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Review of Inaccessible Resources

In various posts, I have discussed the concept of inaccessible resources pursuant to N.J.A.C. 10:71-4.4(b)(6). Inaccessible resources are treated as excludable resources 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.

Some examples of inaccessible resources are as follows:

1. Real estate owned by the applicant with someone else who refuses to sell. The same applies to property in probate, that is, if the community spouse becomes a beneficiary of an estate, the mere fact that the estate is in probate does not cause the inheritance to be a countable resource. It is only a resource if it is distributed.

2. Real estate which doesn't meet the zoning requirements may not be convertible into cash.

3. Monies owed to the community spouse if the payer is bankrupt should not be counted as an accessible resource.

However, resources that can be received only if a penalty is incurred, such as an IRA, are countable resources.

An arcane inaccessible resource arguably would be stocks subject to a buy sell agreement, which I discussed in post 172. The theory is that such resource is not convertible to cash since it is subject to a buy sell agreement. This argument once worked in an administrative hearing in Hunterdon county. I believe the argument is incorrect since the co-holder may not want to buy the stock if someone leaves during their lifetime. If they do not want to buy the stock, the stock may be offered to a third party and therefore may be countable as cash.

There are a myriad of examples of inaccessible resources. The purpose of this article is to provide a summary of the concepts.

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

© August 2012, Post 209

Approach to Advice by an Elder Law Attorney

As my posts have indicated, the law is uncertain in many areas. Failure of New Jersey to follow federal law has been discussed many times in areas such as spousal refusal, waiver of elective share as a transfer and IRA of community spouse as a resource.

The attorney must be very careful about giving concrete advice. My thinking is that the elder law attorney must point out the federal law, the state law, any conflicts and if there is a conflict, whether the conflict can be waived or should be waived.

That is, an elder law attorney should not be dictatorial, but should point out the options, possibly make recommendations, and advise the client, in writing, of any ambiguities. The attorney should state that he or she has rendered advice and informed the client of any conflicts, but not has mandated what steps the client should take.

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

© August 2012, Post 208

Effect of Change in Penalty Rate

Planning may have been undertaken last year with the anticipation of a penalty rate of $7,282. Counsel should be cognizant of the effect of a change in the penalty rate on the date of eligibility.

(A) The period of ineligibility is determined with respect to the average nursing home cost as at the time of application: 42 U.S.C. 1396(c) (1) (E).
(B) An increase in the penalty rate shortens the penalty period. Therefore, such increase between the date of transfer and the anticipated date of eligibility results in an earlier date of eligibility.

Med. Com. 12-10 changes the penalty rate from $7,282 to $7,757 as of May 29, 2012, retroactive to November 1, 2011. An increase between the date of transfer and the anticipated date of eligibility results in an earlier date of eligibility.

Example: An individual transfers $60,000 on December 1, 2011. The anticipated penalty period would be $60,000 divided by $7,282 which equals 8.23 months. However, Med. Com. 12-10 changed the penalty rate to $7,757. Therefore, the period of ineligibility is $60,000 divided by $7,757 which equals 7.7 months and results in an earlier date of eligibility.

Planning point: Counsel should review all transfers during the look-back period. The increased penalty rate may warrant an earlier date of eligibility.

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

© July 2012, Post 207

Review of Inaccessible Resources

Inaccessible resources are treated as excludable resources for Medicaid eligibility 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.

Post 35 discusses in detail that a co-owner of real estate renders the real estate inaccessible if the co-owner (not the applicant) refuses to liquidate. For example, real estate owned with a sibling is an inaccessible resource if the sibling refuses to sell the property. It is not as wonderful as it seems, since one half the net income of the property (not considering paper deductions such as depreciation) is income and must be used to defray Medicaid's costs.

Therefore, although the property is excludable, Medicaid recipient does not inure to the benefit of the income.

Moreover, if the property is a joint tenancy, it will not be subject to the lien until the sibling dies and moves out. However, if the property is a tenancy in common, on the death of the Medicaid recipient, one half of the property allocable to the Medicaid recipient passes to a family member who resided in the home with the Medicaid recipient, according to the will. In such case, the lien will apply when the family member moves out or dies. The difference between a tenancy in common and a joint tenancy is that if the property does not pass to a family member, it will be subject to the lien upon the Medicaid recipient's death.


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

© July 2012, Post 206

Matters to Consider When Putting an Ill Spouse in a Nursing Home

Families are often conflicted as to when to put an ill spouse in a nursing home when the person is in the care of the community spouse.

Although it is important that an individual live in the "least restrictive" environment, there is a point in time when nursing home admission is required.

If the individual becomes a burden to the community spouse, consideration of nursing home placement should be made. Otherwise, if the ill spouse becomes injured when nursing home placement was appropriate, there could be liability of the community spouse or the child who holds the power of attorney.

In one of my prior blogs, I pointed out that on occasion a lawyer must think as a psychologist, not to determine whether the individual should remain at home, but as least be sensitive to the fact that a geriatric care manager should be retained and make an assessment so that the ill person is in the environment most appropriate.

We are all faced with a community spouse who refuses to send the spouse into a nursing home out of guilt. At that point I think it is the attorney's obligation to recommend a geriatric care manager to make an assessment.

Also, the attorney should point out the function of Adult Protection Services. This organization and the public guardian have the obligation to make sure that an individual is not in an improper environment or abused.

So I think the main consideration as to whether an individual goes into a nursing home, does not depend as much on the individual as it does on the effect on 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.

© July 2012, Post 205

Major Differences Between New York and New Jersey Medicaid

On August 9th, 2012, I and three other attorneys will be presenting a program to ICLE entitled: "A Comparison of New York and New Jersey Topics in Medicaid Planning & Interstate Guardianship".

It was surprising to me how different the Medicaid rules are in New York than they are in New Jersey. The program will be presenting approximately 20 areas of difference but the key areas that are dissimilar are as follows:

1. New York computes the community spouse resource in a different manner. In New Jersey, in order to receive the maximum CSRA, you must have twice that amount, or $227,280. In New York, the CSRA is applied to the first assets so that if you have between two spouses $113,640 plus two, the CSRA is $113,640 and the applicant has the appropriate amount with Medicaid being granted initially.

2. In New Jersey, Medicaid only covers home care under waiver programs, which limit the time that home care is available. In New York, home care is actually part of Medicaid coverage so that a person can remain home forever and not go into a nursing home.

3. Finally, although there are many other points, the exemptions for "transfers exclusively for another purpose" are treated differently. For example, in New Jersey, I once had a client who made a pattern of transfers for twenty years starting at age 70. The Medicaid authority said that since it was an elder person, they didn't care that there was a pattern and transfers for the five years prior to application were penalized. In New York, the word "exclusively" is treated differently. That is, if you can show a pattern of gifts, they will treat them exclusively for another purpose and Medicaid would be granted. The New York approach is very similar to the old Internal Revenue Service Rule regarding "transfers in contemplation of death." In that area of law, the federal government looks to the primary or dominant motive and a pattern of gifts was the key to exclusion.

In New Jersey, in order to show that a transfer was "exclusively for another purpose," you have to show an example such as the following: a thirty-five year old person gives $100,000 to his brother, has a stroke at age 36 and goes into a nursing home. It takes a unique example like this for a transfer to be treated "exclusively for another purpose". Therefore, it is important to realize that there are differences between jurisdictions regarding basic Medicaid rules.

At the program, we will be discussing other topics such as spousal refusal, payment of debts and expenses, disinheritance of the Medicaid applicant and the effect of inter vivos trusts. Although many other topics will be discussed, these are some of the other key examples of the difference between New Jersey and New York Medicaid.

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

© July 2012, Post 204

An Elder Lawyer Must Have a Sense of Humor

We are often presented with situations that are humorous. The attorney must decide whether humor is appropriate for the particular client.

I once had a client with whom I was discussing contingent beneficiaries. The client asked me what if you, the attorney, died before the last beneficiary. I answered that it doesn't matter since I am not a beneficiary under the will. The client seemed surprised and acknowledged the fact and then asked the following question: "What if you die before the last beneficiary?" I answered my executor or my secretary as co-holder on the box that held the wills, had a right to enter the box and get the will for them.

The client then asked, "What if you and your secretary died together?" I answered that if my secretary and I died together, my wife would kill me.

Although this story seems silly, it lightened up the conference and the meeting went much better than if I had remained serious.

The point of this story is that you must evaluate the client and determine what is appropriate and not appropriate for the particular situation.

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

© July 2012, Post 203

The Problem of Second Marriages

On occasion, you will have clients who have been married twice, each of whom have children from an earlier marriage. The first issue is should you represent both of them. I think you can obtain a waiver and represent both of them, but that is not the question. Although the conflict can be waived, the question is should you waive the conflict.

Assuming you represent both of them, their wills will probably be different, since they each have different children. If the contingent beneficiaries are children of both marriages, I don’t think you have a problem, and once you have decided you can waive the conflict, it is necessary to prepare a contract to devise pursuant to N.J.S.A. 3B1-4. The contract should obligate you not to change your wills. However, this is illusory since you can make gifts during your lifetime and defeat the purposes of the contract to devise. Therefore, you must also have language in the contract to devise that you will not make gifts to defeat the purpose of your wills. This is not illusory, but I would refer to it as amorphous since you could spend money on your own children that would be difficult and hard to trace.

Therefore, second marriages are fraught with issues without absolute solutions and the conflicts should be seriously considered. That is, assuming there is a conflict, should you waive the conflict and how you preserve the rights of each.

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

© June 2012, Post 202

Timing of Transfer of a House to a Protected Transferee

In Post 6, I pointed out that the transfer of the home to certain individuals does not give rise to a penalty. One of these individuals is a child who provided care for a parent so that the parent need not go into a nursing home.

I pointed out also that the time of transfer is not defined by the statute.

The key point of this article and a point I feel necessary to repeat, is that the transfer should be made at the time of application for Medicaid. A prior transfer, could be challenged by Medicaid as not being a transfer to a protected transferee.

However, if the transfer is made pursuant to the Medicaid application, evidence can be adduced to show the services rendered by the child, and then Medicaid can approve the transfer of the house to the protected transferee without any penalty.

Of course the problem is if the child is only one of the beneficiaries under the will and receives the house, there may not be enough assets for the other children. You, as the attorney for the mother, should not be concerned about this issue for the obligation is to your client (the mother). However, I think you have a further obligation to explain to the transferee that the transfer could be challenged by the other children.

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

© June 2012, Post 201

In Personam Jurisdiction

Although not directly related to elder law, the question often arises as to whether the state has personal (in personam) jurisdiction over an individual. The leading case is International Shoe Co. v. State of Washington, Office of Unemployment Compensation and Placement et al. No. 107. 66 S. Ct. 154. International Shoe Co. held that there must be "sufficient contacts or ties with the state of the forum to make it reasonable and just according to our traditional conception of fair play and substantial justice to permit the state to enforce the obligations which have incurred there." The relevance of this case is that if a judgment is rendered in one state and an individual moves to another state, the judgment can be enforced under the full faith in credit clause. The only exception to this rule is if it is abhorrent to the second state to enforce the judgment of the first state. In today's environment, such a decision is unlikely.

However, if the judgment in the initial state has been appealed and is not a final judgment, the full faith in credit clause does not apply.

Suppose you are an attorney in the second jurisdiction and the judgment in the first jurisdiction is under appeal. My recommendation would be to file an interpleader action and have the proceeds turned over to the judge in your jurisdiction, and let the judge hold the proceeds until the decision in the first jurisdiction becomes final since at that time, the full faith and credit clause would apply.

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

© June 2012, Post 200

Election of the Trustee for a Trust

Very often an attorney will name the surviving parent as trustee of a trust for children if the other parent dies. This approach has negative tax consequences. Firstly, since the surviving parent would have an obligation to support the child, under the grantor trust rules, the income is taxable to the surviving parent as trustee and not to the child. If we have a large estate, and the surviving parent is the trustee, the corpus will be included in that person's estate.

Such a problem can be alleviated even if the surviving parent is trustee if we limit the individual's power to an ascertainable standard. "Ascertainable standard" is defined by the regulations under Section 2041 as health, support, maintenance or education. Notwithstanding, I would be reluctant to name the surviving parent as trustee, because in all likelihood the remaindermen are the children, which could lead to litigation.

Therefore, an ideal trustee would be an aunt or an uncle or the beneficiary, who had no obligation and there would no tax or estate tax consequences for the trustee.

Another solution to the trust situation would be a trust having co-trustees whose interest is adverse to the other. That is, if they were both remaindermen, the distributions need not be limited to an ascertainable standard. However, having two trustee-remaindermen, gives rise to the problem of a disagreement. That is, if the co-trustees disagree, this might require a court proceeding which would be very costly.

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

© June 2012, Post 199

Elder Law and the First Amendment

Many years ago, the federal government held that a lawyer committed a crime if he advised a client how to protect assets. Although the decision was ridiculous, it was the law for a period of time.

Eventually, the government came to its senses and realized that the issue was not the right of the lawyer to advise, but the right of the public to know. Therefore, the government reversed itself and held it certainly is not a crime for a lawyer to advise a client to protect assets. Clearly, as in all areas of law (particularly constitutional law), the public's right to know is paramount.

A similar situation is in Post 174 , in which the Supreme Court of New Jersey held that you may call yourself a Super Lawyer if the language has the proper restrictions. Again, it is not the First Amendment right of the lawyer to advise, but rather the First Amendment right of the public to know.

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

© May 2012, Post 198

The Pros and Cons of Owning a Home with a Sibling

Suppose a Medicaid applicant inherits a home which she owns jointly with a sibling. If the sibling refuses to sell the home, the home is an inaccessible resource. However, after the applicant gets Medicaid, one half the "net" income must be used on the home. For these purposes, "net" income is defined as income from the home without paper deductions such as depreciation. I am assuming of course that the home is rental property.

Therefore, the home will not prevent Medicaid. However, upon the death of the applicant the lien will not be enforced immediately as the sister is a family member - N.J.A.C. 10:49-14.1(g). However, after the sister dies or moves out of the home, the lien is enforced to the extent of the interest of the Medicaid recipient.

This is a unique example of protection of a second home and delay of the lien.

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

© May 2012, Post 197

What Comes First the Chicken or the Egg (i.e. Or Other Advisors)

It has been suggested that counsel has an affirmative obligation to advise a potential donor of the alternative of purchasing long-term care insurance before undertaking such plan (see NAELA News, Volume 7, No. 4, July 1995, "Long-Term Care Insurance - A Necessary Option to Consider", by Barreira, Brian E.). Also, the elder law attorney may be presented with a situation in which it has not been determined where a potential client will reside (i.e. home care, assisted living or nursing home). Therefore, I have often suggested that before clients see me, they should consult with a geriatric care manager.

It is the obligation of any attorney to give the best advice available. However, that advice may not be possible before the client sees other experts (i.e. see above). The ideal situation, if a determination has not been made as to where a person should reside, is the individual should meet with a geriatric care manager and the attorney so that the legal and residential requirements can be discussed together.

The answer to the "chicken or the egg" quandary, is that the chicken (long-term care expert, geriatric care manager) comes first. That is, the elder law attorney should not be overly aggressive about planning, when all information is not available.

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

© May 2012, Post 196

Determination of the Community Spouse Resource Allowance

The statute refers to the date of determination of the community spouse resource allowance (C.S.R.A.) as the first day of the first month of institutionalization. The date of institutionalization is actually the earlier of the first day of the first month of (i) entering a nursing home, (ii) entering a hospital or (iii) receiving home care.

A thirty day break in any of the above requires a re-determination.

Recent Medicaid Communications have indicated that if during the time of the application process before receipt of Medicaid there is an increase in the C.S.R.A., the applicant gets the benefit of the increase.

Many of the blogs have indicated that often the state is more restrictive than the federal statute, and therefore, violates federal pre-emption. In this instance, where one receives an increase in the C.S.R.A., the state is more lenient and it is an opportunity that should not be missed.

Also, as indicated in many blogs, after determination of Medicaid, the C.S.R.A. is not limited. This provides many planning opportunities, which have been discussed in previous blogs.

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

© May 2012, Post 195

A House is Not a Home

As we are all aware, a primary residence of an individual's home is exempt if resided in by the spouse. The leading case on the issue of primary residence is In Re Dorrance's Estate 309 Pa 151, 163 A. 303 cert. denied, 288 U.S. 617 (1932).

The In Re Dorrance's Estate case (which involves the Campbell family) held that your primary residence is a place where you can form domiciliary intent and you have a presence. Since domiciliary intent is subjective, it must be determined by objective factors such as where you live, vote, own a car, spend your time, etc. This is in contrast to a residence which is at a place where you may have a home.

Relating to this are the two cases cited in Post 171 that an individual may qualify for Medicaid the moment they are in a jurisdiction. Neither residence nor domicile is required.

However, to determine an individual's primary domicile for exemption of real estate purposes, the guiding case is In Re Dorrance's Estate, cited above.


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

© April 2012, Post 194

Attributes of an Elder Law Attorney

An elder law attorney is unique in the fact that the individual must be sympathetic and understanding to the client.

Although any educational background will be sufficient, it is my opinion that some courses in psychology would be helpful. Understanding a client or being too officious might render the meeting a nullity.

However, understanding a client and explaining the rules of Medicaid with an understanding of psychology would be helpful.

In fact, New York University has a joint program of law and clinical social work. Such a background would be invaluable and any individual with such degree would be the ideal 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.

© April 2012, Post 193

What is a Trust?

A trust is defined to include any legal instrument of device that is similar to a trust but includes an annuity only to such extent and in such manner as Secretary specifies - 42 U.S.C. 1396 p(d)(6). Transmittal No. 64 describes how annuities are to be treated under the trust/transfer provisions (Section 3258.9B). Statute provides no guidance as to meaning of words "similar to a trust". HCFA has indicated in Transmittal No. 64 that the essence of this definition is a fiduciary relationship and includes entities such as escrow accounts, investment accounts and pension funds.

Therefore, a trust is any fiduciary relationship. Examples are escrow accounts, investment accounts, pensions funds and partnership agreements.

Many attorneys are drafting general partnership agreements, with a general partner making distributions to the other partners. The theory of the general partnership is a partnership is not an available resource. However, under the trust rules, the general partner has a fiduciary relationship to the other partners and any distributions by the general partner to the other partners is subject to the transfer rules. Therefore, since the general partnership is a trust, the result would be that the transfer by the general partner would be deemed a transfer subject to the five year rule (for example, for such treatment, see Post 184.)

It is noted that the trust rules do not apply to trusts established on or before October 10, 1993. However, Transmittal No. 64 indicates the earliest applicable date should be October 1, 1993.

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

© April 2012, Post 192

History of the MMNA

The MMNA (Minimum Monthly Needs Allowance) has a long history and it is worthwhile to discuss its derivation. Approximately 20 years ago, I had a case that went to administrative hearing known as Cleary v. Waltman.

The MMNA is the shelter cost of a community spouse if a primary residence is owned by a community spouse and an applicant is on Medicaid.

The query at the time was can you shift income from the applicant to make up the MMNA or must you shift principal that generates sufficient income to make up the MMNA. Mr. Cleary decided to take the course that you can shift principal and increase the community spouse resource allowance. The Supreme Court of the United States denied cert. and the District Court held that you must shift income.

This is no longer an issue as the new law provides for the "income first" rule which requires that the applicant's income be shifted first to make up the MMNA and if more income is needed (unlikely), then assets can be shifted.

Various blogs have indicated that in addition to the MMNA, the community spouse can keep income to pay Medigap insurance and $35 a month.

Therefore, it is generally prudent not to make the nursing home the representative payee, but reimburse to the nursing home the balance of social security and pension after keeping the MMNA, Medigap insurance and $35 a month.

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

© April 2012, Post 191

Medicaid Must Be Read From the Public Benefit's Point of View and Not as a Trusts and Estates Lawyer

Prior blogs have discussed the seminal case of Mistrick v. Division of Medical Assistance and Health Services 154 NJ 158 (1998). In Mistrick, the New Jersey Supreme Court held that an IRA of a spouse is not considered a resource.

Literally, the New Jersey Supreme Court was incorrect. The reason is that the rules of social security are incorporated in the Medicaid rules by reference. Under the social security rules, an IRA of a recipient is a resource. Since such rules are incorporated in the Medicaid rules, an IRA of a community spouse should be a resource for Medicaid purposes.

Notwithstanding, the Mistrick case held that the IRA of a spouse must be considered. Although this whole thing is literally wrong, New Jersey does not want to allow the community spouse to receive a large retirement payment which is rolled over to an IRA and still receive Medicaid.

Once again, the area of Medicaid is still filled with minefields and you must interpret the law from a public benefit's point of view.

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

© March 2012, Post 190

The Most Egregious Example of the Failure of Medicaid to Follow Precedent

In an administrative decision, the father of a nursing home resident (M.M.) predeceased the nursing home resident and established a discretionary testamentary trust for the benefit of M.M. The trust contained no standards of invasion and provided that the trustee had sole discretion as to the use of the funds (see M.M. v. Division of Medical Assistance and Health Services, OAL Docket #11123-95, 2/20/96, 4/11/96). The trust also included supplemental benefit language. The County denied eligibility and the Administrative Law Judge affirmed holding that the trust was not an excludable resource.

The significance of this case is that the Director reversed on the basis that the Medicaid recipient was not the grantor, the trust was irrevocable and the trustee had considerable discretion. Such reversal presumably indicates an acknowledgement by Medicaid authorities that the corpus of a purely discretionary trust (at least without any standards of invasion, and possibly with supplemental benefit language) is not an available resource.

Notwithstanding, what appears to be precedent has not been followed by Medicaid who now treats a purely discretionary trust as an available resource.

This is just an example of Medicaid's refusal to follow precedent.

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

© March 2012, Post 189

Transfers into the Name of a Potential Medicaid Recipient

Although it is illegal to require payment for a fixed time in order to stay in a nursing home, we know that many nursing homes set such a requirement and rather than fight the issue, payment is often made for the required period of time.

Suppose an individual does not have sufficient funds? It would be appropriate for a child to pay money to the individual so that the required number of months be paid.

There is no penalty for a transfer to an applicant. The penalty only refers to a disposition of assets under 42 U.S.C. Section 1396(p)(c).

That is, a disposition of an asset (resource, income) can give rise to a penalty. However, a transfer of assets into the name of an applicant does not give rise to a penalty, and would fulfill the requirement of the nursing home.


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

© March 2012, Post 188

Marketing by the Elder Law Attorney

There was a time when it was unconstitutional for a lawyer to advertise. However, the courts have held that the public's right to know entitles an attorney to advertise so long as the attorney follows the ethics rules. For example, in Post 174I pointed out that it is unethical to refer to yourself as a Super Lawyer. A lawyer cannot advertise himself as being superior to another lawyer. Therefore, in that post I pointed out that the proper language for a Super Lawyer is as follows:

"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."

There are numerous ways for a lawyer to market his services. Public speaking, his or her website, seminars and written communications are some of the typical ways. For example, on my website I post blogs weekly which discuss various topics of interest. In preparing such blogs, I take care to make them as clear as possible and provide information that I think is relevant.

It is important in conveying information that New Jersey law be referenced, in particular, if that law conflicts with the United States Constitution. I have pointed out in numerous posts that New Jersey does not follow the federal Constitution and is more restrictive. For example, disinheritance of a Medicaid recipient, spousal refusal and what constitutes a transfer are some of the areas in which the State is more restrictive than the federal government. On the other hand, the State can be more lenient than the federal Constitution. For example, the 90-day rule and the treatment of a retained life estate as not being a resource are examples where the State is less restrictive. Finally, I do not believe that the elder law attorney can know 90% of the rules. That is, the attorney must be familiar with all the rules otherwise Medicaid can be denied.

As I have pointed out in my posts, the elder law attorney must be familiar with various areas of law. In addition to elder law, the attorney must be familiar with constitutional law, tax law and the law of wills and estate. In addition, in Post 179I pointed out that the lien law and the asset rules were not drafted with reference to each other. Therefore, it is incumbent upon the elder law attorney to advise the client of this discrepancy. That is, in Post 167, I pointed out that the elder law attorney must give the client options and not be dictatorial in light of the ambiguity of the 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.

© March 2012, Post 187

Utilization of Social Security After Qualifying for Medicaid

In Post 1, I discussed the handling of social security after a person qualifies for Medicaid. Since I have had this question on numerous occasions, I thought I would briefly summarize this issue.

After an individual qualifies for Medicaid, the nursing home will request that you assign social security and pension to them as representative payee.

The problems with such an approach are as follows:

1. Pension monies cannot be assigned as under the Internal Revenue Code they are inalienable (cannot be assigned).
2. Medicaid subsidizes Medigap insurance. Therefore, assigning the social security causes you to rely on the nursing home to pay the Medigap insurance, when you have the right to withhold the Medigap insurance and pay it yourself.
3. A Medicaid recipient can retain $35 a month. You can retain that in a separate account rather than assign that to the nursing home.

Therefore, if the nursing home requests to be the representative payee, refuse to do so and give the above as your answer.

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

© February 2012, Post 186

Review Sale of Remainder Interests in a Life Estate

In Post 36, there was a discussion about transferring property and retaining a life estate.

The advantages to such technique are the life estate has no resource value and is not subject to the Medicaid lien. However, the disadvantage is that when a property is transferred and a life estate is retained, there is a transfer of the remainder interest. The tables for determining the remainder interest can be obtained from your Medicaid office. However, they are identical to the Internal Revenue service tables of 1988 (before the rate of interest became variable) or are set forth in Rev. Proc. 64-19.

The technique I suggested was that if a nursing home applicant transfers property and retains a life estate, the remainderman should purchase the remainder interest so that there is no transfer.

Although this seems like an ideal solution, there are some drawbacks.

Firstly, after the individual gets Medicaid, the expenses of the life tenant must be paid by the remainderman. That is, the applicant cannot use his or her pension or social security to pay the interests of the life tenant. As pointed out in Post 36, if the remainder interest were transferred to a "protected transferee", (i.e. a child who provided the necessary care to allow the applicant to stay at home rather than to go into the nursing home), there would be no period of ineligibility with respect to the transfer and the remainderman would not have to make any payment since the remainder interest is protected under 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 2012, Post 185

Difference Between Transfers from Inter-Vivos Trusts and Testamentary Trusts

As indicated in Blog 115, distributions from inter-vivos trusts can be a transfer. The example given is as follows:

Example: Trust provides for discretionary distributions of income and principal for children. Ten years after trust established by individual, $60,000 principal distribution made to a child. One year after this distribution, individual applies for Medicaid. Medicaid will be denied. Distribution from trust subject to 60-month look-back. Under current law, the penalty will begin only after the individual is institutionalized and assets are reduced to $2,000.

Statutory provisions against "trigger trusts" apply only to inter-vivos trusts under the federal statute - 42 U.S.C. 1396p(d)(3)(B)(ii). As indicated in Blog 85, distributions from testamentary trusts are not transfers. However, such trusts should not have mandatory "kickout" provisions which refer to Medicaid eligibility.

Notwithstanding, if the distributions from the testamentary trusts, do not satisfy the elective share, such trusts may be deemed to transfer if the elective share is not satisfied (see Blog 183). That is, even though distributions from testamentary trusts are not transfers, if the elective share is not satisfied, the state takes the approach that disinheritance of a spouse results in a transfer. This position is incorrect, and this is discussed in Blog 169.

As discussed in many blogs, it is the obligation of the attorney to inform the client of the possibility, while warning them that a solution to one problem can create another problem.

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

© February 2012, Post 184

Review of Meaning of "Transfer"

On several previous blogs, I pointed out that 42 U.S.C. 1396(p)(c ) and 42 U.S.C.(p)(e) require an affirmative act. Therefore, such actions as a gift or a disclaimer constitute a transfer.

However, as I have pointed out, an "option" is not an affirmative act. Therefore, the state's decision that the failure to exercise the elective share is a "transfer" is incorrect. The ability to exercise an elective share is an option, which is an inaction, rather than an action.

Federal pre-emption is basically the problem in New Jersey elder law, and the most egregious example is the state's misinterpretation of the word "transfer".

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

© February 2012, Post 183

Basic Concepts of Fiduciary Income Tax

Many individuals and even lawyers are under the impression that distributions of an estate are subject to income tax. This is a misconception.

Under the fiduciary income tax rules, there is a concept similar to estate income which is called d.n.i. or distributable net income. For example, if an estate has $100,000 and $6,000 of income, and assuming there are three beneficiaries, distributions of the entire estate would only be income to the beneficiaries to the extent of d.n.i.. Suppose that the distribution of $100,000 resulted in d.n.i. of $6,000, the distributions would result in taxable income of $2,000 to each beneficiary.

If the estate does not end within one year, capital gains are also distributed to the estate. Since the estate reaches maximum income at a much lower rate than an individual, accumulation of
estate income only results in a reduction of principal. Therefore, income from an estate should be distributed mandatorily.

Any distributions of income are deductions to the estate. That is, d.n.i. not only is a measuring rod of taxable income, but also determines the distributions to the estate.

If the estate terminates within one year, capital gains pass through as d.n.i.. However, if there are capital gains and the estate is not distributed within one year, the capital gains are distributed to the estate.

Income tax to the distributees can be deferred by the estate electing a fiscal year. That is, income is taxable to the beneficiary in the taxable year of the beneficiary.

Not all items are subject to estate income tax. For example, life insurance is received by the beneficiary tax-free. However, certain items of life insurance are taxable, such as pre-paid premiums and post-mortem dividends.

The computation of d.n.i. is more complicated than the scope of this article, but it does approximate estate income. The form for preparing estate income is a 1041 and the amount of estate income taxable to the beneficiary is reflected on a Form K-1.

Also, the character of the income to the estate carries through to the beneficiary. For example, if one half of the estate income is dividends and one half is bank income, the distributions carry through, pro rata.

As stressed in many of my articles, it is necessary to retain other professionals in handling an estate. Therefore, an accountant should be retained to prepare estate income tax returns.

With respect to the income taxation of trusts, the rules are similar and the form is the same.

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

© January 2012, Post 182

Competent Person with Option to Reside in Two States

Very often the elder law attorney will be faced with a situation in which an individual who is competent and needs nursing home care resides in a state other than New Jersey. The family is considering whether the individual should go into a nursing home in the other state or should go into a nursing home in New Jersey.

Although the cardinal rule is that the decision should be made with respect to what is best for the parent, such decision may be made with reference to the law in both states.

It is my opinion that an attorney should not practice elder law in two jurisdictions as the law changes day to day in almost every jurisdiction. Therefore, I would recommend that the competent parent be on a conference call between the attorneys from two jurisdictions.

The attorneys from each jurisdiction should advise as to how Medicaid works in each of the jurisdictions and let the family decide which jurisdiction is appropriate.

An attorney rendering such advice who is licensed in only one jurisdiction, could be acting criminally for giving advice in the other jurisdiction. Also keep in mind, that if the person is incompetent, a change in jurisdiction would be impossible as the individual could not form domiciliary intent.

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

© January 2012, Post 181

Attributes of an Elder Law Attorney

The elder law attorney must be familiar with various areas of law. These areas include elder law, tax law, constitutional law and estate law. The following are merely some examples. In a prior ICLE seminar, Janice Chapin, Esq. pointed out that the Medicaid statute should not be reviewed from the tax point of view but should be reviewed from the benefits point of view. The following are an example of this and other examples:

1. In the Mishkin case, the court held that the IRA of a community spouse was a resource. Technically, since Medicaid incorporates the social security statutes by reference and such IRA is not a resource for social security purposes, this decision is technically incorrect.
2. The elder law attorney must be familiar with the constitution. In one of my prior seminars, entitled: Constitutional Aspects of Elder Law, I stress such constitutional issues and in particular the doctrine of federal pre-emption.
3. The elder law attorney must be familiar with estates and trusts. For example, an estate in probate is an inaccessible resource. The question becomes when a community spouse inherits, whether the property in probate becomes a resource.
4. The elder law attorney must be able to rely on other professionals and determine what the appropriate time is. In Blog 165, I pointed out the need for other professionals and the appropriate time.
5. The approach of the elder law attorney is pointed out in Blog 167. That is, the elder law attorney should not dictate to the client what to do, but should point out the various possibilities and let the client decide.

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

© January 2012, Post 180

Resource and Lien Regulations Not Drafted with Reference to Each Other

In our Legislation course at law school, we learned the doctrine of in pari materia. This means that statutes are drafted with reference to each other.

Unfortunately, this is not the case with respect to the resource rules and the lien regulations.

For example, in Blog 60, I pointed out that the state treats a disinheritance as a transfer to the extent of the elective share. The spouse's beneficial interest in any life estate or trust shall be valued at one-half the total of the property of the trust. Therefore, it would appear that a testamentary trust provided solely income to the spouse in the nursing home would prevent disinheritance from being treated as a transfer. That is, a trust with twice the income of the community spouse devised to the spouse in the nursing home satisfies the elective share requirements. However, lien regulations under N.J.A.C. 1:49-14.1(n)3. provides that if a trust is a discretionary trust, the Medicaid beneficiary cannot compel distributions and if the Medicaid recipient had no interest for 5 years, the trust is not subject to the lien. However, such testamentary trust would be treated as a disinheritance and not satisfy the elective share.

Therefore, I have concluded in my materials on an ICLE program entitled: "Estate Planning Issues" Final Medicaid Regulations (Finally!), that the best approach to avoid such problems would be to devise the elective share to the nursing home recipient.

The discrepancy between the lien regulations and the transfer regulations seems ridiculous. That is, if you provide for a discretionary trust for a nursing home resident, that would be treated as a resource notwithstanding the fact that such trust would not be subject to the lien regulations. Query: how could one draft a trust that would not satisfy the lien regulations, if one did not qualify for Medicaid since such devise would be a transfer under the elective share provisions which would require mandatory income.

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

© January 2012, Post 179

Real Estate Spending as Part of the Spenddown

In numerous blogs, I have pointed out that real estate expenses are part of the spenddown to Medicaid.

However, sometimes such expenses may raise questions.

For example, in a recent blog (entitled: "Step-Transaction Doctrine"), an interesting issue arises.

Suppose a parent is going to transfer the house to a child because the child provided the necessary care to allow the parent to remain home. We are aware that such transfers are exempt.

The question then becomes can expenses be incurred by the parent before the transfer as part of the spenddown or would Medicaid apply the step-transaction doctrine and say such expenses were for the benefit of the child.

I have spoken to several supervisors and they have taken the position that so long as the expenses were paid while the potential applicant is residing in the home they will not be treated as transfers and be part of the spenddown. I was surprised by such result, but it just points out that you have to inquire even if you are in doubt regarding Medicaid issues.

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

© January 2012, Post 178