Advantages and Disadvantages of Owning Joint Property with a Sibling

It has been pointed out in prior blogs that a secondary residence held jointly with a sibling is an inaccessible resource if the sibling refuses to sell. Notwithstanding the fact that such ownership would not disqualify a person from Medicaid if the sibling refused to sell, there are some negative aspects to such planning.

Firstly, if an individual qualified for Medicaid owning such property, one half the joint income would have to be used to defray the cost of the home. Medicaid would not let you use your pension or social security, so the cost of the home would have to be paid by the sibling.

Moreover, if such property were a tenancy in common, the decedent's interest would be subject to the Medicaid lien. However, if such property were a joint tenancy and the applicant died first, there would be a cogent argument that the property is not subject to the lien.

In a prior blog in which I discussed real estate planning (Post 11), I pointed out that an exempt transfer to a sibling who has an equity interest in the home and who is residing in the home for at least one year prior to the date of institutionalization is an exempt transfer. This reference is to the primary residence and presumably the spouse of the Medicaid applicant has predeceased. If the potential applicant transfers the property to a sibling who had such equity interest in the home, the transfer would be exempt and not subject to the Medicaid lien. However, if the sibling predeceased and the property passed by operation of law to the applicant, the interest would be subject to the lien.

Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.

© December 2011, Post 177

Disinheritance of a Child

In a prior post (Post 124), I stressed the point that the will is not only to dispose of one's assets but also is a legacy.

That is, in common law jurisdictions, one can disinherit a child. The question is should one disinherit a child and if so, how to make such provisions.

Under the civil law system, there is a concept known as "forced share," which means that a child has an interest in an estate as we have in a concept known as the elective share.

I advise my clients carefully that before they disinherit a child, they should be aware of the fact that it is a legacy and should be sure that they desire to do so. Notwithstanding, if a child is to be disinherited, the question is how to make such provisions.

In such case, I use language similar to: "I have made no provisions under this will for my child, for reasons best known to him". In a recent article in The New York Times, that was the language suggested.

Other language, which might be more inflammatory, opens one up to a will challenge and I believe that the best language is provided above. Merely leaving out the name of the child also could lead to litigation, and a reference to the child in the above manner seems advisable.

Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.

© December 2011, Post 176

The Relationship of Elder Law Attorney, Geriatric Care Manager and Long-Term Insurance

Several of my previous blogs have stressed the need for other professionals, such as geriatric care managers, doctors, long-term insurance experts, colleagues and the various institutions.

A typical example might be an individual transferring from New York to New Jersey and the family is in doubt as to the appropriate type of care. In such case, I would not meet with the client initially, but would refer a geriatric care manager to advise me of the appropriate venue.

Also, many writers are of the opinion that it is an attorney's obligation to advise of long-term care insurance before undertaking any planning.

Therefore, I would view it as an ethical issue as to the appropriate time an attorney should render his advice. Ideally, counsel should meet with a client and the appropriate expert so that information is given simultaneously.


Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.

© December 2011, Post 175

Ethical Issues Relating to the Listing as a "Super Lawyer"

After much controversy, the rules of professional conduct 7.1 effective November 2, 2009 discussing a listing as a Super Lawyer, authorized such listing so long as the following requirements are met:

"A truthful communication that the lawyer has received an honor or accolade is not misleading or impermissibly comparative for purposes of this Rule if: (1) the conferrer has made inquiry into the attorney's fitness; (2) the conferrer does not issue such an honor or accolade for a price; and (3) a truthful, plain language description of the standard or methodology upon which the honor or accolade is based is available for inspection either as part of the communication itself or by reference to a convenient, publicly available source."

This opinion was clarified by Opinion 42 Issue December 16, 2010 which requires language similar to the following so that the word "Super Lawyer" does not imply a comparison to other lawyers.

An appropriate listing is: "Mr. Smith is on a list called Super Lawyers for the year 2011. Such list is prepared by Thomson Reuters. The selection process includes peer nominations, a blue ribbon panel review and independent research of candidates. Such list does not imply a comparison to other lawyers, but is compiled by the above process. This advertisement has not been approved by the Supreme Court."

Therefore, a listing of one as a "Super Lawyer" is unethical unless the above qualification is made.

It would appear that these opinions are based upon the First Amendment rule of the public to be informed rather than the First Amendment right of an attorney to state his qualifications.


Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.

© December 2011, Post 174

The Step-Transaction Doctrine

In the area of corporate reorganizations, there is a theory known as the "Step-Transaction" doctrine. The argument is that you cannot accomplish in two steps what would be disallowed in one. Therefore, any corporate reorganizations, which appear to be non-taxable, are treated as taxable when the taxpayers attempt to accomplish in several steps what is not allowed in one transaction. A further discussion of this topic in the corporate area is beyond the scope of our analysis.

However, the state attempted to apply the doctrine when transfers to disabled children were not allowed. The attempted theory was that if the disabled child transferred the assets to another child after the initial transfer, under the step-transaction the transfer would have been treated to the healthy child and not the disabled child. However, the state has recanted its position. There is no justification for application of the doctrine in the elder law area.

However, in discussing the two-year rule (child providing the necessary care so that a transfer of a house to the child is exempt from the transfer rules), I pointed out that there should not be a preconceived plan that the transferee child divide the transferred assets amongst the protected transferee and the other children. That is, there is always a danger that the state could apply the doctrine, in which case a transfer would not have been deemed made to the child who provided the necessary care, but rather to all the children, which would result in a penalizing transfer.

Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.

© November 2011, Post 173

Purposes of a Buy-Sell Agreement

In Post 138, I raised the possibility that stock of a closely-held corporation might be deemed an inaccessible resource. Although not directly related to the elder law area, I think it would be helpful to discuss the purposes of a buy-sell agreement.

A buy-sell agreement has the following purposes:

1. To set the value for estate tax purposes
2. To provide liquidity to the estate of the shareholder
3. To prevent the beneficiaries of a shareholder from owing stock so that the remaining shareholder(s) can have the stock
4. If a stockholder is disabled, the stock can be purchased mandatorily.

Valuation of stock is set forth in Section 7203 of the Internal Revenue Code, which requires that stock can be valued in accordance with the industry.

Although the purchase of stock during lifetime can be optional, it must be mandatory upon death.

One might also provide that if a shareholder becomes disabled it is mandatory that the stock be purchased by the corporation. In the event such shareholder does not become disabled, the stock can be treated as key-man insurance. That is, such insurance would replace the value of the deceased shareholder to the corporation.

Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.

© November 2011, Post 172

The Issue of Competence

Many people confuse the meaning of competence for medical purposes and for legal purposes.

The standard for legal competence varies depending upon the document to be signed. For example, competence with respect to testamentary capacity (ability to make wills) requires that the individual be aware of the objects of his or her bounty, the assets that they own and the disposition to those individuals. Competence for power of attorney purposes requires that the grantor of the power understand that control is being given to the holder.

It is extremely important in preparing a power of attorney that the power not be joint, either several or together. A joint power of attorney gives rise to conflict, which should be avoided at all costs.

Some of the clauses in a power of attorney should include transfers when appropriate (i.e. the home to a child or children who provided the necessary care, the home to a spouse who does not go into a nursing home,) HIPAA language, revocation of a prior power of attorney, avoiding staleness and the ability to undertake general Medicaid planning.

A major issue, which will be discussed by Janice Chapin, Esq., at our upcoming webinar entitled: "Constitutional Aspects of Elder Law and Guardianship" is the mental state of an individual coming from another jurisdiction to New Jersey. As indicated in the seminal case of Shapiro v. Thompson 394 U.S. 618,89 S. Ct. 1322,22 L. Ed. 2d, if a person enters New Jersey, it would be unconstitutional to deny such individual benefits. The question to be addressed is that if the person came to New Jersey and were not competent, I believe the person would not be entitled to benefits, since the person's domicile would be the last jurisdiction in which the individual had competence. Another major issue is the definition of domicile. In this regard, I refer you to In Re Dorrance's Estate 309 Pa. 151, 163 A. 303, cert. denied, 288 U.S. 617 (1932). Although domicile is a subjective determination (a place where a person lives and intends to make a home,) such subjective termination is made by objective factors such as time spent in a jurisdiction, place of filing of income taxes, the jurisdiction in which a car was rented and similar matters.

Finally, from a legal point of view, if an individual meets the test of competence at the moment of signing of documentation, that would be sufficient. Therefore, it is an attorney's ethical obligation to make his or her own determination of legal competence in order for an individual to sign documents.


Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.

© November 2011, Post 171

Engagement Letters for Elder Law Attorneys

Very often an individual will be represented by two attorneys in the elder law field. For example, an elder law attorney might not have the vision and expertise to handle a real estate transaction or might be of the opinion that to represent two individuals would be a conflict. For example, an attorney representing a potential transferee of real estate (i.e. a child who provided care to allow a parent to remain home rather than go into a nursing home - see Post 6), might be of the opinion that to represent the applicant and the transferee would be a conflict.

It would be wise for the two attorneys to have separate engagement letters as the representation of the individuals is separate. However, if one of the attorneys is of counsel to the lead attorney, a separate engagement letter is not necessary. However, it is my opinion, that it would still be prudent for an individual who is "of counsel" to have a separate engagement letter.

As Carol Johnston, Esq. of the Advisory Committee on Professional Ethics and I pointed out in my webinar entitled "Ethical Dilemmas for Elder Law Practitioners", the question often is not whether there is a conflict, but whether the conflict should be waived. Therefore, elder law counsel who feels there is a conflict, should have a separate engagement letter from the other attorney.

Generally, since the state often violates federal pre-emption (which I will be discussing in my next webinar entitled "Constitutional Aspects of Elder Law and Guardianship", dated December 15, 2011,) counsel should point out in correspondence to a nursing home applicant areas of uncertainty. For example, in order to execute a proper caretaker agreement, the payments to a child must be "reasonable". The state refuses to define reasonable and will not give an a priori decision. Therefore, counsel should indicate in his or her correspondence to the client, this vague language and that you have advised the client that there is no guarantee that the payment to the child would be deemed unreasonable, and the excess of the amount of the payment over the amount deemed "reasonable" by the state would be deemed a transfer.

For example, I personally feel that the word "reasonable" violates the due process clause as it does not provide adequate notice as to the amount of payment that can be made by a parent to the child.

In my upcoming webinar, I point out many of the ambiguities in the state's statue due to violation of federal pre-emption. Whether your ambiguities should be in an engagement letter or a separate letter, is at the discretion of counsel. The main areas of violation of federal pre-emption are "disinheritance of the community spouse" and "spousal refusal".

The state has retracted "reverse half-a-loaf planning." Although I have pointed out in Post 113 that such planning should work, it is highly advisable not to undertake such a plan in light of the state's decision in Medicaid Communications 10-02 and 10-03. Therefore, I would point out in an engagement letter or subsequent letter, the fact that such planning should work but is not acceptable by the state.

I am particularly concerned about the violation of federal pre-emption in the state's denying reverse half-a-loaf planning. Firstly, the real reasons are set forth in Post 113. Moreover, the ruling which denied reverse half-a-loaf planning (Medicaid Communication 10-02), was dated May 26, 2010. Notwithstanding, the state has denied such planning even before that date. It is my opinion that such position not only violates federal pre-emption, but constitutes an ex post facto law, since the state is applying such ruling prior to the date of the Medicaid Communication.

Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.

© November 2011, Post 170

Negating the State's Position that Disinheritance is a Transfer by a Nursing Home Resident

In Post 60, I pointed out the State's position that disinheritance be treated as a transfer of one-third the augmented estate (i.e. the elective share).

Notwithstanding pursuant to N.J.S.A. 3B: 8-1, a surviving spouse or domestic partner does not have a right of election if the decedent and the surviving spouse or domestic partner (i.e. nursing home resident) had been living separate and apart in different habitations or ceased to cohabit as man and wife, as a result of a judgment of divorce from bed and board or circumstances which would give rise to a cause of action for divorce or nullity of the marriage prior to the date of death of the decedent. In my prior posts, I pointed out that the state violates federal pre-emption in treating a disinheritance as a transfer, on the theory that the elective share is an option and not an affirmative act (i.e. a transfer). Moreover, pursuant to the statute, the elective share does not apply if the decedent and the surviving spouse or domestic partner (i.e. nursing home resident) had been living separate and apart in different habitations or had ceased to cohabit as man and wife.

Therefore, if there is no elective share based upon the definition in N.J.S.A. 3B: 8-1, the state's argument that disinheritance is a transfer is completely negated.

N.J.S.A. 3B: 8-2 provides that the right of a surviving spouse or domestic partner (i.e. nursing home resident) to take an elective share of property in New Jersey is governed by the law of the decedent's domicile at date of death.

The meaning of "augmented estate" is set forth in N.J.S.A. 3B: 8-3 through 3B: 8-18.

Specific reference is made to N.J.S.A. 3B: 8-12 which gives the surviving spouse or domestic partner an election to take his elective share in the augmented estate by filing a complaint in the Superior Court within 6 months after the appointment of the personal representative of the estate. That is, as Post 137 indicates, the right to take the elective share is not an affirmative act but the surviving spouse or the domestic partner may elect to take the elective share. This statute indicates that the 6 month period may be extended for "good cause shown" by the surviving spouse or domestic partner.

Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.

© November 2011, Post 169

Basic Documents Needed by Clients in Estate Planning Revisited

In a prior post, I discussed the necessary documents for a client. There are several additional points, particularly with respect to joint holders of a power of attorney and joint holders of a living will that I think should be addressed.

Therefore, I will review the prior post with these topics indicated. There are several basic documents that I discuss with every older client whom I represent. However, many of these ideas also apply to younger individuals.

The basic documents for every person, particularly the elderly, are a will, a living will and a power of attorney.

A will is a document that directs how the assets in the name of the individual shall pass upon their death. The nature of the will depends upon the person's situation. For example, the purpose of the will might be to minimize death taxes, which can involve complicated estate planning. Or, the will might be that of a healthy spouse whose partner is in a nursing home, which has rather complicated considerations also.

However, one must keep in mind that a will is not the only document that disposes of assets upon an individual's death. Assets that pass under a will are known as probate assets and those that pass outside of a will are known as non-probate assets. Non-probate assets are those that may pass by beneficiary designation, such as life insurance, retirement plans or annuities. The beneficiary designations of such non-probate assets should be coordinated with the plan under the will.

It is my practice not to dictate to a client the terms of a will. I point out the alternatives, discuss advantages and disadvantages of different approaches, review the assets with the client and let the individual decide what is the best course to follow from a personal point of view. That is, in addition to the objective legal reasons for a will, it is the client's subjective intent (after understanding all possibilities) that should govern the overall estate plan.

It must be kept in mind that a will performs two functions. One is to dispose of one's assets in the appropriate manner. A will is also a legacy. That is, an individual often feels that his or her child has not met expectations and desires to "disinherit" such child. I point out to the individual that such language will be the individual's "legacy" and must be carefully considered before undertaken.

With respect to a power of attorney, the first point of significance is that the document must be "durable". That is, at law, a power of attorney is a consensual agreement by the person granting the power (the principal) and the individual given the power (agent). If an individual becomes incompetent, the ability to consent ceases. Therefore, it is necessary that the power of attorney be "durable" and, therefore, survives the incompetence of the principal. That is, for an elderly person, there is a need for someone to act on one's behalf if such individual becomes incompetent.

There is a form of power of attorney known as a "springing" power of attorney, which becomes effective only if a person is incompetent. I do not recommend such a power since a durable power of attorney avoids the issue of incompetence and a springing power of attorney would only be effective if an individual becomes incompetent. Therefore, the "springing" power of attorney has no benefit.

The key to a power of attorney is that it has language so that all assets of the principal are "accessible" to the agent. In this way, if the principal needs money for any reason, including a nursing home, and is not competent, the agent can "access" these funds.

Also, a power of attorney should have special language, such as the ability to access medical records if the principal (who generally is an elderly person) is unable to do so. The durable language allows this result. Also, a power of attorney should include planning language to cover a situation in which a person may enter a nursing home in the future. The language dealing with Medicaid planning depends upon the situation of the principal and will be discussed more fully in another blog.

Very often a parent will name two children as joint holders of a power of attorney so as to avoid family friction. I think this approach requires careful review, since if the children differ on the power of attorney and one acts on his or her own, such actions might violate the thoughts of the other holder. Even worse would be to name joint holders of a power of attorney who must act together. This could create a non-agreement and possibly court approval, which a power of attorney is to avoid.

It is my practice to reference any type of asset an applicant may have to make sure the power of attorney can be used to liquidate such asset. However, not all companies will require that the power of attorney have language relating to the specific asset. It is important that the power of attorney be done as soon as possible, particularly if the individual is failing. A power of attorney can only be done if the individual is competent.

A living will is a document which provides as to whether extraordinary methods be taken in case an individual cannot make the decision by himself or herself. There are several types of living wills. One form known as an "Appointment of Health Care Representative" gives the individual appointed under a living will the general authority to carry out the wishes of an individual based upon the individual's intent as conveyed to the appointee during lifetime. A second type of living will known as an "Advance Directive for Health Care" sets forth the desires for the individual in advance. For example, this document provides that treatment be withheld if it is "experimental". Such language creates an ambiguity as the definition of "experimental" can vary from medical institution to medical institution. Therefore, it is my recommendation that if an elderly person has someone that he or she trusts, the general grant of authority under the Appointment of Health Care Representative is preferable.

It is necessary that an individual appointing a holder of a living will not name two holders either severally or jointly. Decisions regarding a living will often must be instantaneous. Having joint and several holders or joint holders together could create a conflict situation and ruin the simplicity of the living will. Therefore, holders of a living will must be named successively.

As can be seen, pro-forma language is not suitable for any of the documents discussed, and must be discussed individually in detail. That is, the client makes the final decision with respect to the format of each document, after being fully informed.

Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.
© October 2011, Post 168

Approach of Elder Law Attorneys in Dealing with Clients

Elder law is unique in that the state often disregards the federal rules. In this regard, various blogs have discussed the violation of federal pre-emption. For example, the state's position on spousal refusal, disinheritance of a spouse being treated as a transfer and the requirement that all trusts have the state as the remainderman, all clearly violate the federal statute.

Therefore, the elder law attorney is often presented with the conundrum of the approach to take in advising a client. My particular thinking is that the attorney should not be dictatorial, but should point out the federal law, the state law and even the variants from counties to counties.

For example, I have discussed in numerous blogs the exemption of the transfer of the home to a child who provided care for the parent for two years prior to the nursing home admission as being an excludable transfer. I have also pointed out in one example a situation in which a child does not live in the home, but is willing to. I pointed out the possibility of the child moving into the home in the hope that the parent not go into the nursing home for two years, so that the two year rule should apply. Whether this advice should be given mandatorily or optionally, is obvious. This is just an example of a possible situation in which the client should decide after the attorney advises of the possibilities.

We have also discussed caretaker agreements in which the state has determined that the compensation to the child should be "reasonable". The state refuses to define reasonable. Therefore, in doing a caretaker agreement you must advise the client that the state's position might be unconstitutional and violate due process, as the word "reasonable" is not sufficient to provide adequate notice of the amount of compensation.

Another example of an uncertainty is whether an individual constitutes a dependent relative. We have discussed the fact that a dependent relative residing in the home renders the house an exempt resource. It is not the attorney's decision to decide whether a relative is dependent, but it is the attorney's role to bolster the status of dependency, the various factors for which are set forth in Post 14.

Therefore, it is my opinion that an elder law attorney should never dictate to a client what path to take, but rather should point out the law, the uncertainties of the situation and what the client subjectively is willing to undertake.

Further, in your correspondence to your client, you should set forth a memo as to the plan, the issues presented and the fact that you can never guarantee results because of the uncertain status of New Jersey law.

Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.
© October 2011, Post 167

Marketing for the Elder Law Attorney

Every elder law attorney has his or her own method or methods of marketing. Websites, blogs, articles and speaking are the typical techniques.

I have found it particularly helpful to have a marketing expert to craft my website so as to convey the nature of my practice. I have personally utilized the talents of Daniel Rudy (daniel.rudy1@gmail.com) in developing my website. Mr. Rudy has advised me that it is important in developing a website to convey the nature of your practice and what your firm has to offer. There are many marketing experts who provide such activities.

With respect to lecturing as a marketing technique, it is necessary to present topics of interest. Personally, I am undertaking my fifth webinar in the last two years, which is entitled: "Constitutional Aspects of Elder Law and Guardianship". Past webinars have been entitled: "Medicaid Planning Essentials: What You Need to Know", "Practical Medicaid Planning Revisited" and "Ethical Dilemmas for Elder Law Practitioners". Of course, public speaking is the best venue. I have had the pleasure of speaking at numerous ICLE programs with Janice Chapin, Esq. of North West New Jersey Legal Services.

In addition, on my website, I exhibit one blog a week on a topic that I think is pertinent to the elder law attorney.

Perhaps most important, is to point out the uncertainty of conclusions in the elder law area. This is a topic I will be discussing at my next webinar.

Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.
© October 2011, Post 166

Review of the Need for Other Professionals

It has been stated, and I agree, that it is an obligation of an attorney to advise a client of long-term care insurance before undertaking transfers for any reason. There are many long-term care insurance experts and it is an attorney's obligation to recommend an individual who in the attorney's judgment is most knowledgeable in the area.

I have also discussed the need for a geriatric care manager. Such person is necessary to advise the attorney of the proper facility that an individual should live in. That is, the most basic doctrine of elder law is that a person should live in the least restrictive environment. Therefore, whether the home, an independent living facility, an assisted living facility or a nursing home is most appropriate, is a decision that should be made by a geriatric care manager.

I have discussed the need for an accountant to prepare an individual's tax return, the payment of such tax being part of the spenddown process.

An attorney should have colleagues with whom the attorney consults in light of the confusion of the New Jersey Medicaid law. Particularly, an attorney should have a relationship with legal services, who often are aware of the benefits available.

A disabled child has special status under the Medicaid law. Often, such individual will not have qualified for social security benefits. The state will make its own determination if sufficient information is provided.

It has been discussed in Post 103, that once Medicaid planning is undertaken, financial planning or estate planning is no longer relevant. Therefore, it is necessary to have a relationship with a broker, who would be available to liquidate the individual's stocks or retirement plans.

Also, an attorney should consult with someone regarding Medicare and supplemental benefits. An individual in a nursing home, may require medical treatment, and the cost of the Medigap are covered by Medicaid as discussed in Post 1.

A relationship with administrators of various nursing homes would be advantageous, particularly if you require immediate placement in a nursing home. Such relationship is also advantageous in light of the fact that admission agreements also often have unenforceable contracts, such as a third party guarantee. Convincing the nursing home to eliminate such requirement although required by law (both state and federal), is a difficult task.

Finally, I think it would be helpful if an attorney has experience with a Medicaid supervisor in each of the counties in which he or she practices. This dialogue is often necessary if there are equivocal issues regarding Medicaid.

The list of other professionals is probably infinite, but the above represents some of those that should be part of every elder law attorney's arsenal.

Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.
© October 2011, Post 165

The Importance of Timing of Transfers

In Post 6, I analyzed the reasoning for delaying the transfer of a house to a child who provided care for a parent for the requisite time period and concluded that the transfer should be delayed until the Medicaid proceedings. The reasons were having the advantage of presenting information to justify the necessary care and also to lose the step-up in basis upon death only if necessary.

Similarly, if an individual has a disabled child who is a possible transferee, the transfer should be delayed until the Medicaid proceeding. That is, a transfer currently if the parent never goes into a nursing home, loses the step-up in basis upon death. The transfer results in the child receiving a carryover basis, which can be voided if the parent dies prior to going into the nursing home. Of course, if the child receives the home and resides in it for the requisite time period, the carryover basis can be increased by a $250,000.00 amount or $500,000.00 amount should the client be married.

Since reverse half-a-loaf planning has been denied by the State, if five-year planning is contemplated, the transfer should be made currently regardless of the laws of the step-up in basis to start the clock running on the 60-month lookback period.

Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.
© September 2011, Post 164

Summary of Factors to Consider in the Spenddown Process

In the simplest situation which we have a single applicant applying for Medicaid, the following are some of the salient factors to consider in projecting the date of eligibility. Assuming an average monthly nursing home costs $10,000.00 and social security of $2,000.00 (no pension), and $100,000.00 of assets, consisting of stocks, cash accounts and retirement benefits, the following factors should be considered:

1. The net cost per month would be $8,000.00 ($10,000.00 minus social security).
2. An approximate cost of a pre-paid funeral would be $10,000.
3. The nursing homes often require a deposit of two months nursing home costs, the net amount of which would be $16,000.00
4. There is a cost of liquidating the IRA, the distribution of which results in ordinary income. Therefore, the income tax cost would be part of this spenddown.
5. If there is a money market, many people are concerned that there would be a penalty for termination during a money market term. However, there cannot be a penalty if the term is interrupted by the death of the applicant.
6. Of course, as indicated in Post 3, the cash value of life insurance could also be a factor.
7. If there are stocks, which must be sold, capital gain enters into the computations.

As indicated in Post 103, once the decision is determined that Medicaid is the goal, financial planning is no longer relevant. That is, a client cannot hold on to a valued investment since all resources must be liquidated in order to project the date of eligibility.

Many other topics relate to this, such as an inadvertent inheritance of the Medicaid applicant which is discussed in Post 60.

As indicated throughout the postings, the relevant amount of $4,000.00 or $2,000.00 must be made on the first day of the first moment of institutionalization. Institutionalization has been defined as the earlier of the first day a person enters a nursing home, goes into a hospital or receives home care.

Keep in mind in a spousal situation, the "spousal income allowance," also known as the shelter allowance and/or MMNA, can be set aside for the community spouse. Also the amount of Medigap insurance can be retained by the community spouse, as can $35.00 a month. Therefore, as indicated in Post 1, a spousal situation assigning social security, might be imprudent. Said posting also points out that pension benefits cannot be assigned because of restrictions in the Internal Revenue Code.

Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.
© September 2011, Post 163

Review of Partial Interest in Real Estate

In Post 86, I discussed the advantages and disadvantages of a potential Medicaid applicant transferring property and retaining a life estate. The advantages are that the retained life interest is assigned no resource value nor is it subject to the lien. On the negative side, as pointed out in said Post, New Jersey Practice, Celantano, ¶4.8 indicates that the individual with retained life interest has certain obligations. If an individual is in a nursing home, the social security and/or pension cannot be applied to pay these costs and the burden falls on the remainderman.

In addition, the remainder interest is deemed to be a transfer and could cause a delay of Medicaid. The computations for the value of a life estate and the remainder interest are set forth in a prior Revenue Procedure, which bases its tables on the Internal Revenue Code prior to the IRS adjustment for current interest rates.

The transfer penalty can be avoided by having the remainderman purchase his or her remainder interest. However, the monies paid to the applicant are then available resources.

I have also discussed in Post 48 the fact that inaccessible resources are excludable resources for Medicaid. Therefore, if the applicant owns property jointly with another individual, the property is an inaccessible resource if the co-owner refuses to sell (Post 48).

If the co-owner is a child of the applicant and provided care for at least two years that enabled the applicant to remain at home rather than go into a nursing home, a transfer to the child is exempt from the Medicaid transfer rules (see Post 6). However, if the co-owner is not a child (a stranger), the applicant has an obligation to pay one-half the net cost with no money to do so. Another situation would be if the applicant owned the property jointly with a sibling (see Post 11), and the sibling resided with the applicant for at least one year prior to institutionalization, the transfer to the sibling also results in a non-penalizing transfer.

The advantage of a transfer to the child or the sibling as discussed above, is that the property is also exempt from the Medicaid lien.

From an estate planning point of view, keep in mind that a joint ownership passes by operation of law, while a tenancy in common is a probate asset and passes under the applicant's will.

As in all areas of Medicaid, an applicant after consultation with counsel must review the pros and cons of any planning technique, particularly when we are dealing with jointly-owned real estate.

Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.
© September 2011, Post 162

Creativity Required in Elder Law Planning

Very often a situation will arise where it appears that Medicaid eligibility is lost. Often, creative thinking can preserve eligibility.

I can think of two very clear examples which will emphasize this point.

There is a theory in Medicaid known as the "stupid kid" defense. Assume a child has a power of attorney for a single parent and has $3,000 and the parent has a $2,000 liability. Further assume the child neglects to pay the liability so that the amount of resources at the appropriate time is $3,000. Janice Chapin of Central Jersey Legal Services has been successful in arguing what is known as the "stupid kid" defense. That is, Medicaid has allowed eligibility on the basis that the parent should not suffer neglect of the "stupid kid".

Another example comes to mind. Approximately 20 years ago, Hunterdon County Legal Services had a matter where the only applicant's resource was corporate stock and a buy-sell agreement. Such an agreement often provides for the other shareholders to have an option to buy and that upon the death of the shareholder, the purchase can be mandatory. At an administrative hearing, it was held that such stock was not an available resource since it was subject to the buy-sell agreement.

Like in all Medicaid situations, there is no guarantee that these approaches will work with any County board. However, these arguments have worked in the past and creativity should be the key note planning by any Elder Law attorney.

Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.
© September 2011, Post 161

The "Pig" Theory in Elder Law

Numerous blogs have discussed excludable resources such as funeral expenses, expenses used to fix up the home, transfers to a disabled child, payments pursuant to a Caretaker Agreement, and related matters.

Underlying these expenditures is an unwritten rule known as the "pig" theory. That is, even for an expense that is exempt, there is a subjective limitation. For example, I doubt whether Medicaid would allow funeral expenses of $50,000. Similarly, fix-up expenses on an excludable resource, such as a home, are limited by the theory. It is doubtful whether Medicaid would allow $200,000 in improvements.

Caretaker Agreements have been limited by the word "reasonable." Although Medicaid has not defined the word "reasonable", there is a subjective limitation limited by the "pig" theory.

Although transfers to a disabled child are exempt, it is my inclination that there is some limitation that Medicaid would not accept.

While one motor vehicle is an excludable resource, it is doubtful whether the purchase of a Lamborghini would be allowable. Although such examples are limitless, such theory must be considered even when making an exempt transfer or purchasing an excludable resource.

Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.
© August 2011, Post 160

Key Federal Estate Tax Issues in Elder Law

Numerous blogs have referred to the fact that knowledge of federal estate tax is necessary for an Elder Law attorney.

I thought it would be helpful at this point to review some of these issues. Major considerations would be the following:

1. If property is transferred with a retained life estate, the property gets a step-up in basis under Section 36.
2. If property is gifted, the transferee gets a carryover basis.
3. The basis of any property is increased by capital improvements such as roofing and improvements for a disabled relative.
4. Cost of maintenance and upkeep after date of death are not deductible.
5. Cost of preparation of property for sale and the cost of sale (such as attorney's fees and broker's commissions) are deductible as administration expenses.
6. Any debt of decedent regardless of its nature, is deductible under Section 2053. Other administration costs that are deductible are costs of sale of any type (such as an auction to sell personal property and commissions to sell stock).
7. For federal estate tax purposes, life insurance over which decedent had any form of ownership and life insurance payable to the estate (including certain items such as post- mortem dividends and post-mortem interest) are includable. However, for New Jersey inheritance tax purposes, life insurance to a named beneficiary is not taxable except for limited items.
8. Other typical administration costs are costs of burial, including the cost of the administrator to travel to administer the estate. However, costs of a beneficiary, are not deductible.
9. Costs of the executor, such as litigation relating to the elective share, are also deductible. However, costs of a beneficiary in seeking elective share are not deductible. An argument can be made that costs of a beneficiary in this case should be deductible as all costs are necessary to resolve the administration of the estate.

Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.
© August 2011, Post 159

Planning When One Spouse Enters a Nursing Home

Suppose a couple has approximately $700,000.00 in liquid assets and the wife is about to enter the nursing home. The question is what might be an appropriate plan in such a situation.

Since "reverse half-a-loaf planning" has been incorrectly denied by the Medicaid authorities (see Post 113), the best plan might be to transfer all the assets to the healthy spouse. If the ill spouse lives five years, the maximum community spouse resource allowance ($109,560.00) plus any remaining monies would be saved for the healthy spouse.

In the event the healthy spouse predeceases, it is recommended that the will of the community spouse leave the elective share outright to the ill spouse (see The Final Medicaid Regulations (Finally!), 2001 "Estate Planning Issues", by Levin, Mark) with discretionary income and principal to the ill spouse and others. In the event the ill spouse enters the nursing home, the principal can be distributed to the other sprinkle beneficiaries as the transfer rules for trusts apply only to inter-vivos trusts (see Post 15) and not to testamentary trusts. Of course, it is necessary that words such as "distributions of income and principal be paid in a way that the person qualifies for Medicaid" has the opposite result in light of the statutory language in N.J.S.A. 30:4D-6f.

Such planning is particularly appropriate in the event of the possibility that a child goes into a nursing home so that the "kickout" can be to the other child.

Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.
© August 2011, Post 158

The Role of an Elder Law Attorney

As my numerous postings have indicated, there is often a great discrepancy between the federal Medicaid statute and the state's position. That is, the state is often violative of federal pre-emption.

Therefore, your role as an elder law attorney is not to dictate to a client the path to take. Rather, one should point out the various alternatives, the benefits and the risks.

Such areas as the will of the community spouse, spousal refusal and exempt transfers present issues that are equivocal and not easily decided.

Similarly, whether a child has provided the necessary care to be deemed a "protected transferee," is a subjective issue.

Therefore, it is your role to point out the issues, possibly give recommendation, but not dictate to a client the course to take.

Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.
© August 2011, Post 157

Testamentary Planning for Will of Husband When Ill Wife Remains in the Community

A client of mine in his forties has an ill wife who will not need nursing home care but requires and will require home care.

Clearly, Medicaid does not pay for home care on a long term basis. Therefore, the format for a testamentary trust of the husband is a major consideration.

The couple have no objects of their bounty other than each other.

Clearly, a restrictive trust or a special needs trust would serve no purpose since the wife receives $2,300.00 in income from a state pension. Therefore, in this situation it would be recommended that the husband's will provide for the wife with discretionary income with broad standards so that she can live in the best manner available. Such language might be "the trustee shall distribute income and principal to or for the benefit of my wife for her health, comfort, welfare and support so that she can live in the best standard and accommodations available."

The inclination to make a restrictive trust should be avoided.

Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.
© August 2011, Post 156

The Significance for Medicaid with Respect to a Joint Tenancy and a Tenancy in Common

New Jersey law follows the common law that to create a joint tenancy the express words "joint tenants" must be expressed. Ownership by two people other than a husband and a wife without such language creates a tenancy in common.

A joint tenancy passes to a survivor by operation of law, while a tenancy in common passes as a probate asset under an individual's will.

If an individual owns a non-residence with respect to either ownership, such ownership constitutes an unavailable resource if the co-tenant refuses to sell the property. If the property is held with a relative, a joint tenancy will not be subject to the lien until the relative dies, sells or moves out.

On the other hand, if the tenants in common are relatives and the will of the person leaves the property to a non-relative spouse, such property will be subject to the lien upon the death of the tenant in common.

Therefore, a deed is to be carefully reviewed in light of the above.

Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.
© July 2011, Post 155

Additional Advantages of Dependent Relative Residing in Home of Applicant

In Post 14, it was discussed that a dependent relative living in the home of a Medicaid applicant results in the exclusion of the home from consideration as a resource. There is no time requirement for the dependency to occur.

This is unlike the two-year rule pursuant to which a child must reside for two years in the home with the applicant before institutionalization for the house to be transferred without transfer penalty.

Therefore, if it is anticipated that an individual will be entering a nursing home in the near future, a dependent relative should move into the residence.

The results of such planning would be as follows:

1. The home would be excludable as a resource.
2. The home would not be subject to the Medicaid lien upon the death of the Medicaid recipient until such time as the dependent relative dies, sells the property or moves out. As discussed in prior postings, the nature of the dependency is very broad.

Of course, should a child reside in the house with the applicant for two years and provide the care necessary for the applicant to reside at home, this would be preferable. In such case, the home could be transferred to the child and permanently free of the Medicaid lien. This planning is discussed in prior postings (see particularly Post 6).


Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.
© July 2011, Post 154

Review of Federal Pre-Emption

Many of the blogs I have posted have discussed federal pre-emption. I think it is an appropriate time to review the salient examples of this topic:
1. The state has continued to misinterpret the meaning of spousal refusal (See Post 78).
2. The most egregious example is the state treats the disinheritance of an applicant as a transfer (See Post 60).
3. Of course, the state has denied the planning technique known as reverse half-a-loaf planning (See Post 88) due to another misinterpretation of federal pre-emption.

On the other hand, in two main areas the state has been more lenient. That is, it does not violate federal pre-emption for the state to be more lenient than the federal law. Two key examples of this are:
1. The ninety-day rule (See post 10).
2. The fact the state does not put a lien on a retained life estate.


Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.
© July 2011, Post 153

Inaccessible Resources

In Post 138, I discussed the advantages of holding an inaccessible resource (jointly held real estate) with a relative.

Suppose a Medicaid applicant owns real estate jointly (either a joint tenancy or a tenancy in common) with a non-relative. The affects of such arrangements are as follows:

1. The individual will qualify for Medicaid since the real estate is an inaccessible resource.
2. Unlike Post 138, the real estate cannot be transferred without a penalty.
3. Further upon the death of a Medicaid recipient, the Medicaid outlay will be subjected to the Medicaid lien.
4. In addition, if the property is income-producing, one-half the "net" income must be used to reduce the Medicaid reimbursement rate. The net income is determined without considering "paper" deductions such as depreciation.




Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.


© July 2011, Post #152

Practical Application of Purchase of Home by Community Spouse

Assume wife enters nursing home at the time that spousal resources are $400,000.00. The community spouse resource allowance is $109,560.00 and the spouse's protected amount is assumed to be $2,000.00. The parties are renting an apartment.

Further assume that after the applicant enters a nursing home, the community spouse purchases a condominium for $250,000.00. The protected amount is approximately $360,000.00. Therefore, the spenddown is $40,000.00

The spenddown can consist of pre-paid funeral arrangements for spouses of $20,000.00, two months deposit of nursing home of approximately $20,000.00, attorney's fees and justifiable expenses on the home.

The community spouse could sell the home after the applicant receives Medicaid (see Post 11).

Therefore, Medicaid eligibility could be almost immediate with a savings of approximately $360,000.00 for the community spouse.

Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.
© June 2011, Post 151

Five Year Planning for Husband and Wife with Children

Suppose a spouse is about to enter a nursing home and spousal resources are $800,000.00 in cash. A potential plan would be to transfer the $800,000.00 to a reliable child. Such child would use the funds on the transferor who enters the nursing home.

The will of the child would be a discretionary trust amongst the remaining parent, the child and other children. If the transferor enters a nursing home within five years, the portion of the $800,000.00 are spent until 60 months after the transfer. If the transferor goes into a nursing home after five years, any remaining monies are saved for the family. The transferee child would use any excess monies on the second parent if such parent enters a nursing home. If the second parent does not enter a nursing home, and then passes away, the child can distribute the monies to him/herself and the remaining children.

If the transferee predeceases the second parent, the funds would go to a testamentary trust. If a child or the remaining parent then enters the nursing home, a kick-out to the other relatives would not be a transfer (see Post 85).

Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.
© June 2011, Post 150

Inaccessible Resources Revisited

Post 48 discusses inaccessible resources, which are treated as excludable for Medicaid purposes (N.J.A.C. 10:71-4.4(b)6 ). The theory is that a countable resource is only such that can be converted to monies to pay nursing home costs. Further, suppose a Medicaid applicant resides with a sibling who has an equity interest in the home and who was residing in the home for at least one year prior to the date of institutionalization (see Post 11).

In this situation, not only is the real estate inaccessible, and therefore not a countable resource, but there is an additional benefit. If the sibling resides in the home for the requisite time period, the applicant's interest in the home can be transferred to the sibling without such transfer being subject to the penalty. Therefore, the individual would qualify for Medicaid, and the home would not be subject to the lien.

Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.
© June 2011, Post 149

Dependency Exclusion Revisited

Post 14 discusses the dependency exclusion for the home of a Medicaid applicant. That is, if a dependent relative (as defined in Program Instruction Number 85-8-9), resides in the applicant's home, the home is excluded for Medicaid purposes.

The key to this exclusion is that there is no time period limitation for the dependent relative to reside in the applicant's home. Therefore, if it is contemplated that an individual may be going into a nursing home, a dependent relative (i.e. a child) can move into the home. Unlike the exclusion from the transfer rules, which requires two years of care (see Post 34), the time limitation on dependency does not apply.

Moreover, if the dependent individual is a relative (would be a relative by definition), the Medicaid lien does not apply upon the death of the Medicaid applicant. The lien would only apply at such time as the family member dies, sells or moves out of the primary residence (see N.J.A.C. 49:14.1).

As indicated in Post 14, financial dependency is easy to prove. For example, even a working child could be financially dependent if such child could not afford an abode where the cost is comparable to recipient's primary residence.

Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.
© June 2011, Post 148

Review of Advantages of Community Spouse Resource Allowance

As indicated in Post 11, the community spouse resource allowance is not limited after the applicant receives Medicaid.

The advantages of this have been discussed in several posts and are to be considered in accordance with the situation.

For example, if a spouse is in a nursing home and the home has been transferred to a community spouse, the community spouse may sell or gift the residence after the applicant receives Medicaid (see Post 94). Similarly, if the community spouse inherits property after the applicant receives Medicaid, the inheritance is received free of the Medicaid rules.

As indicated in Post 33, if the community spouse is working, it has been suggested that the community spouse cease working until the applicant receives Medicaid. After such time, the community spouse can resume working and receive the earnings free of the Medicaid rules.


Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.
© June 2011, Post 147

Advantages of Purchasing a Home by Community Spouse Revisited

In Post 11, the advantages of purchasing a home by the community spouse were discussed.

Suppose there are community assets of $400,000.00 and the community spouse is renting a home. The community spouse resource allowance maximum is $109,560.00. The community spouse can protect additional assets by purchasing a home which would be an excludable resource. As indicated by Post 11, the resources of the community spouse are no longer relevant after the applicant receives Medicaid.

Therefore, a viable planning technique would be for the community spouse to temporarily purchase a residence, which could be sold or gifted after the applicant gets Medicaid.

Further, as discussed in Post 33, if the community spouse is working, the community spouse should cease working until after the applicant receives Medicaid.

Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.
© May 2011, Post 146

Negative Results of Disclaimer by Nursing Home Resident

Although a disclaimer may have estate planning benefits, such an action would be treated as a transfer under the Medicaid rules (see Federal Statute 42 U.S.C. Section 1396p(c) and (e)). The first Statute treats a transfer as any disposition and the second statute requires an affirmative act.

Since a disclaimer is an affirmative act, the period of ineligibility from the disclaimer would run not from the date of the disclaimer but from the date the individual was in the nursing home and down to the appropriate amount ($2,000 or $4,000).

Pursuant to Medicaid Communication 10-02 and 10-06 , reverse half-a-loaf planning will not work in New Jersey. Therefore, the only choice is not to disclaim and to spend the monies on the nursing home. The appropriate planning would be to transfer monies to the appropriate donees who would then use the monies for the benefit of the nursing home resident. Should any monies remain after the 5 year look back period, such funds would be saved for the donees.

Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.
© May 2011, Post 145

TIAA-CREF and its Effect on Medicaid

Many Medicaid applicants are recipients of a retirement plan known as TIAA-CREF. This is the retirement benefit paid to those working within the college environment.

There are two basic types of retirement benefits. One provides for an irrevocable election of payment of an annuity. The other type of benefit may be in the form of an annuity, but the remaining balance constitutes an available resource.

Therefore, it is incumbent upon counsel to carefully review the available plan. Should the benefit remain an available resource, this has a negative effect on Medicaid eligibility. However, if the benefit is an irrevocable election, the funds must be used to help defray the cost of Medicaid in the manner of a pension or social security.

Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.
© May 2011, Post 144

Designation of Agent Under a Power of Attorney

The significance of a power of attorney with respect to accessibility has been discussed in Post 54. Another significant aspect of the power of attorney is the designation of the agent. For example, if a husband and wife are adverse in any way, they should not be designated as agent. Similarly, children of the parents may feel that they do not want to serve as agents given a conflict situation.

As discussed in my webinar, Ethical Dilemmas for Elder Law Practitioners, although many conflicts can be waived, the seminal question is whether they should be waived. Therefore, counsel must address the question of representation of the husband and wife when they are adverse. The second issue is the designee of the agent who ideally would not be the spouse or children but should rather be an independent party.

Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.
© May 2011, Post 143

Meaning of "Assets" and "Resources"

Post #7 sets forth the requirements for Medicaid eligibility in terms of the resources an individual and/or a community spouse must have in order for an applicant to have eligibility. Resources refers to funds available to pay nursing home costs.

The transfer rules are determined with respect to "assets." The word "assets" refers to both resources and income. That is, 42 U.S.C. 1396p(c) refers to a disposition of assets giving rise to a penalty. That is a transfer of both resources and income triggers the penalty rules.

Pension and social security monies are income in the first month received, but if not utilized to pay the nursing home or other debts before the first day of the first month following receipt, constitute resources.

Therefore, it is important to note the distinction between assets and resources as the word "assets" constitutes both resources and income. The eligibility rules are defined in terms of resources, while the transfer rules are defined in terms of assets.

Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.
© April 2011, Post 142

Negative Aspects of Inaccessible Resources

In Post 48, inaccessible resources are treated as excludable for Medicaid resource purposes. For example, a tenancy-in-common held by a Medicaid applicant with her sister is an inaccessible resource if the sister refuses to consent to a sale.

Notwithstanding, the definition of the Medicaid reimbursement rate is the outlay of Medicaid reduced by any continuing flow of income that the Medicaid recipient receives. If the tenancy-in-common were rented, one half the "net" rent would have to be used to defray the cost of Medicaid. Moreover, the property would be subject to the Medicaid lien upon the death of the Medicaid recipient.

Therefore, an excludable resource while being an advantage for Medicaid eligibility purposes, does have negative characteristics.

Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.
© April 2011, Post 141

State Violates Federal Pre-emption by Limiting Post Eligibility Treatment of Income for Pre-Eligibility Medical Expenses (PEME) for Three Months

This relates to amounts that may be due to a nursing home if an individual is dilatory in applying for Medicaid.

Clearly, as indicated by the HCFA-PM-85-3 statement, this has been the federal law since 1985. However, Med. Com. No. 10-07 indicates its applicability to state law effective January 1, 2010. Previously, state law had been less restrictive and it allowed PEME to be paid back without the three month limitation. Therefore, since the state's position was less restrictive than the federal law, there was no violation of federal pre-emption.

The state, by limiting eligibility to pay such cost for three months retroactively, violates federal pre-emption in that the state was less restrictive in allowing payments in full. Therefore, its change in position in denying PEME to all applicants even before the date of Med. Com. No. 10-07 violates federal pre-emption, and is incorrect.

Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.
© March 2011, Post 140

The Nature of Joint Bank Accounts

Pursuant to N.J.S.A. 46:2B-11, every account with two names is deemed to be a "joint" bank account under New Jersey law. That is, it is irrelevant as to whether the language is "or", "and" or just has joint names. The account is deemed to be owned by each person in its entirety.

Therefore, as pointed out in many of my blogs, it is dangerous to maintain a joint account in the names of the applicant or others, since the presumption will be that all the funds in the account are owned by the applicant. This presumption can be rebutted by specific proof that the co-holder contributed to the account. In such case, a withdrawal of the co-holder's funds would not be a transfer.

Post 1 points out that it is recommended that joint accounts between applicant and spouse be terminated within 90 days pursuant to the 90-day rule.

The nature of joint accounts is governed by state law and maintaining a joint account between the applicant and another could endanger Medicaid eligibility. In Post 21, I pointed out that if the co-holder predeceases the applicant, the monies would be presumed to pass to the applicant by operation of law, which raises another problem.

The recommendation is that joint accounts between the applicant and another, particularly the spouse, be terminated.

Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.
© March 2011, Post 139

Inaccessible Resources Revisited

In Post 48, I discussed the relevance of inaccessible resources as being excludable for Medicaid eligibility purposes. The theory is that a countable resource is only such that can be converted to monies to pay nursing home costs.

Examples presented were joint real estate if the co-owner refuses to liquidate, property in probate, real estate which may not comport with zoning requirements and unpaid funds such as future salary.

However, this is an area that allows for creativity. For example, as discussed in my Webinar with Carol Johnston on Ethical Dilemmas for Elder Law Practitioners, I raised the possibility that stock of a closely held corporation might be deemed an inaccessible resource if subject to a buy-sell agreement. Also, monies that are not currently payable such as royalties, constitute inaccessible resources as they are not immediately available. The definition of inaccessible resource is not exclusive, but provides examples. Therefore, creativity is required in this area.

Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.
© March 2011, Post 138

The Role of the Constitution in Elder Law

The theme throughout many of my blogs has been the concept of federal pre-emption. That is, the federal law supersedes state law except if state law is less restrictive. For example, Post 113 indicates that under the concept of federal pre-emption, reverse half-a-loaf planning should be acceptable. That is, although the state and federal law appear to conflict, state law is less restrictive and should allow such planning.

Similarly, the state is misguided in its position that the disinheritance of an individual in a nursing home results in a transfer. Section 42 U.S.C. 1396(p)(e) requires an affirmative act for a transfer and the state's law is more restrictive in that the state is imposing a penalty for a transfer on the failure to exercise the elective share, which is not an affirmative act, but rather an option.

There are numerous examples of such violation. One more which is rather important is the refusal of the state to honor spousal refusal. As pointed out in Post 78, spousal refusal and the right of the community spouse to contribute is to be allowed if the state has the right to pursue the community spouse. This is clearly the case in New Jersey as the state can stand in the shoes of the applicant and sue the community spouse for any non-payment. Notwithstanding, New Jersey does not follow this approach.

The concept of federal pre-emption and the extent to which a state follows a law varies from jurisdiction to jurisdiction. Therefore, not only is knowledge of the federal statute absolutely necessary, but the interpretation by the state is even more significant.

Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.
© March 2011, Post 137

Givebacks When Transfers Have Been Made to More Than One Person

The concept of givebacks has been previously discussed (see post 99). Basically under the new law and prior law, givebacks undo a penalty pro-rata. As indicated in such post, givebacks are particularly significant in the current law since they undo the onerous penalty provisions.

The issue arises if transfers have been made to two people and the Medicaid authorities refuse to allow the transfers to be considered “exclusively for another purpose” (see post 43). The question arises if transfers are made to two individuals and Medicaid has determined that the transfers were for a purpose other than to qualify for Medicaid. The State takes a hard line on allowing the exclusion. Therefore, to negate the penalty, the monies must be given back. However, assume that one of the donees does not have sufficient funds. The question becomes can the other donee repay so that the problem of the dual transfers is deemed cured. Several Medicaid supervisors have indicated that the wealthier donee (who has funds) can reverse the transfer penalty for both donees by returning all of the funds himself. This is a viable solution to a difficult problem.

Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.
© February 2011, Post 107

Issues to Consider When a Disabled Individual Under Age 59 Seeks Medicaid Eligibility

Often an individual becomes disabled early in life. For Medicaid purposes, a (d)(4)(A) trust for the benefit of the individual is a method of establishing an excludable resource so long as the state is the remainderman.

Another salient point is the fact that the individual will generally be receiving disability income payments. Unfortunately, such continuing payments help defray Medicaid's cost and reduce the Medicaid reimbursement rate, and therefore, do not serve to benefit the individual.

Depending upon the nature of the individual's disability, it is extremely important that there be a power of attorney for the individual so that assets can be accessed if the individual becomes incompetent.

As discussed in Post 21, as with any person qualifying for Medicaid, it is extremely important that the will or non probate assets of another not pass to the disabled individual, which would render the person ineligible for Medicaid.

Also, keep in mind that as with any other Medicaid recipient, if the "disabled child" owns property jointly with another, the property is an "inaccessible resource", which would render the property protected. If the disabled child is not a family member seeking Medicaid, Post 42 discusses the fact that transfers to the disabled child are exempt.

Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.
© February 2011, Post 136

Apportionment of Transfer Penalty When Community Spouse Enters Nursing Home

Transfers by the spouse of an applicant are considered in determining the Medicaid eligibility of the individual. Under both the MCCA and the Deficit Reduction Act, such transfers will also be considered again in determining eligibility for a community spouse who subsequently was institutionalized. That is, transfers by a community spouse who was subsequently institutionalized resulted in a double penalty. OBRA '93 requires that a "reasonable methodology" be employed to apportion the period of ineligibility between the applicant and a transferor-spouse who is subsequently institutionalized.

Example: Individual is in nursing home. Transfer of assets by spouse results in a 20-month penalty period for individual. Eight months after the transfer, spouse is institutionalized. The remaining penalty period of 12 months is to be apportioned. Presumably, six months will be allocated to each so that individual's period of ineligibility due to the transfer will total 14 months.

Under the Deficit Reduction Act, this allocation is particularly onerous as the transfer is deemed to have occurred at the date the individual would be otherwise eligible but for the transfer.

Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.
© February 2011, Post 135

Planning in the Event a Child Requires Nursing Home Care Before a Parent

In Post 85, I discussed the advantage of having a trustee with sprinkled powers amongst several beneficiaries, including elderly parents and other relatives.

The theory of such trust is it would be immune from creditors of the wayward child and should not be an available resource for the parent beneficiary.

Assuming an independent trustee and a child requires nursing home care before the parent. The child is one of the remaindermen of the trust. If the child goes into a nursing home, there would be an argument that the trust is not an available resource. However, the child's remainder interest would render the child ineligible upon receipt and death of the other beneficiaries.

The solution to such problem in the event the child enters the nursing home (to avoid the possibility of receipt of the remainder interest), would be a distribution by the trustee to a healthy child.

Such distribution should consider the following:
1. The trusts should not have mandatory "kickout" provisions which refer to Medicaid eligibility - N.J.S.A. 30:4D-6f.
2. The distribution should not be deemed a transfer. That is, statutory provisions against "trigger trusts" only apply to inter-vivos trusts under the federal statute - 42 U.S.C. 1396p(d)(3)(B)(ii).
3. Therefore there would be no resource of the child other than any funds the child may have and the distribution would not trigger the transfer rules.


Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.
© February 2011, Post 134

Ideal Planning for a Potential Medicaid Applicant with a Disabled Child

Assume an individual who is elderly but does not need nursing home care has one child, who is disabled. The individual has a house and several hundred thousand dollars.

The plan would be to transfer all the assets to the disabled child, which would be an exempt transfer. The disabled child would then use the monies transferred on the care of the individual.

Should the individual go into a nursing home, there would be no transfer. That is, the monies retained by the disabled child would be exempt from the transfer rules as would the monies used by the disabled child for the applicant.

Also, since the home is out of the applicant's "estate", the lien would not apply.

Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.
© February 2011, Post 133

Ethical Issues in Elder Law

Last week I had the pleasure of conducting an ICLE webinar with Carol Johnston, Esq., Secretary to the Advisory Committee on Professional Ethics. Carol informed us of many ethical issues relating to Elder Law. I am giving one example to point out the overriding principle in the ethical area. That is, although you may have a conflict, the conflict may be waived. The seminal issue is should you waive the conflict. For example, suppose there is a child who provides care to a parent for the required two-year period and the home can be transferred to the child without Medicaid planning. Further suppose, that the child is one of several offspring who are beneficiaries under the client's will.

The ethical issue is should you represent the client and the children. Carol pointed out that although the issue may be waived, it might be prudent not to do so. That is, if you represent a disabled child and a transferor, the remaining children might challenge the transfer and you would be vulnerable to an ethics complaint. That is, there is a presumption when a disproportionate distribution is made to one individual, that undue influence was exercised.

When counsel is presented with a conflict, the issue is not whether the conflict can be waived, but whether it should be waived. Such a principle is overriding in the Medicaid area.


Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.
© January 2011, Post 132

The Necessity to Use a Daily Money Manager

On occasion Medicaid attorneys will need the assistance of an expert in handling the paperwork for their clients both on a daily basis and for Medicaid purposes. Attached is a description of Liberty Paperwork Solutions describing their services.

My name is Emily Lutz, and my company is Liberty Paperwork Solutions LLC. We are part of a relatively new and growing professional field known as Daily Money Management. Daily Money Managers help individuals and families with their personal paperwork. This may include bill paying, checkbook balancing, filing, organizing and budgeting, as well as submitting and tracking medical insurance claims.

Older adults as well as busy professionals are likely to engage the services of a Daily Money Manager. DMM services can help older adults maintain independence while providing their adult children with peace of mind, knowing their parents’ needs are being met.

We work closely with our clients’ other network of professionals, including attorneys and accountants, so that all information is shared in a timely and accurate manner. If and when the time comes to apply for Medicaid, we can move the application process along by helping to retrieve statements that satisfy the Medicaid “look back” period. We also monitor the accounts on an ongoing basis to make sure the Medicaid recipient does not exceed the specified resources in order to remain eligible.

Liberty Paperwork Solutions LLC has been helping people take care of their personal business and paperwork tasks for over 4 years. With an extensive background in banking and working with seniors, we have many satisfied clients. We are a member of the American Association of Daily Money Managers, and are fully insured. For further questions, or to schedule a complimentary consultation, I can be reached at Emily@LibertyPaperworkSolutions.com, or 973-462-5733.

Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.
© January 2011, Post 131

The Dilemma of Caretaker Agreements

Agreements pursuant to which a Medicaid applicant can reimburse a child (i.e. Caretaker Agreements) have been discussed in Posts 6, 17, and 34. That is, a child can now be reimbursed if the payments to the child are deemed by the state to be "reasonable". This creates a dilemma as the state will not make an a priori decision regarding the validity of a caretaker agreement. The applicant runs a risk that the amount by which the child is compensated is not deemed by the state to be reasonable. In such event the excess payment to the child by the parent is deemed to be a penalizing transfer.

Therefore, it is important that counsel indicate in his letter that the validity of a Caretaker Agreement is not guaranteed as the state will only honor payments by the parent that are deemed to be "reasonable", and that the parties are at the mercy of the state.

I particularly call your attention to Post 52 in which I suggest the documents to be submitted to support a Caretaker Agreement.

Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.
© January 2011, Post 129

Ethical Issues Relating to Joining Network Groups

As many attorneys and other professionals have been joining network groups to promote business, the issue arises as to an attorney's ethical obligations. That is, a network group is formed so that the members provide referrals to each of the members of the group.

There is certainly no ethical problem joining a network group unless you are financially penalized for not recommending members of the group.

However, counsel's obligation is always to his client. Therefore, while the joining of a network group is not an ethical problem, making recommendations to individuals in the group rather than to the best professional that counsel knows, violates the obligation attorneys have to provide their clients with the best advice available. This creates a dilemma for an attorney joining a network group who wants to generate work and decides only to refer matters to members of the group. If he or she does so with knowledge of a more competent professional in a particular area, counsel is violating his or her obligation to provide an individual with the best recommendation available.

Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.
© January 2011, Post 130

The Necessity to Use a Qualified Home Care Agency

It is necessary on many occasions to use a qualified home care agency. Below is a description of one of the outstanding home care agencies (Freedom Eldercare) located in Hackensack, New Jersey. The telephone number of Freedom Eldercare is (201) 883-1200 and the fax number is (201) 833-1283.

When choosing home care for a loved one, you should be aware of the risks associated with using a non licensed agency or independent provider.

Liabilities and abuses

Payroll Taxes
Consumers and the families of those receiving care are confronted by a confusing array of federal and state laws. The simplest and most direct requirement is that anyone who gets a paycheck must pay the government any taxes due. This includes social security, Medicare, federal and state unemployment, and state and federal payroll taxes.

When the consumer is the employer and responsible for compliance, and none of these taxes are being paid, the government may sue the consumer or their estate for back taxes, interest and penalties. In a situation where many days of care or many hours each week of care over a long period of time have been delivered, this tax responsibility can be a substantial amount. Other remedies that authorities may seek can include civil fines and criminal penalties.

There are also many problems for workers. No payment into social security leaves them vulnerable in their old age, and no protection is afforded for their periods of unemployment. Also, workers may not be receiving the minimum wage and overtime protection to which they may be entitled.

Worker Related Injuries
This is the most potentially financially devastating result for consumers and workers who are unaware of the employer-employee relationship. If no workers’ compensation protection is provided (as mandated by law for employees for nearly every state), and the worker sustains an on-the-job accident, the liabilities can be substantial. Medical costs, and disability payments for workers could cause financial hardship for even a very wealthy client. For clients who could not afford to pay, the worker could be left with no help for a devastating injury. Many consumers incorrectly assume that homeowner’s insurance will cover this type of loss, when, in fact, homeowner’s insurance usually specifically excludes employees in the home.

Abuse and Exploitation
Most workers who enter the home care industry are caring, giving people. Unfortunately, there are also those who know that it is very easy to take advantage of frail, functionally limited, often cognitively impaired clients. Registries or independent contractor agencies, because they have little ongoing liability and want to avoid being considered as the employer of the worker, may provide inadequate or no background investigations on their caregivers. This could subject clients to physical, psychological or financial abuse. Families of the consumer can help, but time constraints and geographical distances often don’t allow for this.



Supervision of the Worker
Because of Internal Revenue Service regulations, registries and independent contractor agencies cannot provide any substantive work supervision, scheduling, or training to workers in home care without becoming employers. If they do, the company, by law, becomes the employer of the worker. Supervision, scheduling and worker training are important benefits to consumers and workers and are provided only by agencies that hire their workers.

For consumers and their families, hiring a licensed home care agency provides assurance that someone with experience and responsibility is reviewing the changing care needs of the client. The licensed home care agency provides ongoing assessments of the limits of care that individual workers are allowed to provide. They also provide appropriate supervision that can potentially head off, or at least deal with, the sometimes difficult relationship issues that can occur between clients and their care workers.


Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.
© January 2011, Post 128