong word in the wrong place can wreak havoc with a client’s goals and leave you with no protection. The right word (or omission) in the right place can conversely protect hundreds of thousands of dollars. Another case that went to judgment in Connecticut Superior Court highlights a common oversight when it comes to estate planning - flawed language leading to inadequate asset protection.

Rome v. Wilson-Coker (Ct. Super. Ct., No. HHBCV064012367S, Oct. 24, 2007).

Marjorie Rome is bipolar with a history of institutionalizations. She needs help and a certain level of benefits to receive treatment for her condition. Presumably with good intentions and a desire to help Marjorie, her father created a trust for Marjorie in his will. The trust was based on the model of a discretionary trust which vested discretion in the trustee to make or refuse distributions for Marjorie’s benefit.

Unfortunately, for some reason which I fail to comprehend, the trust language directed the trustee to make distributions as necessary for Marjorie’s “interest and general welfare, even to the extent of exhausting the entire Trust estate.” This is a big blunder if you want to include asset protection in your estate plan or trust and it cost the Rome family.

So eventually Marjorie entered a nursing home and applied for Medicaid. The Department of Social Services denied her application based on their determination that her father’s trust was available to Marjorie as an asset. The Trustee thought it was a good idea to deny distributions to Marjorie for nursing home costs, mistakenly believing that he actually had real discretion to do so.

Marjorie Rome later pleads her case to the Superior Court claiming that the trust is not available because the Trustee is refusing to make distributions to her. The court recognizes that the flawed language in her father’s trust gives Marjorie a right to compel distributions from the trust even if the Trustee refuses.

Her father made a mistake in his estate plan, and Marjorie had to pay for it. If you are looking for asset protection, do everything you can to make sure it works.

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Full post as published by Connecticut Medicaid & Estate Planning on December 19, 2007 (boomark / email).

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