Superior Court Upholds MassHealth Applicant's Sale of Property to Daughter:

Part 2
A Summary of Clark v. Dehner

Superior Court Decision

The Superior Court overturned MassHealth's decision, finding that the transaction between Susan and Michelle was valid and should not be considered a disqualifying transfer. The Court determined that the transaction was for fair market value, and that the promissory note satisfied all of the regulations requirements, in that it was actuarially sound, provided for equal payments, and prohibited cancellation at Susan's death. The Court disagreed with MassHealth's determination that the note was not reasonably enforceable because the transaction had occurred between family members. The Court acknowledged that there was no guarantee that Susan would sue Michelle in the event that she defaulted on the note. However, the Court noted that it was inappropriate of MassHealth to assume that Susan would not seek to enforce the note by all available means.

Conclusion

Practitioners and clients should be encouraged by the Court's decision in Clark. The decision validates transactions between family members using promissory notes, which can be a valuable last-minute planning option for clients needing immediate long-term care in a nursing home. Clark also offers practitioners with a creative planning opportunity to cure disqualifying transfers into irrevocable trusts, while preserving the value of the transferred asset for the family. The decision is also an important step in reversing MassHealth's trend of dissallowing long-term care planning techniques between family members set into motion by the implementation of the DRA. However, even in light of this favorable decision, practitioners are urged to be cautious and draft promissory notes and related agreements between family members in strict accordance with MassHealth's regulations.

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