Entire Value of Property in Which Medicaid Recipient Had Life Estate is Recoverable in Idaho

The Idaho Supreme Court has ruled that the state may recover Medicaid benefits from the entire value of a property that a Medicaid recipient transferred to his daughter while retaining a life estate for himself. In re Estate of Peterson (Idaho, No. 40615, Aug. 13, 2014).

Melvin Peterson deeded property to his daughter, retaining a life estate for himself. He then applied for Medicaid benefits. When he died, Mr. Peterson had received a total of $171,386.94 in Medicaid benefits.

The state filed a claim against the estate to recover the Medicaid benefits it paid for Mr. Peterson's care. Under Idaho law, the state may recover any property that passes outside of probate, including any property that that the Medicaid recipient had a legal interest in that passes to a survivor through a life estate or "other arrangement." The trial court ruled that the life estate remainder interest, but not the retained life estate, was an estate asset, and the appeals court affirmed. The estate appealed, arguing Mr. Peterson had no interest in the life estate at his death, so it could not be subject to recovery.

The Idaho Supreme Court affirms in part holding that both the life estate and the remainder interest were estate assets subject to Medicaid recovery. The court determines that Mr. Peterson's life estate interest in the property was transferred to his daughter when he died, and under state law "when assets of a Medicaid recipient are conveyed to a survivor, heir or assign by the termination of a 'life estate,' the assets remain part of the recipient’s 'estate'" for purposes of Medicaid recovery. In addition, the court rules that the remainder interest Mr. Peterson's daughter received is also part of Mr. Peterson's estate as an "other arrangement."

For the full text of this decision, go to: http://www.isc.idaho.gov/opinions/40615.pdf

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