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