SSA Clarifies Its Position on Court-Established (d)(4)(A) Trusts

Responding to criticism from advocates that the Social Security Administration (SSA) was unfairly refusing to allow court-established (d)(4)(A) trusts to qualify as exempt resources for Supplemental Security Income (SSI) purposes, the SSA has issued an Administrative Message clarifying its policy regarding these trusts and ordering officials to approve the trusts if they meet the other (d)(4)(A) requirements and were not created prior to the order issued by the court.

Apparently based on the SSA's Trust Training Fact Guide, some SSA offices have recently been refusing to approve court-established (d)(4)(A) trusts because they were not created by a court "order."  Since people with disabilities are unable to establish their own (d)(4)(A) trusts, if the SSA's position were uniformly applied it would mean that no court could ever establish a (d)(4)(A) trust unless it did so on its own initiative.

The SSA has now issued an Administrative Message, first published by Illinois attorney and Social Security expert Avram L. Sacks on the NAELA members listserv, explaining that the rejection of court-established (4)(d)(A) trusts is inappropriate when the trust was not finalized prior to the court's action.  The message states that "[i]n the case of a special needs trust established through the actions of a court, the creation of the trust must be required by a court order for the exception in section 1917(d)(4)(A) of the Act to apply. That is the special needs trust exception can be met when courts approve petitions and establish trusts by court order, so long as the creation of the trust has not been completed before, the order is issued by the court. Court approval of an already created special needs trust is not sufficient for the trust to qualify for the exception. The court must specifically either establish the trust or order the establishment of the trust."

The message goes on to give four clarifying examples of situations where trusts may or may not fit this criteria.  In the first example, an SSI beneficiary's sister petitions the court to create and order the funding of a trust to hold the beneficiary's inheritance.  The sister provides a draft trust to the court.  When the court issues an order approving the petition and ordering the creation of the trust, it will meet the requirements of SI 01120.203B.1.f.  In the second example, a judge orders the creation of a trust to hold a settlement, and the trust document lists the settlement as the trust's original corpus.  This trust also passes muster with the SSA.  In the two negative examples, the SSA claims that when a court approves a trust that has already been created ahead of time, or when a court amends a defective trust with a nunc pro tunc order to make the amendment retroactive to the date the trust was originally created, the trusts will not qualify for the special needs trust exception.

Click here to read the SSA's entire message.

Get legal Advice When Applying for Medicaid- State Can Recover From a Medicaid Recipient's Estate Even Though Estate Would Have Qualified for Hardship Waiver

A recent case underscores the importance of seeking and obtaining legal advice when dealing with Medicaid resource recovery.  A Michigan appeals court has ruled that a Medicaid recipient's estate cannot avoid estate recovery by claiming undue hardship because the state didn't pursue a hardship waiver when it had the chance. In re Estate of Clark (Mich. Ct. App., No. 320720, May 28, 2015).

Larry Wykle enrolled his mother, Violet Clark, in Medicaid. The application included an acknowledgment that the state may try to recover for services from Ms. Clark's estate and that the state may agree not to pursue recovery if an undue hardship exists. After Ms. Clark died, Mr. Wykle became the administrator of her estate. The state notified Mr. Wykle that it intended to recover Medicaid expenditures. The notice included information about applying for a hardship exemption. The estate's only asset was a house that was valued at less than the average price of a home in the area, which under the state Medicaid plan would have made it eligible for a hardship exemption.

Mr. Wykle did not pursue the hardship waiver and he denied the state's claim. The state sued the estate. Mr. Wykle argued that the estate could not collect against the estate because the value of the home qualified for a hardship waiver, and that the state did not provide Mr. Wykle with information how to apply for a hardship waiver, informing him only that such a waiver was available.  The trial court granted the estate summary judgment because the estate consisted only of a modest household and the state did not provide Mr. Wykle with information on how to apply for a hardship waiver when he enrolled Ms. Clark in Medicaid.The state appealed.

The Michigan Court of Appeals reversed, holding that Mr. Wykle received proper notice of the hardship exemption and that the hardship exemption does not prevent the state from pursuing estate recovery against an estate that might have qualified, but did not apply. The court rules that Mr. Wykle "cannot now attempt to avail himself of the waiver’s benefits without having followed the procedural rules necessary to claim the benefit." In addition, the court rules that the written notice about the waiver in the application was sufficient.

For the full text of this decision, click here.

State Cannot Modify Penalty Period Unless All Transferred Assets Are Returned

A New Jersey appeals court has held that a Medicaid applicant's penalty period cannot be modified unless all the assets transferred during the look-back period are returned. C.C. v. Division of Medical Assistance and Health Services (N.J. Super. Ct., App. Div., No. A-4291-13T4, May 29, 2015 unpublished).

C.C. sold her house and gave half the proceeds ($99,233.75) to her nephews. She applied for Medicaid and the state imposed a 387-day penalty period based on the transfer. During the penalty period, her nephews returned $17,000 to pay for her care.

C.C. argued that the state should reduce her penalty period because the nephews returned $17,000. The state determined that it could not reduce a penalty period unless all the transferred funds are returned. C.C. appealed to court.

The New Jersey Superior Court, Appellate Division, agreed with the state that the penalty period should not be changed. The court holds that "both federal and state law require the return of all assets transferred during the look-back period in order to modify the penalty."

For the full text of this decision, click here.

Spouses of Hospice Residents Less Likely to Become Depressed

Symptoms of depression are less common in the spouses of hospice residents when compared to families where hospice was not involved, a recent study suggests.  Investigators at Mount Sinai's Icahn School of Medicine in New York City studied data from a national survey and Medicare claims, and followed more than 1,000 surviving spouses of deceased patients who were over age 50. They found those whose spouses were in hospice for at least three days were less depressed, and the positive effect was more prominent a year after the death.

Although they could not correlate specific services with improvement of symptoms, hospice offered medical services, symptom management, spiritual counseling, social services and bereavement counseling.  These services are provided to patients and their immediate families.

Approximately 45% of terminally ill residents die while receiving hospice care in the U.S, more than a 20% increase from the past decade.

This was the first national study to examine the mental health of spouses of residents with all types of serious illnesses.  Prior studies focused mostly on cancer patients and their families.

Source: McKnight's

Husband Acquitted of Nursing Home Rape of His Wife

The jury acquitted the 78-year-old retired farmer and former state legislator of sex-abuse charge in a case that captured international attention.

To read my prior post regarding and including a background of this case, click here.

Prosecutors had contended he was guilty of the felony because he had sexual contact with his wife after nursing-home staff members told him her Alzheimer's disease had stolen her ability to consent. The case raised wide-ranging questions regarding the law, and relationships between persons where one suffers from dementia. The defendant's attorney, in fact, warned that conviction might cause partners to avoid visitations in order to avoid potential criminal culpability.

Regardless the outcome, the case has led to a heightened awareness regarding the need for dialogue regarding such matters.  See, for example, Eliza Gray's article, "Why Nursing Homes Need to Have Sex Policies," published in Time magazine.  

Elder Justice Website Aids Reporting Elder Abuse and Financial Exploitation

The United States Department of Justice has launched the Elder Justice Website, as part of the Elder Justice Initiative designed to provide a coordinated federal response by emphasizing various public health and social service approaches to the prevention, detection, and treatment of elder abuse. Victims and family members will find information about how to report elder abuse and financial exploitation in all 50 states and territories by simply entering a zipcode.

The Elder Justice Act represents Congress’s first attempt at comprehensive legislation to address abuse, neglect, and exploitation of the elderly at the federal level. 

On the Elder Justice Website, individuals will find information about how to go about reporting elder abuse and financial exploitation.  The website is intended to serve as a “dynamic resource” and will be updated to reflect any changes in the law and current news in the elder justice field.

Payments from Special Needs Trust Causes Section 8 Ineligibility

Special Needs Trusts (SNT's) are generally designed to prevent beneficiaries from losing their Medicaid and Social Security eligibility.  These trusts are not without challenges and possible disadvantages.  In resolving  Social Security and Medicaid issues, SNTs often sacrifice other opportunities.  HUD's Section 8 housing assistance program, for example, has no language in its rules that expressly recognizes and protects SNTs.  A federal district court recently held that a local housing authority properly counted payments from a SNT as income when it determined that a Section 8 beneficiary was no longer eligible for a housing voucher.  DeCambre v. Brookline Housing Authority (D.Mass., No. 14-13425-WGY, March 25, 2015).

Kimberly DeCambre is the beneficiary of a court-established first-party special needs trust that was funded with the proceeds from a $330,000 personal injury settlement.  Ms. DeCambre receives Supplemental Security Income (SSI) and Medicaid due to a variety of serious medical conditions, and she also received a Section 8 housing voucher.  In fall 2013, the Brookline Housing Authority (BHA), the local agency that administers Ms. DeCambre's housing voucher, informed Ms. DeCambre that she was no longer eligible for Section 8 because the trust had disbursed more than $60,000 during the year for her car, phone, Internet, veterinary care for her pets and travel expenses.   A hearing officer upheld the BHA's decision.

Ms. DeCambre filed suit against the BHA in state court and her claims were removed to federal court.  Ms. DeCambre claimed that the BHA violated her civil rights by counting the payments from the trust as income and by discriminating against her due to her disability.  She also raised several due process claims.  Instead of hearing arguments on Ms. DeCambre's request for a preliminary injunction, the parties agreed to a case stated hearing to resolve Ms. DeCambre's underlying claims. At this hearing, Ms. DeCambre posited that it was improper to treat the distributions from the trust as income when, according to Department of Housing and Urban Development (HUD) rules,  the same payments would not be considered income had she simply taken the settlement as a lump sum outside of a trust.   

The U.S. District Court for the District of Massachusetts reversed, ruling that the BHA properly terminated Ms. DeCambre's Section 8 benefits.  Although sympathizing with trust beneficiaries who have difficulty  retaining Section 8 benefits, the court determined that it is "unable to find any regulatory support for DeCambre's argument that her Trust expenditures must be excluded from annual income and that her Trust corpus remained a lump-sum settlement.  To the extent BHA treated DeCambre's expenditures as spending from an irrevocable trust, rather than from a personal settlement fund, the Court holds that their determination was a reasonable one." The court also ruled that Ms. DeCambre's due process claims failed because she did not have a property interest in Section 8 benefits and was afforded ample hearings.  The court concluded that Ms. DeCambre was not discriminated against due to her disability because HUD treats special needs trust and non-special needs trust beneficiaries equally when it comes to income attribution.

To read the full text of the court's decision in this case, click here. 

To read a previous article regarding the complexities involved in crafting SNTs, click here and here.

Estate Plans Should Consider and Attempt to Resolve Guardianship

Well-crafted estate plans consider and attempt to resolve issues arising from incapacity and incompetency. Many estate plans are crafted to avoid or prevent guardianship. A recent New Jersey case illustrates why these concerns are worthy of attention.  After a trial court refused to consider the wishes of a putative ward, both respect to choice of guardian and place of residence, and accepted a "settlement" regarding guardianship to which the ward objected, a New Jersey appellate court was compelled to rule that a person who is incapacitated may still be able to express a preference as to his or her choice of a guardian or place of residence, both of which the court must consider before making rulings regarding the ward.  Matter of the Guardianship of Walter J. Macak, 377 N.J. Super. 167 (App.Div. 2005).

In the case, Mr. Macak’s daughter filed a complaint seeking the appointment of a guardian for her father and his million dollar estate based on her claim that he was incapacitated. The impetus for the complaint was her concern that Mr. Macak had Alzheimer’s disease, was unable to manage his finances, and was falling prey to financial “scam artists.”  Mr. Macak directed his attorney to oppose the guardianship application and specifically indicated that, if he was declared incapacitated, he was opposed to having his daughter appointed as his guardian.

Instead of opposing the guardianship or advocating for Mr. Macak's choice of guardian, his attorney negotiated a “settlement” under which she signed a consent order on Mr. Macak's behalf. The consent order, which the trial court signed without holding a hearing or making findings of fact and conclusions of law, declared Mr. Macak to be incapacitated and appointed another attorney as his guardian, and providing that the guardian could "continue" Mr. Macak’s “gifting program” of giving his daughter $ 18,000 per year.  The "settlement" also required that Mr. Macak  sign a separate written agreement with the attorney appointed as his guardian, in which he agreed to move out of his house into an assisted living facility within five days of the date of the agreement, but that she (his guardian) would agree to permit him to visit his house on a regular basis.

After the court-appointed guardian refused him access to his house, Mr. Macak sought to set aside the guardianship, claiming he had signed the guardianship “agreement” under duress, duress being the threat that if he failed to sign, his daughter would be appointed as his guardian. Mr. Macak also contended that he was not legally incapacitated but only needed assistance in managing his finances, and on that basis asked the court to appoint a conservator.

Tenant's Estate Sues Landlord for Buyout Payment- Contracts and Agreements Are Assets

Estate planning is a discipline that requires periodic consideration and reconsideration of your circumstances as they change. When the estate plan involves a trust or other entity, contracts and agreements that are assets of your estate, should work within the estate plan.  Oil and gas leases, land installment contracts, rental agreements, installment sales, notes, security interests that you take in other's property, and the like, should be crafted in order to ensure that these assets remain viable assets of your estate after your death, and are marshaled and disposed in accordance with your wishes.  Sometimes, this is a simple task of assigning or conveying the rights to your trust, company, or other entity. These are too often overlooked, though, leading to unnecessary loss, risk, and legal dispute.  

A recent example resulted in a New York City landlord and the estate of one of the landlord's tenants fighting over whether the landlord is required to continue paying on a buyout of the tenant now that the tenant is deceased.

Walter Blomeyer, a black-cab driver, lived for decades in a single-room apartment in a building owned by Icon Realty Management, according to a recent article in the New York Post.  When Icon decided to convert the building into luxury condominiums, it offered to pay Mr. Blomeyer $525,000 to  induce him to move. Mr. Blomeyer accepted the deal, which required Icon to pay Mr. Blomeyer an initial sum of $300,000, allow him to live rent-free in another one of their buildings for a year, and make a final $225,000 payment.

Unfortunately, Mr. Blomeyer died in February of a heart attack before the final payment was made.  Icon has refused to make the payment to Mr. Blomeyer's estate. Mr. Blomeyer's estate was forced to file suit against Icon for $225,000. According to the Post, Icon's attorney argues it doesn't have to pay the estate because there was nothing in the agreement about the estate benefiting from the agreement.  "His estate is entitled to nothing," the lawyer said.

If the agreement had been reviewed by the estate planning attorney prior to execution, the agreement could have been easily modified to remove any doubt that the obligation was owed to Mr. Blomeyer, "his heirs and/or assigns" and that payments could be made to him, "his estate, his personal representative, or the trustee of his trust." Simple language, and as my niece would say, "mischief managed."

For the article about this case from the New York Post, click here. 

Husband Charged with Raping His Wife- Nursing Home Aids Claim Dementia Made Consent Impossible

Henry Rayhons, is accused of having sexual relations with his wife at a nursing home when she was unable to give consent due to Alzheimer's disease. He's charged with one count of felony sexual abuse.

 Donna Lou Rayhons’ dementia advanced so quickly in the months before her death she couldn't recall how to eat, thought her mashed potatoes were eggs and couldn't make decisions on her own, care center workers testified.  Prosecutors say Henry Rayhons had sexual relations with his wife on May 23, 2014, in her room at the care center. Prosecutors say he was told earlier that month that his wife was no longer able to consent to sex.

Donna Lou Rayhons died in August. Henry Rayhons was arrested five days later.

A 14-member jury, eight women and six men, heard testimony from Barrick and other staff who worked at the care center, Garner police and Dr. John Brady of Garner Medical Clinic. Prosecutors spent much of the day asking the care center workers and doctor about Donna Lou Rayhon's condition and her husband's behavior in the weeks leading up to the alleged incident.

Charge nurse Shari Dakin testified she didn't see Donna Lou Rayhons make a single decision on her own without help in the months she lived in the care facility in Garner.

"You could see that Donna had Alzheimer's — she was not like you and I," Dakin said. "She was just in her pleasant little world, her own little world."

Barrick told the jury that Henry Rayhons was upset when told he could no longer take his wife out of the care center as he had in the past.  She said he took Donna Rayhons to a doctor, after telling staff they were going for breakfast, in a bid to get overnight visits reinstated.

The doctor, John Brady, told jurors Henry Rayhons made an unsolicited comment while in the exam room with his wife.  "Mr. Rayhons expressed his frustration with not being able to take Donna outside the facility as they had been doing previously," said Brady, of Garner Medical Clinic. "He made an unsolicited comment about his frustration with the family, but saying it's not like I'm going to take her out for sex or anything."

Jurors were shown surveillance footage of Henry Rayhons walking to and from his wife's room on May 23. On the way out, he drops an item in a laundry cart.  Witnesses said it was a pair of Donna Rayhons' underwear. Police collected the undergarments as evidence. Sheets, a blanket and Donna Rayhons' comforter also were taken for testing.

Henry Rayhons' attorney, Joel Yunek, questioned how often laundry was done. He also pointed out Donna Lou Rayhons' roommate, who reported the alleged incident, never explicitly said she heard the Rayhons having sex.

He said it may have been what care center workers thought she implied, but not what she actually said. In his opening statement, Yunek said there's no physical evidence his client had sex with his wife on May 23, as prosecutors contend.

Yunek asked several witnesses whether anyone ever saw Donna Rayhons act afraid of her husband, or show any signs he was mistreating her.  Apparently no one testified that she complained, and no one reported any signs he was mistreating his wife. Though often "pleasantly confused," Donna Rayhons spoke warmly of her husband, Concord Care Center employee Brittany Bouslaugh reportedly said Monday.  "She said 'He takes me out and he buys me these beautiful things and beautiful jewelry'," Bouslaugh said. "And, she was just very, very happy."

Defense lawyer Joel Yunek contended in his opening statement that Henry Rayhons had lost a "power struggle" with two of his stepdaughters, which led to his wife being placed in a nursing home against his will last March. One of the step-daughters petitioned for, and received appointment as a guardian for her mom.  After the felony charge was filed last August, Henry Rayhons' supporters suggested the prosecution was sparked by bad feelings between him and two of his stepdaughters.

According to the New York Times, "it is rare, possibly unprecedented, for such circumstances to prompt criminal charges. Mr. Rayhons, a nine-term Republican state legislator, decided not to seek another term after his arrest."

For more on this case, click here, here, here, and here.