Can you trust your trust?

 Recently, I was speaking to a group at a local Council on Aging about elder law issues on behalf of the Massachusetts Bar Association . We were discussing the different types of trusts when a member of the audience stated" my assets are safe". "My trust , written many years ago has language that states, if I ever have to apply for government benefits, none of the trust assets can be accessed." Unfortunately, this is not true today .

Sadly, I had to inform this individual that while that particular trust language was fine years ago when the trust was written, it is called an exculpatory clause . The rules have changed since that this trust was written and now such language means the trust will be considered a Medicaid Qualifying Trust. Such a trust should be called a Medicaid Disqualifying Trust. The plain English result of all this means all of the trust assets will be counted as though you had all the trust assets in your bank account and you could withdraw them at any time. You will be denied receiving benefits from a government program like Medicaid for a period of time depending upon how much money you have in the trust.

The way government agencies look as this exculpatory clause is that the language in the trust limits the authority of the trustee to distribute funds from the trust if the distribution would jeopardize eligibility for government programs including Medicaid. The Massachusetts courts have referred to exculpatory clauses as devices intended to allow an individual " to have his cake and eat it too". Bottom line, your application will be denied.

If you have a trust written years ago and you believe it contains similar language or you're not sure and want to know if your trust assets are protected, what should you do? You should have the trust examined by an attorney experienced in elder law issues , particularly Medicaid regulations ( called Mass Health if you live in Massachusetts) to determine if the trust will protect your assets.

What if the trust contains an exculpatory clause? It might not be too late to change the trust to comply with the current rules. Trust reformation is a topic which I'll discuss in a future blog. The moral of this story is that the rules in elder law change and change frequently . We elder and disability law attorneys are constantly studying to keep up with these changes to better serve our clients.