Agent Under Power of Attorney Liable for Damages to Nursing Home for Breach of Contract

Nursing homes have devised numerous strategies to legally seek reimbursement from residents' family members in light of federal and state laws prohibiting them from demanding that family members personally guarantee payment of  a resident's nursing home bill. The Nursing Home Reform Act (NHRA), for example, which governs skilled nursing facilities and nursing facilities accepting Medicare and Medicaid assisted residents facilities cannot “require a third party guarantee of payment to [its] facility as a condition of admission (or expedited admission) to, or continued stay in, [its] facility.” 42 U.S.C. § 1395i–3(c)(5)(A)(ii); 42 U.S.C. § 1396r(c)(5)(A)(ii); see also 42 C.F.R. § 483.12(d)(2).  

Nursing Home admission agreements are, therefore, filled with alternate provisions, such as those requiring that family member or agents assist in obtaining Medicaid or other government assistance, or those requiring family member agents to ensure that the resident's assets are spent down on nursing home care.  Planners are concerned that these provisions might negate or interfere with otherwise lawful spend down strategies, such as spending assets for improvement of a home, or for purchase of a car for a resident's spouse.  

Supporting these efforts to find alternative reimbursement is a recent decision by an Ohio Court of Appeals.  The Court ruled in favor of a nursing home suing a resident's agent for breach of contract, holding that the nursing home is entitled to damages if the agent had control of liquid assets at the time the nursing home invoice came due even though some of the assets were paid to maintain the resident's home. Classic Healthcare Systems, LLC v. Miracle (Ohio Ct. App., 12th Dist., No. CA2017-03-029, Nov. 13, 2017).

David Miracle was his mother's agent under a power of attorney. When his mother entered a nursing home, he signed the admission agreement on her behalf and agreed to use his mother's finances to pay the facility. Mr. Miracle paid the nursing home infrequently, and his mother owed more than $100,000 by the time she was discharged.

The nursing home sued Mr. Miracle for breach of contract. Evidence showed that Mr. Miracle used $56,486.63 of his mother's resources to maintain her real estate and spent an additional $12,971.54 on payments not related to his mother. The trial court found that the additional payments were unauthorized and awarded the nursing home damages in that amount. The nursing home appealed, arguing that it was also entitled to the money that was used to maintain Mr. Miracle's mother's home.

The Ohio Court of Appeals reversed and remanded the case to the trial court.  The Court held that the nursing home is entitled to damages for breach of contract if Mr. Miracle "had control over liquid assets at the time an invoice came due." The court ruled that the trial court improperly looked at the entire nursing home stay as one transaction. According to the court, if Mr. Miracle "had control of [his mother's] liquid assets on the due date that were not paid to [the nursing home] then that amount constitutes damages properly payable to [the nursing home]."

For the full text of the opinion, go here. 

Maryland Repeals Filial Responsibility Law

Maryland has repealed its little-used filial responsibility law. Maryland's filial responsibility law provided that adult children are obligated to financially support an indigent parent with basic needs such as food, care, shelter, and clothing. The law was not used much in nursing home cases because Maryland law also prohibits a nursing home from holding adult children responsible for a parent's nursing home bill unless the child consents in writing to be financially responsible. However, the law could have been used when a parent under age 65 was under the care of a psychiatric hospital, or for parents receiving nursing home care paid for by Medicaid in resource recovery after the parent's death.

 Although, like many states, Maryland never used its filial responsibility law to seek repayment of Medicaid benefits, other states have followed the recommendation of the  Centers for Medicare & Medicaid Services (CMS) policy analysts in expanding Medicaid resource recovery efforts to include application of the law.  These states include Pennsylvania, Connecticut and South Dakota.  

  

The repeal saw bipartisan support.  The arguments for repealing the law included that filial responsibility laws were a holdover from Elizabethan times, and that a parent’s failure to exercise sound financial planning should not burden the parent’s adult children.  Of course, one only needs to witness the chaos created by filial responsibility laws in Pennsylvania to justify repeal. 

Idaho repealed its filial responsibility law in 2011.  Only Maryland and Idaho have repealed filial responsibility laws in the modern age, rejecting the havoc that such laws often play play in creating family disputes and  discord, and in potentially negating responsible long term care financial and estate planning.   A host of other states continue to keep and enforce filial responsibility as state law.

 To read the full repeal, go here.

Filial Responsibility In the News

Philly.com published the most recent warning: Children May have to Foot Bill for Indigent Parents' Care. The author writes:

Remember when Mom and Dad bailed you out on that overdue bill?

Now, it may be your turn.

More than half of U.S. states have so-called "filial responsibility" laws that require adult children to support their parents if they become indigent.

For example, under Pennsylvania's 2005 statute, spouses, parents, and children are obligated to care for or financially assist destitute family members.

That means you could be held financially responsible for a parent's nursing-home care, says Marc Jaffe, estate-planning lawyer and partner at Fromhold Jaffe & Adams in Villanova.

"A nursing home will sue an adult child to recover monies the parent didn't pay," Jaffe says.

"It's not used very often. And you are not necessarily responsible for all of that person's debts. However, you might be held responsible for that person's food, shelter, clothing, medical care, and other similar necessities if the person did not have the funds to pay," he notes.

Such lawsuits "may become more common, as the government in general is looking to be less generous with benefits, and if a medical provider doesn't get paid, they may look more toward the family," Jaffe adds.

For the remainder of the article, go here.

Update [July 13, 2016]:  A similar article, "Are You Going to Saddle Your Kids With Your Debt?," can be found here. 

Filial Responsibility Laws Lead to Chaos

Filial responsibility laws often lead family chaos to spill-over into the legal system. A recent Pennsylvania case, involving a claim by one child against his brother and sister illustrates the ensuing chaos, and the case does not involve Medicaid!  

Joseph Eori is the attorney-in-fact for his mother, Dolly Eori, who requires 24-hour care.  Mr. Eori lives with his mother and provides management of her care and resources.  Mr. Eori testified that his mother's medical and caregiving expenses exceeded her income.  Although Ms. Eori had not filed for Medicaid, and apparently did not require Medicaid assistance, and was on no other form of public assistance, Mr. Eori filed a complaint on behalf of his mother seeking filial support from his brother, Joshua Ryan, and from his sister Paulette Rush.  The daughter entered into a consent order to pay her mother $400.00 per month in filial support before trial. 

Mr. Ryan, however, objected to paying anything on behalf of his mother on a number of grounds.  He lost at the trial court, and the Court entered an Order for Filial Support requiring Ryan to pay his mother Dolly Eori $400 per month in support.  Ryan appealed the judgment against him.  

Mr. Ryan first argued that his mother was not legally indigent because she did not have outstanding medical bills.  The court ruled against him, even though her medical and other bills were wholly satisfied.  The court, refusing to resort to receipts and detailed checking account statements as demanded by Mr. Ryan,  relied upon the testimony and documents submitted by the caregiving son.  The court recounted the testimony:

Plaintiff [the caregiving son] testified that his mother is diagnosed with cancer, dementia and Alzheimer's disease and requires twenty-four hour care. During the day, she goes to Senior Life adult day care. For the remaining hours, Plaintiff is responsible for ensuring that someone is available to care for his Mother. There are currently three individuals that provide that care, and he pays each of them in cash. He pays them a total of $1,722 per month for the care. According to Plaintiff's testimony, he has not been able to obtain care for his mother on weekends because she cannot afford it. Therefore, the total amount is not even reflective of the full care that Ms. Eori needs.

In addition to the caregiver costs, Plaintiff estimates that Ms. Eori spends an additional $1,000 per month on hygiene items, cleaning expenses, and diapers. The electric bill is an additional $250 per month and there is a deduction evidenced on her bank statements for Verizon at approximately $95 per month. These basic needs already total more than Ms. Eori's monthly income, and the bank statements submitted by Defendant evidence additional expenses for medical needs, such as a payment of $773 to Prime Medical Group in July 2012 and another $115 payment in September 2012. To further show the disparity between Ms. Eori's income and expenses, Plaintiff admitted a bank statement for January 2014 showing a deposit of $1789 and a withdrawal of $1779.67.

Based on the evidence and testimony presented, the Appellate Court determined that Ms. Eori did in fact satisfy the common law definition of "indigent." The appellate court agreed that "[a]lthough she is not extremely destitute, she has sought financial assistance in the past and does not have sufficient income to provide for her maintenance and support."  The appellate court continued:

...the definition of indigent does not state that outstanding debt is necessary for an individual to qualify as indigent. It just requires an inability to provide for ones [sic] own maintenance and support with the income received. The mere fact that Ms. Eori has been able to remain out of debt does not eliminate her from the definition of an indigent person. One does not have to be "helpless" or in "extreme want." Therefore, the Court did not err in finding Ms. Eori indigent merely because there was no evidence of unpaid or outstanding medical bills or other liabilities.

Ryan next argued that the Trial Court committed error in failing to consider the fact that Plaintiff, as power of attorney for Ms. Eori, claimed her as a dependent on his 2013 Federal Income Tax return. Federal law required the Plaintiff to be responsible for at least fifty percent of Ms. Eori's expenses in order to claim the deduction. The court held that while this may be true for federal income tax purposes, it failed to see how that impacted the determination that Ms. Eori is indigent. The court wrote: "[i]f her son has to provide at least fifty percent of her expenses to maintain her daily needs, then she, on her own, is clearly indigent."  The court failed to determine whether the son, in fact, contributed such sum, and failed to consider the benefit the son derived from the deduction, a fact that will later demonstrate why these matters are so poorly resolved by legal means. 

Ryan next argued that the Trial Court erred in failing to consider the amount Plaintiff contributes to Ms. Eori's support. The court agreed that from 2012 to 2014, Ms. Eori's bank account has never had a negative balance. However, the positive balance was not, according to the Plaintiff, the result of Ms. Eori's income. Plaintiff testified that he used his personal money to maintain a $2800 balance in case of an emergency,  and because there are no burial plans for his Mother.  The court did not, however, consider and recount the actual amounts contributed by the caregiving son, noting simply that his occasional need to support his mother evidenced her legal indigence.

Ryan finally argued that he had been estranged from his mother and that he had an abusive childhood.   Ryan was initially sued as Russell Eori. Although his birth name was Russell Eori, Russell Eori obtained a legal name change to Joshua Ryan.  The record was unclear whether the childhood abuse played any role in his name change.  Pennsylvania's filial responsibility law negates the support obligation if the parent abandoned the child for a 10-year period.  The court ruled that his testimony was legally insufficient to constitute a defense to his support obligation.  The court explained:

The term "abandoned" is not defined in the act itself. However, the Custody Act at 23 Pa. C.S.A. §5402 defines "abandoned" as "left without provision for reasonable and necessary care or supervision." Defendant testified that he did not have the greatest family growing up and he wanted to get away. (N.T. 6/5/14 pg. 66, lines 8-13). He testified that his grandmother cared for him more than his Mother; however, they were never far apart because he testified that his grandmother either lived with Mother or beside Mother. (N.T. 6/5/14 pg. 61, lines 21-25 and pg. 62, lines 1-7). Although he testified that Mother was abusive, left and caused them to move many times, and was either gone or fighting, he never established that she left for a ten year period. He did not provide details or time periods on any of the testimony presented. Therefore, it was not clear from his testimony that Mother ever left for a ten year period without provision for his reasonable and necessary care or supervision. Although it may not have been an ideal childhood, there was no evidence of abandonment to release Defendant from his obligation to support Mother.

The Pennsylvania Superior Court affirmed, holding that Mr. Ryan is required to provide support to his mother. The court agreed with the trial court's decision that the filial responsibility law doesn't require a showing of unpaid bills or liabilities to justify a claim. In addition, the court affirmed the trial court's ruling that while Mr. Ryan may not have had an ideal childhood, there was no evidence that his mother abandoned him.

There was no explanation regarding the $800.00 in ordered support, and whether that bore any equitable relationship to the occasional financial support provided by the caregiving son, or whether any financial support was even necessary under the statute since he performed non-monetary services.  The court did note that the caregiving son might also be responsible for financial support, but failed to address the issue since it was subject of the lawsuit.  The court did not explain whether the caregiving son would, in fact, need to sue himself before the court would consider such an argument, or whether refusing to consider the care giving son's potential liability left the other children responsible for their mom's care. In fact one might conclude, as did Ryan, that the son benefited financially from providing services to his mother (in that he received a tax deduction, a place to live, and meal and transportation opportunities) which benefits were not considered by the court.

One can expect more lawsuits under filial responsibility statutes and laws.  

For the full text of this decision, click here.  

Man Can't Challenge Discharge of Brother's Debt for Mom's Care under Filial Responsibility Law

A U.S. district court has affirmed a bankruptcy court's decision that a man cannot prevent the discharge of his brother's debt owed to their mother's assisted living facility under Pennsylvania's filial responsibility law because the man was not a creditor of his brother. In re: Skinner (U.S. Dist. Ct., E.D. Pa., No. 14-6697, May 27, 2015).

Dorothy Skinner lived in an assisted living facility until she was evicted for non-payment. The facility sued Ms. Skinner's sons, Thomas and William, under Pennsylvania's filial responsibility law. The court entered a default judgment against Thomas for $32,224.56. Thomas filed for bankruptcy and sought to discharge the debt.

William filed a claim in the bankruptcy court, arguing that Thomas's debt was non-dischargeable because it resulted from fraud and embezzlement. William argued that Thomas used their mother's assets for his personal expenses, so if William was liable to the assisted living facility, he was entitled to be reimbursed by Thomas.  A U.S. bankruptcy court dismissed the claim, holding that William did not have standing because he was not a creditor of the debtor.

The U.S. District Court for the Eastern District of Pennsylvania affirmed the bankruptcy court's decision, holding that William is not a creditor of Thomas. According to the court, Pennsylvania's filial support law does not provide for contribution or reimbursement, so it does not give William a claim against Thomas.

For the full text of this decision, go here.

For a prior article about this case, go here.

To read more about filial responsibility, go here, here, here, here, and here.  

Don't Let Institutions Plan for You: Medicaid-Eligible Nursing Home Resident Stuck With Costs of Private-Pay Room

An Illinois case illustrates why seniors, their families, and caregivers simply cannot entrust their best interests to institutions. An Illinois appeals court rules that Medicaid does not cover a Medicaid-eligible nursing home resident who was in a private-pay room ,and that the nursing home was not required to move her to a Medicaid-certified bed earlier than it did, meaning that the resident could be discharged from the nursing home for nonpayment. Slepicka v. State (Ill. Ct. App., 4th Dist., No. 12MR743, July 7, 2015).

Mary Slepicka entered a nursing home as a Medicare patient. When her Medicare nursing home coverage ran out in April 2011, she became a private-pay resident.  At the time Ms. Slepicka signed the private-pay contract, money from the sale of her house was her main asset. The nursing home did not place Ms. Slepicka in a Medicaid-certified bed until March 2012. After visiting a financial planner, Ms. Slepicka put the assets from the sale of her house in an annuity and applied for Medicaid. The state granted her benefits retroactive to June 2011.

The nursing home claimed it could not bill Medicaid for the days Ms. Slepicka was not in a Medicaid-certified bed, so it billed Ms. Slepicka. Ms. Slepicka did not pay the nursing home (the case description does  make clear whether Ms. Slipicka could pay, given the fact that she purchased and ostensibly irrevocably annuitized the proceeds from the sale of her home), and the nursing home served Ms. Slepicka with a notice of discharge. Ms. Slepicka appealed the discharge, arguing that she could not be charged for the days Medicaid covered. The nursing home argued it did not put Ms. Slepicka in a Medicaid-certified bed right away because it believed she had assets that she needed to spend down. The trial court granted the nursing home summary judgment, and Ms. Slepicka appealed.

The Illinois Court of Appeals affirmed, holding that Medicaid is not required to cover expenses incurred by private-pay residents even if the resident is eligible for Medicaid, and that the nursing home was not required to move Ms. Slepicka into a Medicaid-certified bed. According to the court, "just because a resident is financially eligible for Medicaid, it does not necessarily follow that Medicaid will cover every expense the resident incurs during the period of eligibility, regardless of where the resident incurs the expense." In addition, the court holds that the nursing home did not know that Ms. Slepicka would qualify for Medicaid as soon as she did, so it was not required to move her into a Medicaid-certified bed any sooner.

Sadly, the likely consequence of this case is that Ms. Slepicka's family will be forced to pay for the additional nursing home costs, and for the legal expenses of attempting to protecting her residency in the nursing home.  

One wonders whether underlying the court's decision is an effort by the court to move the State of Illinois to common law filial responsibility since the state does not have a filial responsibility statute.  Future cases may make clear the court's objective, if such an objective exists.    

For the full text of this decision, go here.

Use of Filial Responsibility to Collect a Nursing Home Debt Survives Federal Challenges

The State of Pennsylvania is racking up victories supporting the use of filial responsibility in resource recovery of Medicaid benefits.  Future courts will likely point to the Second Circuit Court's decision in Eades v. Kennedy, PC Law Offices (U.S. Ct. App., 2nd Cir., No. 14-104-cv, June 5, 2015) as a peculiarly important case paving the way for greater reliance upon filial responsibility.  Aside from the fact that the case concerned an effort to collect funds from a Medicaid recipient's family who were residents of another state, the court specifically rejected any claim that existing federal law preempts  state filial responsibility.

The U.S. Court of Appeals held that a law firm that was attempting to collect a debt from a nursing home resident's family did not violate debt collection law when it filed a lawsuit against the family based on Pennsylvania's filial support law.  Joni Eades' mother died owing the Pennsylvania nursing home she resided in around $8,000. The nursing home hired Kennedy, PC Law Offices to collect the debt from Ms. Eades and her father, who resided in the State of New York. Kennedy sent a letter to Ms. Eades, stating that she could be held liable for the debt under Pennsylvania's filial support statute. During a phone call with Ms. Eades, a Kennedy employee allegedly stated that if the debt was not paid, Kennedy would put a lien on her father's house and garnish her wages.

Kennedy filed a complaint against Ms. Eades and her father for failing to pay the debt. Ms. Eades and her father filed a lawsuit in federal court against Kennedy alleging that it violated the fair debt collection law. The district court granted Kennedy's motion to dismiss, ruling that it did not have jurisdiction over Kennedy and that Ms. Eades’ obligation to pay the nursing home was not a debt. Ms. Eades and her father appealed.

The U.S. Court of Appeals, Second Circuit, affirmed in part but remanded  part of the case. The court held that while the court does have jurisdiction over Kennedy and while Ms. Eades' obligation to pay the nursing home was a debt, there was no conflict between the federal nursing home law and Pennsylvania's support law, so filing a lawsuit under the filial support law did not violate the debt collection law.

The court held that federal law did not preempt the Pennsylvania law.  Eades argued that the federal Nursing Home Reform Act (NHRA), which prohibits nursing homes from requiring third party guarantees of payment, preempted the Pennsylvania law.  The court disagreed: 

"[T]he NHRA is not inconsistent with the Pennsylvania indigent support statute, which holds an indigent person’s spouse or child liable for the person’s maintenance or financial support, unless the spouse or child is financially unable to support the indigent person or meets other statutory exceptions. 23 Pa. Cons. State 4603(a).  By its terms the Pennsylvania statute does not appear to condition the continuing care of the indigent person on a family member’s financial support. Thus, a nursing home can petition a court to order an indigent resident’s spouse or child to pay for the resident’s nursing home care pursuant to the state statute without violating the NHRA, as long as the nursing home refrains from conditioning the resident’s admission, expedited admission, or continued stay on a third party guarantee of payment. For these reasons, we conclude that the indigent support statute does not conflict with the NHRA."

The court did remand the case to the district court to consider the the issue of whether the phone call from the Kennedy employee to Ms. Eades violated the debt collection law.

For the full text of this decision, go here.

Man Can't Challenge Discharge of Brother's Debt for Mom's Care under Filial Responsibility Law

A bankruptcy court has ruled that a man does not have standing to prevent the discharge of his brother's debt owed to their mother's assisted living facility under the state's filial responsibility law. In re: Skinner (Bankr. E. D. Pa., No. 13-13318-MDC, Oct. 8, 2014).

Dorothy Skinner lived in an assisted living facility until she was evicted for non-payment. The facility sued Ms. Skinner's sons, Thomas and William, under Pennsylvania's filial responsibility law. The court entered a default judgment against Thomas for $32,224.56. Thomas filed for bankruptcy and sought to discharge the debt.

William filed a claim in the bankruptcy court, arguing that Thomas's debt is non-dischargeable because it resulted from fraud and embezzlement. William argued that Thomas used their mother's assets for his personal expenses, so if William is liable to the assisted living facility, he is entitled to be reimbursed by Thomas.

The U.S. Bankruptcy Court, Eastern District of Pennsylvania, dismissed the claim, holding that William does not have standing because he is not a creditor of the debtor. According to the court, even if Thomas's actions injured Mrs. Skinner, that conduct was directed at Mrs. Skinner and her property, not at William. The court rules that William "may not invoke a cause of action that belongs to his [m]other to remedy the [Thomas's] liability for the Support Claim."  

Of course, underlying this case of one sibling fighting another is the liability created by filial responsibility; the siblings are jointly and severally liable.  Joint and several liability means that the creditor, in this case the assisted living facility, can enforce and collect the debt from the siblings jointly, or any one or more of the siblings severally.  If one sibling is unable to pay, the full debt falls to the other(s).  The assisted living facility can collect the full debt from any one of the siblings who is most likely to pay quickly.  Hence, one sibling seeks to stop a bankruptcy court from exonerating the other, leaving the sibling that does not file for bankruptcy solely responsible for the debt.  

Filial responsibility will only create more instances of familial discord and conflict as circumstances cast these obligations to fall inequitably among family members. Moreover, the court suggested that the Pennsylvania law does not allow for an action for contribution or reimbursement; if one family member is held responsible and another is not, the responsible family member may not be able to do anything about it.  Bottom line: parents' efforts to treat children equally or equitably will likely be sacrificed on the altar of Medicaid resource recovery in a filial responsible world. 

To read more about filial responsibility, click here, here, here, here, and here.  

Elderly Couple May Be Responsible for Adult Son's Unpaid Medical Bills

An elderly Pennsylvania husband and wife are being asked to pay their deceased adult son's medical bills under a law making family members responsible for a loved one's unpaid bills. The case is a reminder that such “filial responsibility” laws may go both ways – requiring parents to pay the debts of adult children as well as the children to pay for their parents'.  

For those involved in estate and retirement planning, the case underscores just how clueless policymakers are to the challenges of proper planning.  The financial risk of filial responsibility debt adds yet another layer of uncertainty, and non-quantifiable risk to planning considerations.  For the well-informed senior, asset protection planning is the order of the day, since only asset protection planning will mute the blow of unexpected financial filial responsibility.  But, the vast majority of ill-informed seniors will continue to accept too much risk for too long in their retirement plans in order to reach an ever receding horizon represented by the amount of money necessary to live comfortably safe from risk.  This species of planning has brought current financial and retirement planning to the crisis point at which most seniors find themselves today.  

Alternately, seniors and their children, recognizing the seemingly insurmountable hurdles of these risks will simply eschew savings and financial planning- living month-to-month, year-to-year as best they can, relying upon the harsh and dangerous hand of government benefits as their safety net.  Many will find the benefits they imagined to be illusory.  Others will find that the benefits come at a cost- sacrifice of independence, quality of care, quality of life, and control.  Never before in history have so many risked so much for so little.     

Peg and Bob Mohn's son died at age 47, leaving unpaid medical bills. Now according to an article in The Morning Call, debt collectors are trying to dun the Mohns using an archaic state law that was not enforced until recently. Pennsylvania is one of at least twenty-eight (28) states that currently have filial responsibility laws. These laws usually make adult children responsible for their parents’ care if their parents can't afford to take care of themselves, but some of the laws also make parents responsible for their childrens' care. Filial responsibility is the law in the State of Ohio, although like Pennsylvania a few years ago, the law was rarely enforced.

Filial responsibility laws, which originated before the advent of the modern public support system, have been rarely enforced since these public support systems were enacted. States and health care providers have been clamoring for states to begin enforcing the laws in order to recover medical expenses, including Medicaid payments. In May 2012, a Pennsylvania court found an adult son liable for his mother's $93,000 nursing home bill under the state's filial responsibility law.

According to attorney Stanley Vasiliadis who is quoted in the Morning Call article, these laws provide additional incentive for people to plan their estates. Without proper planning, children could be on the hook for their parents' nursing home bills, and vice versa.

States with filial responsibility laws include: Alaska, Arkansas, California, Connecticut, Delaware, Georgia, Indiana, Iowa, Kentucky, Louisiana, Maryland, Massachusetts, Mississippi, Montana, Nevada, New Jersey, North Carolina, North Dakota, Ohio, Oregon, Pennsylvania, Rhode Island, South Dakota, Tennessee, Utah, Vermont, Virginia, and West Virginia. Two states, Idaho and New Hampshire, recently repealed their filial responsibility laws, but elder law attorneys in Pennsylvania haven’t made much headway in convincing their legislators to repeal.

These laws differ from state to state.  If you live in a state that still has such a law on the books, check with your attorney to find out how you can protect yourself from a child or parent’s debts. 

For more information on filial responsibility laws, go here. 

Conveyance to Son Was Fraudulent, But His Siblings May Also Be Liable Under Filial Support Law

North Dakota is apparently utilizing its filial responsibility statute in allocating long term care liabilities.  North Dakota's highest court recently held that a nursing home resident's sale of property to his son should be set aside as a fraudulent conveyance, but the trial court should not have declared the son personally responsible for his parent's debt under the state's filial responsibility law without also deciding whether his siblings where liable under the same law. Four Seasons Healthcare Center v. Linderkamp (N.D., Nos. 20120432, 20120433, Sep. 4th, 2013).

Earl and Ruth Linderkamp owned a farm. They leased the land to one of their sons, Elden, who farmed the property. Elden claimed that he had an oral agreement with his parents that they would compensate him for improvements to the land as part of the consideration to buy the property at a later date. In 2006, the Linderkamps sold the property to Elden for $50,000, well below its market value. Elden claimed he had made more than $100,000 in improvements to the property. Soon after, the Linderkamps entered a nursing home where they remained until their deaths, leaving a total of $93,000 in unpaid nursing home charges.

After the Linderkamps died, the nursing home sued Elden to set aside the property transfer as a fraudulent conveyance. The trial court set aside the conveyance, finding the Linderkamps did not receive equivalent value in exchange for the property. The court also determined Elden was personally responsible for his parents' debt under the state's filial responsibility law, but refused to determine his siblings' liability. Elden appealed, arguing the conveyance was not fraudulent and the court should not impose personal liability against him for his parents' nursing home debt.

The North Dakota Supreme Court affirmed in part, holding the conveyance was fraudulent, but remanded the case to determine whether Elden is personally responsible for the debt. According to the court, there was no evidence of an oral agreement or improvements made to the property "and the conveyance was made when there was a reasonable belief the parents would be entering a nursing home and would not be able to fully pay for their long-term care." The court concluded, however that the trial court erred in finding Elden personally liable for his parents' nursing home debt without deciding the other children's potential liability under the filial responsibility law.

For the full text of this decision, go here.

Filial Responsibility- Complicating Estate, Retirement and Asset Protection Planning

Twenty-eight states currently have laws making adult children responsible for their parents if their parents can't afford to take care of themselves. While these laws are rarely enforced, there is growing pressure upon states to use these laws as a way to save on Medicaid expenses.

These laws, called filial responsibility laws, obligate adult children to provide necessities like food, clothing, housing, and medical attention for their indigent parents. According to the National Center for Policy Analysis, a conservative research organization, 21 states allow a civil court action to obtain financial support or cost recovery, 12 states impose criminal penalties on children who do not support their parents, and three states allow both civil and criminal actions. (For a list of the states and citations to state statutes, click here.  Note that Idaho's and New Hampshire's statutes have since been repealed.)

Generally, most states do not require children to provide care if they do not have the ability to pay. States vary on what factors they consider when determining whether an adult child has the ability to pay. Children may also not be required to support their parents if the parents abandoned them or did not support them.

The passage of the Deficit Reduction Act of 2005 made it more difficult to qualify for Medicaid, which means there may be more elderly individuals in nursing homes with no ability to pay for care. In response, nursing homes may use the filial responsibility laws as a way to get care paid for. For more information, click here.

For a discussion of filial responsibility laws in the New York Times's "New Old Age" blog, click here.

Pennsylvania's Filial Support Law Survives Federal Challenge

Pennsylvania's filial support statute has survived a multi-faceted challenge in federal court. Filial responsibility includes the legal responsibility of a child to care for an indigent parent.  Pennsylvania recently began enforcing its filial responsibility laws, wielding the the legal obligation as a sword in Medicaid resource recovery, in effect requiring a child to reimburse the State for paying through Medicaid the cost of the parent's long-term care. Simply, a child may remain responsible for a parent's long term care costs.  

The U.S. District Court, Western District of New York upheld Pennsylvania's use of filial responsibility in Medicaid resource recovery holding that it was not preempted by  the federal Nursing Home Reform Act, and that collection of a Medicaid  debt created by the statute does not give rise to a Fair Debt Collection Practices Act claim.  Eades v. Kennedy, PC Law Offices (U.S. Dist. Ct., W.D. N.Y., No. 12-CV-6680L, Dec. 3, 2013).  Levere Pike, a New York resident, placed his wife in a Pennsylvania nursing home. After Mr. Pike's wife died, the nursing home hired a law firm that attempted to collect payment from him and his daughter, Joni Eades. The law firm eventually filed a lawsuit in Pennsylvania that is still pending.

Mr. Pike and Ms. Eades sued the law firm, arguing that the attempts to collect the debt violated the Fair Debt Collection Practices Act (FDCPA). They also argued that Pennsylvania’s filial responsibility law is preempted by the portion of the Nursing Home Reform Act (NHRA) that prohibits a nursing home from requiring a third-party guarantee as a condition of admission. The law firm filed a motion to dismiss.

The U.S. District Court, Western District of New York, granted the motion to dismiss, holding the court does not have jurisdiction over Mr. Pike and Ms. Eades' claims. The court went on to conclude that even if it did have jurisdiction, debts created by filial support statutes do not give rise to claims under the FDCPA.  In addition, according to the court, the filial support statute is not preempted by the NHRA because the two laws do not "cover the same territory."  Although arguably the decision is mostly dicta, the court's decision illuminates how federal courts are likely to view filial responsibility in the event that more states follow Pennsylvania in applying filial responsibility to Medicaid recourse recovery.

For the full text of this decision, go here.  

Adult Children Could Be Responsible for Parents' Nursing Home Bills

The adult children of elderly parents in many states could be held liable for their parents' nursing home bills as a result of the new Medicaid long-term care provisions contained in a law enacted in February 2006. The children could even be subject to criminal penalties.

The Deficit Reduction Act of 2005 includes punitive new restrictions on the ability of the elderly to transfer assets before qualifying for Medicaid coverage of nursing home care. Essentially, the law attempts to save the Medicaid program money by shifting more of the cost of long-term care to families and nursing homes.

One of the major ways it does this is by changing the start of the penalty period for transferred assets from the date of transfer, to the date when the individual would qualify for Medicaid coverage of nursing home care if not for the transfer. In other words, the penalty period does not begin until the nursing home resident is out of funds, meaning there is no money to pay the nursing home for however long the penalty period lasts. (For the details, click here.)

With enactment of the law, advocates for the elderly predict that nursing homes will likely be flooded with residents who need care but have no way to pay for it. In states that have so-called "filial responsibility laws," the nursing homes may seek reimbursement from the residents' children. These rarely-enforced laws, which are on the books in 29 states (the figure was 30 but Connecticut's statute has since been repealed), hold adult children responsible for financial support of indigent parents and, in some cases, medical and nursing home costs.

For example ,Pennsylvania recently re-enacted its law making children liable for the financial support of their indigent parents. 

According to the National Center for Policy Analysis, 21 states allow a civil court action to obtain financial support or cost recovery, 12 states impose criminal penalties for filial nonsupport, and three states allow both civil and criminal actions.

Son Liable for Mother's Nursing Home Bill Under Filial Responsibility Law

A Pennsylvania appeals court has held a son liable for his mother's $93,000 nursing home bill under the state's filial responsibility law. Health Care & Retirement Corporation of America v. Pittas (Pa. Super. Ct., No. 536 EDA 2011, May 7, 2012).

John Pittas' mother entered a nursing home for rehabilitation following a car crash. She later left the nursing home and moved to Greece and a large portion of her bills went unpaid. Mr. Pittas' mother filed an application for Medicaid, which is still pending.

The nursing home sued Mr. Pittas for nearly $93,000 under the state's filial support law, which requires a child to provide support for an indigent parent. The trial court entered a verdict in favor of the nursing home, and Mr. Pittas appealed. Mr. Pittas argued that the trial court improperly put the burden of proving his inability to support his mother on him and that the court should have considered alternate forms of payment, such as Medicaid and his mother's husband and her two other adult children.

The Pennsylvania Superior Court affirmed, holding that Mr. Pittas is liable for his mother's nursing home debt. The court agreed with Mr. Pittas that the nursing home had the burden of proving that Mr. Pittas' ability to support his mother, but it ruled that the nursing home submitted enough evidence to meet that burden. The court also held that the law does not require it to consider other sources of income or to stay its determination pending the resolution of the Medicaid claim.  It notes that if Mr. Pittas had wished to share his support burden with other family members, he could have joined them in the case.

Imagine trying to explain to your brother or sister at Thanksgiving that suing them wasn't personal; "Just sharing the burden."  

Nursing Home May Sue Resident's Daughter for Breach of Contract

A Connecticut trial court has ruled that a nursing home may sue a resident's daughter for breach of contract because she agreed to use her mother's assets or Medicaid to pay for the nursing home, even though she did not sign as a personal guarantor. Cook Willow Health Center v. Andrien (Conn. Super. Ct., No. CV116008672, Sept. 28, 2012).

Judy Andrien admitted her mother to a nursing home and signed an admissions agreement as her mother's responsible party. She agreed to take steps to ensure the nursing home was paid out of her mother's assets or by Medicaid.

The nursing home sued Ms. Andrien for breach of contract, alleging that she did not use her mother's assets to pay the nursing home or apply for Medicaid when the assets were near depletion. Ms. Andrien filed two special defenses. She argued that the admissions agreement was void and unenforceable because it made Ms. Andrien personally liable for the cost of her mother's care. She also argued the agreement was a surety contract, so the nursing home was required to meet certain preconditions before enforcing the contract. The nursing home moved to strike Ms. Andrien's two defenses.

The Connecticut Superior Court granted the nursing home's motion to strike the special defenses. The court rules that the contract does not contain a personal guarantee, so it did not violate federal law prohibiting nursing homes from requiring a third-party guarantee as a condition of admission. The court also ruled that the contract is not a surety contract, i.e., a guarantee of one party for the obligation of another to a third party.  According to the court, the nursing home's "complaint is not based upon a breach of a promise to answer for the debt of another, but rather a breach of contract."  The contract, according to the court, "does set forth a scenario in which the responsible party would be liable for any costs of care and services for the resident incurred should the resident make a transfer rendering him/her ineligible for Medicaid payment or assistance."  The Court wrote that the Complaint alleged no facts that would indicate such a scenario, but nonetheless, set aside all of Ms. Andrien's affirmative defenses, and permitted the action to proceed.   

For the full text of this decision, click here.

The Legal Responsibility of Adult Children to Care for Indigent Parents

A conservative policy group has released an issue brief proposing that states begin enforcing filial responsibility laws in order to reduce long-term care costs. Thirty states, including Ohio, have filial responsibility laws that require adult children to care for their indigent parents. The National Center for Policy Analysis (NCPA) claims that if these statutes are enforced, adult children would have to reimburse the state programs that provided care for their indigent parents.

Filial responsibility laws have traditionally not been enforced, possibly because federal law prohibits state Medicaid programs from looking at the finances of anyone other than the applicant or the applicant's spouse for eligibility purposes.  There is, however, no such restriction in resource recovery, the statutory right of a state to recover assets after the death of a Medicaid beneficiary.

The NCPA, a group whose goal is to develop and promote private alternatives to government regulation and control, cites a 1983 report by the Health Care Financing Administration that says enforcing these statutes would have reduced Medicaid long-term care spending by $25 million, and argues that today the figure would be much higher.

Of course, the implications of enforcement of filial responsibility for seniors and their families are complex, but deserve some consideration in day-to-day estate planning.  One can easily imagine a future in which the states routinely sue children in order to recover amounts paid for their parent's long-term care, with children then being forced to apportion these costs among themselves, sometimes through legal action between and among them.  Whether these collections will and must involve the probate court, and whether avoiding probate in the first instance will discourage or prevent these actions remains to be seen.  Regardless, asset protection planning finds one more threat among those justifying and supporting such planning.  

To read the full brief, click here.