Former Resident Liable to Nursing Home for Unjust Enrichment

A New York trial court has held that a nursing home is entitled to summary judgment on an unjust enrichment claim against a former resident who did not pay for care, but the court denied summary judgment on a breach of contract claim against the resident's daughter.Blossom View Nursing Home v. Denner (N.Y. Sup. Ct., Wayne Cty., No. 76117, July 3, 2014).

Arnold Denner entered a nursing home, but refused to sign the admission agreement. His daughter, Linda Clevenger, eventually signed as the "responsible party." The contract stated that the responsible party was required to use the resident's resources to pay for care. Mr. Denner's co-insurance and Social Security paid for some of his care at the facility, but he left a balance of $31,318.23 when he moved out.

The nursing home sued Mr. Denner and Ms. Clevenger for breach of contract. It also stated a claim for unjust enrichment against Mr. Denner. Ms. Clevenger argued that the nursing home pressured her into signing the agreement and that her father told her not to use his resources to pay for his care. The nursing home asked for summary judgment.

The New York Supreme Court, a trial court, denied the nursing home summary judgment on the breach of contract claim, but granted it on the unjust enrichment claim. According to the court, there are triable issues of fact regarding whether the nursing home used duress in getting Ms. Clevenger to sign the admissions agreement and whether she actually had access to her father's resources. But, the court held that although the nursing home can't state a claim for breach of a contract that Mr. Denner did not sign, he is liable to the nursing home for unjust enrichment because he received and accepted its services. 

For the full text of this decision, go to: http://law.justia.com/cases/new-york/other-courts/2014/2014-ny-slip-op-31734-u.html

A Walk on the Wild Side of Estate Planning

Reed performing at the
Hop Farm Festival in Kent, 2011
http://en.wikipedia.org/wiki/Lou_Reed

Danielle and Andy Mayoras wonder, in an article written for Crain's Wealth, why Lou Reed, late lead singer and guitarist of The Velvet Underground, a musician and songwriter with a successful solo career, "would be so careless with his estate plan."  According to the article, probate filings available to the public paint a vivid picture of Lou Reed's estate:

Recent filings with the Surrogate's Court in Manhattan show that Reed's estate has already earned more than $20 million since he passed away from liver disease at the age of 71, on Oct. 27. This is only the income that Reed's estate has brought in since his death, primarily from royalties.

The executors filed a report recently with the court, listing the income and providing an updated inventory of estate assets. There is other property worth around $10 million in Reed's estate. Reed's wife and his sister are the primary beneficiaries, along with a half million dollars set aside for the care of Reed's 93-year old mother. Reed's widow and his sister receive 75 percent and 25 percent, respectively, of the residue, while all of the personal property and almost $9 million worth of real estate in New York will go to his widow alone.

Reed relied on a 34-page will he signed in April 2012.  Apparently Reed was aware he was suffering from liver disease, and he signed his will a year-and-a-half before he passed. 

The article continues:

Why would someone with assets worth tens of millions rely on a will, instead of a revocable living trust, if not even more sophisticated estate planning?  

That's the question that doesn't appear to have a good answer.  If Reed had used a revocable living trust, and transferred his assets into the trust during his life, then all of this information would have been kept private. That's a key difference between wills and trusts. Wills have to pass through probate court (called Surrogate's Court in New York), which is a public process. Trusts, when used the right way, avoid probate court entirely. 

While most people don't have to worry about the press leaking details of their financial worth, everyone should strive to avoid probate court. On top of being public, it's also expensive, stressful, time-consuming, and more prone to fighting.  

It's much easier for disgruntled family members to file will challenges in probate court, as opposed to a trust that is administered privately, outside of court. In fact, trusts can even help you when you are alive by addressing who and how your assets are managed if you are no longer able to do so. Wills can't help with that.

The The authors conclude that Lou Reed should have updated his plan to include a revocable living trust, thereby protecting his family's privacy, and avoiding the aggravation of probate court:

It's a lesson for everyone … even those who don't have more than $30 million. So let Reed stick to walking on the wild side when it comes to estate planning. Talk to your loved ones about the benefits of a revocable living trust.

To read the whole article, click here.

GAO Report: The Myth of Millionaires on Medicaid

A new U.S. Government Accountability Office (GAO) report examining Medicaid planning strategies finds that that only 14 percent of Medicaid applicants had more than $100,000 in total resources and that only 5 percent transferred assets, adding support to assertions that Medicaid planning has a negligible impact on program outlays. 

The Report means hard evidence to rebut the assertions of some that perpetuate the myth that Medicaid for long term care provides benefits to "Millionaires on Medicaid"  The arguments ordinarily come from academics who have little real experience how Medicaid works, or the wide array of options available to the wealthy, other than reliance upon Medicaid, that better protect assets from long term care costs.  

The GAO reviewed 294 approved Medicaid nursing home applications in three states – Florida, New York and South Carolina -- to study the extent to which individuals are using available methods to qualify for Medicaid coverage. To identify the methods used to reduce countable assets to qualify for Medicaid coverage for nursing home care, the agency spoke with officials from the Centers for Medicare & Medicaid Services (CMS), interviewed nine attorneys recommended to it by the Director of the American Bar Association’s Commission on Law and Aging, and conducted undercover calls with representatives from 17 law offices whose websites indicated that they provided assistance with Medicaid planning.

During the undercover calls, the investigator posed as an adult child seeking advice on obtaining Medicaid coverage for his parent while preserving the parent’s assets. Two scenarios involved a parent with immediate need for care (one married and one widowed) and one scenario involved a parent who would need care in the future.

The following are some of the key findings in the report:

• Applicants most commonly owned financial and investment resources (95 percent), burial contracts and prepaid funeral arrangements (39 percent), life insurance policies (34 percent), their primary residence (31 percent), and vehicles (26 percent). Only nine applicants owned a trust and three applicants owned annuities.
• Sixty-five percent of applicants had annual gross incomes of $20,000 or less.  
• 30 percent had annual gross incomes between $20,001 and $50,000, and 5 percent had annual gross incomes of more than $50,000.Five percent of applicants transferred assets for less than fair market value.
• The median amount of assets transferred was $24,608, and the amounts ranged from $5,780 to $296,221. All but one of the applicants found to have transferred assets were from New York; the remaining applicant was from South Carolina.
• Five percent of applicants had a personal service contract that was determined to be for fair market value. The median value of the personal service contracts was $37,000; the value of the contracts ranged from $4,460 to $250,004.
• Two percent of applicants (5 applicants) used the “reverse half-a-loaf” method of transferring assets (in which the applicant gifts assets, incurs a penalty period, and then either converts other countable assets into an income stream or accepts a partial return of the assets). Four of those applicants transferred money in exchange for a promissory note and gifted between $20,150 and $227,250 worth of resources, resulting in penalty periods of between 2 months and 22 months.
• Thirteen applicants were able to use spousal refusal to allow the community spouse to retain assets. The median value of non-housing assets retained was $291,888, and two spouses were able to retain more than $1 million.
• According to state Medicaid officials, county eligibility workers, and attorneys interviewed, the value of annuities for the community spouse have average values ranging from $50,000 to $300,000.

To read the full report, "Medicaid: Financial Characteristics of Approved Applicants and Methods Used to Reduce Assets to Qualify for Nursing Home Coverage," click here.

For a National Academy of Elder Law Attorneys' press release responding to the GAO report, click here.

Father May Evict Based on Allegations of Elder Abuse

A New York housing court has ruled that a 72-year-old man may evict his son and his son’s girlfriend from his apartment because of the man’s fear of elder abuse. Huggins v Randolph (N.Y. Civ. Ct., Kings Cty., No. 91343/13, July 10, 2014).

Norris Huggins, the tenant of record in a Brooklyn apartment, sought to evict his son, Julian Randolph, and his son’s girlfriend, Ashley Richmond, alleging that he had been forced to flee his apartment because he was afraid of Mr. Randolph.  In an affidavit, Huggins said that "my son has in the past threatened my health and safety, forced me to sign a power of attorney and taken other steps to put me in fear of him."

Earlier this year the court granted Mr. Huggins’ motion for summary judgment against Mr. Randolph and Ms. Richmond.  Mr. Randolph subsequently moved out and Ms. Richmond tried to stay the eviction, arguing that Mr. Huggins lied in saying he feared his son, and that in any case he is free to return to the premises because his son is no longer there.

In rejecting Ms. Richmond’s motion, housing court judge Susan Avery finds that “in light of the many forms of elder abuse,” Ms. Richmond’s argument that Mr. Huggins no longer has anything to fear is “quite disturbing.” 

“[I]t is incumbent upon judges and court personnel to recognize the signs of possible elder abuse and act to protect society's vulnerable seniors," Judge Avery writes.  ". . . Mr. Huggins has the right to live in his home with the occupants of his choosing, or if he so chooses, no other occupants at all. Mr. Huggins is entitled to be the sole decision maker as to which guests, if any, are invited into his home."

For the full text of this decision, go to: http://law.justia.com/cases/new-york/other-courts/2014/2014-ny-slip-op-24184.html

SSA's Guide for Evaluating Special Needs Trusts Problematic

The Social Security Administration (SSA) recently instituted a nationally uniform procedure for review of special needs trusts for Supplemental Security Income (SSI) eligibility, routing all applications that feature trusts through Regional Trust Reviewer Teams (RTRTs) staffed with specialists who will review the trusts for compliance with SSI regulations. 

The SSA has also released its Trust Training Fact Guide, which will be used by the RTRTs and field offices when they evaluate special needs trusts.  In an article in the July/August 2014 issue of The ElderLaw Report, New Jersey attorney Thomas D. Begley, Jr., and Massachusetts attorney Neal A. Winston, both CELAs, discuss the 31-page guide in detail and caution that while it is a significant step forward in trust review consistency, it contains “a few notable omissions or terminology that might cause review problems.”  Following is the authors’ discussion of the problematic areas:  

• Structured Settlements. The guide states that additions/augmentations to a trust at/after age 65 would violate the rule that requires assets to be transferred to the trust prior to the individual attaining age 65. It does not mention that the POMS specifically authorizes such payments after age 65, so long as the structure was in place prior to age 65. [POMS SI 01120.203.B.1.c].

• First-/Third-Party Trust Distinction. Throughout the guide, there are numerous references to first-party trust terms or lack of terms that would make the trust defective and thus countable. These references do not distinguish between the substantial differences in requirements for first-party and third-party trusts.

• Court-Established Trusts/Petitions. This issue is more a reflection of an absurd SSA policy that is reflected accurately as agency policy in the guide, rather than an error or omission in the guide itself. This section, F.1.E.3, is titled “Who can establish the trust?” The guide states that creation of the trust may be required by a court order. This is consistent with the POMS. It would appear from the POMS that the court should simply order the trust to be created based upon a petition from an interested party. The potential pitfall described by the guide highlights is who may or may not petition the court to create a trust for the beneficiary. It states that if an “appointed representative” petitions the court to create a trust for the beneficiary, the trust would be improperly created and, thus, countable. Since the representative would be considered as acting as an agent of the beneficiary, the beneficiary would have improperly established the trust himself.

In order for a court to properly create a trust according to the guide, the court should order creation of a trust totally on its own motion and without request or prompting by any party related to the beneficiary. If so, who else could petition the court for approval? The plaintiff’s personal injury attorney or trustee would be considered an “appointed representative.” Would a guardian ad litem meet the test under the guardian creation authority? How about the attorney for the defendant, or is there any other person? If an unrelated homeless person was offered $100 to petition the court, would that make the homeless person an “appointed representative” and render the trust invalid? The authors have requested clarification from the SSA and are awaiting a response.

Until this issue is resolved, it might be prudent to try to have self-settled special needs trusts established by a parent, grandparent, or guardian whenever possible.

• Medicaid Payback/Administrative Fees and Costs. Another area of omission involves Medicaid reimbursement. The guide states that “the only items that may be paid prior to the Medicaid repayment on the death of the beneficiary of the trust are taxes due from the trust at the time of death and court filing fees associated with the trust. The POMS, [POMS SI 01120.203.B.1.h. and 203B.3.a], specifically states that upon the death of the trust beneficiary, the trust may pay prior to Medicaid reimbursement taxes due from the trust to the state or federal government because of the death of the beneficiary and reasonable fees for administration of the trust estate such as an accounting of the trust to a court, completion and filing of documents, or other required actions associated with the termination and wrapping up of the trust.

While noting that the guide, in coordination with training, “is a marked improvement for program consistency for trust review,” Begley and Winston caution advocates that “the guide should be considered as a summarized desk reference and training manual and not a definitive statement of SSA policy if inconsistent with the POMS.”

Annuities Purchased by a Medicaid Applicant Must Name State as Remainder Beneficiary

The Georgia Supreme Court recently issued an opinion regarding the requirement that an annuity purchased by a Medicaid applicant must name the state as a remainder beneficiary.  The opinion, though, is instructive as much for its deference to CMS and state agency statutory interpretations, as it is for its holding. Reversing an appeals court decision, the court ruled that, because it finds that the federal statute is ambiguous, annuities benefitting a Medicaid applicant need to name the state as a remainder beneficiary in order to avoid a transfer penalty. Cook v. Glover (Ga., No. S13G1127, July 11, 2014).

Jerry Glover purchased an annuity for himself shortly before applying for Medicaid. He later refused to name the state as a remainder beneficiary on the annuity, the state approved his application but assessed a seven-month transfer-of-assets penalty against him.

Mr. Glover appealed, arguing he wasn’t required to name the state as a remainder beneficiary. After a hearing, an administrative law judge upheld the penalty, and a trial court affirmed the decision. The Georgia Court of Appeals reversed. Although agreeing that a plain reading of 42 U. S. C. § 1396p (c) (1) (F) standing alone clearly required that the state be named a remainder beneficiary of any annuity, the Court of Appeals interpreted subsection (G) to unambiguously remove actuarially sound annuities benefitting Medicaid applicants from the requirements of subsection (F) by removing them from the definition of “assets” with respect to a transfer of assets.  

The Georgia Supreme Court reversed, holding that the penalty period is valid. The court examined the statutory language regarding annuities and found that the relationship between the two subsections is not clear and unambiguous.  Because the federal law was vague and ambiguous, the court ruled that the state Medicaid agency's interpretation, which is consistent with the Centers for Medicare and Medicaid Services' interpretation of the statute, is "reasonable and entitled to deference."

For the full text of this decision, go to: http://www.gasupreme.us/sc-op/pdf/s13g1127.pdf

California Heir Liable to Reimburse State for Mother's Medicaid Benefits

A California appeals court has ruled that the heir of an estate who sold her interest in her mother’s house to her brother is liable to the state for reimbursement of her mother’s Medicaid expenses. Estate of Mays (Cal. App., 3d, No. C070568, June 30, 2014).

Medi-Cal (Medicaid) recipient Merver Mays died, leaving her house as her only asset. Ms. Mays’ daughter, Betty Bedford, petitioned the court to be appointed administrator of the estate, but she was never formally appointed because she didn’t pay the surety bond. The state filed a creditor’s claim against the estate for reimbursement of Medi-Cal expenses, and the court determined the claim was valid.  A dispute arose between Ms. Bedford and her brother, Roy Flemons, over ownership of the house. After the court determined Mr. Flemons owned a one-half interest in the property, Ms. Bedford and Mr. Flemons entered into an agreement in which Mr. Flemons paid Ms. Bedford $75,000 and transferred the house to his name.

The state petitioned the court for an order requiring Ms. Bedford to account for her administration of Ms. Mays’s estate. The court determined Ms. Bedford was liable to the state for the amount she received from Mr. Flemons because although she wasn’t formally appointed administrator, she was acting as administrator. Ms. Bedford appealed.

The California Court of Appeal, 3rd Appellate District, affirmed on different grounds. The court ruled that Ms. Bedford cannot be held liable due to her failure as administrator of the estate because she was never formally appointed administrator. The court held, however, that Ms. Bedford is liable as an heir of the estate who received estate property. According to the court, Ms. Bedford’s settlement with Mr. Flemons was “essentially an end-run around the creditor’s claim and the estate process” and “the $75,000 payment represented proceeds of the estate that would otherwise be available to satisfy creditors’ claims.” 

For the full text of this decision, go to:http://www.courts.ca.gov/opinions/nonpub/C070568.pdf

Caregiver Payroll Service

More and more families are hiring private-duty caregivers, meaning that an increasing number are facing a new dilemma – how to deal with the payroll, tax, and labor law aspects of household employment.  While everyone wants to follow the law and do the right thing for the caregiver, it’s a tall task because of the complexities and administrative burdens of being an employer.

Luckily, there is a service -- Care.com® HomePaysm, Provided by Breedlove -- that can guide busy families through all the complex tax and payroll requirements of hiring outside help while eliminating every piece of tedious paperwork.  For more than 20 years, HomePaysm has been handling payroll, tax and Human Resources (HR) obligations for families -- more than 55,000 families to date -- with guaranteed accuracy.  From paydays to tax time and all points in between, these folks take care of—and assume full accountability for—every payroll obligation, including, but not limited to:

• Manage payroll calculations, prepare paystubs, and process Direct Deposit payroll each payday;
• Prepare and file state and federal employment tax returns;
• Prepare and distribute Form W-2;
• Prepare and file Form W-2 Copy A/Form W-3 each January;
• Prepare Schedule H to be filed with Form 1040.

If you would like more information, or would like to receive one of a limited number of coupons that my office received so that clients can start using HomePaysm and receive a waiver of the registration fee (a$100 value), please email us.

There are also many fine bookkeepers, accountants, and payroll services locally.  If you would like a local referral, please let us know! 

Inherited IRA's are not Exempt from Creditors in Bankruptcy

In a unanimous opinion, the U.S. Supreme Court has ruled that funds held in an inherited individual retirement account (IRA) are not exempt from creditors in a bankruptcy proceeding because they are not retirement funds. Clark v. Rameker (U.S., No. 13-299, June 13, 2014).

Heidi Heffron-Clark inherited an IRA from her mother. Her inherited IRA had to be distributed within five years, and Ms. Heffron-Clark opted to take monthly distributions. During the five-year period, Ms. Heffron-Clark and her husband filed for bankruptcy and claimed that the IRA, worth around $300,000, was exempt from creditors because bankruptcy law protects retirement funds.

The bankruptcy court found that the IRA was not exempt because an inherited IRA does not contain anyone's retirement funds. Ms. Heffron-Clark appealed, and the district court reversed, ruling that the exemption applies to any account containing funds originally accumulated for retirement. The Seventh Circuit Court of Appeals reversed, holding that the money in the IRA no longer constituted retirement funds, while the Fifth Circuit Court of Appeals decided in In re Chilton (674 F.3d 486 (2012)) that funds from an inherited IRA should be exempt. The U.S. Supreme Court agreed to resolve the conflict.

The U.S. Supreme Court affirmed the Seventh Circuit's decision in Clark, holding that the funds held in inherited IRAs are not "retirement funds." In a unanimous opinion delivered by Justice Sotomayor, the Court finds that funds in an inherited IRA are not set aside for retirement because the holders of inherited IRAs cannot invest additional money in the account, are required to withdraw money from the account even though they aren't close to retirement age, and may withdraw the entire balance of the account at one time.

If you want to ensure that your IRA's are inherited by your heirs and remain exempt from their creditors, see an elder law attorney.  

For the full text of this decision, go to: http://www.supremecourt.gov/opinions/13pdf/13-299_mjn0.pdf