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.  

Court Invalidates Pocket Deed As Fraudulent Effort to Defraud the Surviving Spouse

[The following is reprinted from my former newsletter, Your Estate Matters.]

A recent case from Tennessee illustrates the dangers inherent in using "pocket deeds." Pocket deeds are executed during the owner's life, but recorded after the owner's death.  While they are rarely used by attorneys or serious planners, they still find their way into the plans of individuals who may devise the schemes without legal advice.  

The case concerns the marriage of Ancie Lee Maness  and Jewell Maness,  When they married, he already had three grown sons and a 330-acre farm in Henderson County, Tennessee. He and Jewell both worked outside the farm.  Her income paid for food, utilities and household bills, but his  income was mostly used to pay expenses on the farm.

Mr. Maness ran a small herd of cattle at the farm, and allowed his sons to keep a few head of their own on the property. At different times, Mr. Maness even gave each of his sons an eight-acre parcel on the edge of the farm. It was clear, however, that Mr. Maness operated the farm, with only occasional help from his sons. Until 1992, the farm income, and Mr. Maness’ wages, went to pay off a mortgage on the farm as well.

Shortly after Mr. Maness’ death in 1993, one of the sons informed Mrs. Maness that he had transferred the farm to them nearly ten years earlier. When she investigated, she discovered that Mr. Maness had signed a deed to the property, conveying it to his three sons, and had given the deed to his son Willie. He had instructed Willie and his wife not to tell anyone about the deed, and to hold it in their safe deposit box.  They had removed it and recorded it three days after Mr. Maness’ death, and the title now appeared to be in the sons’ names.

Mrs. Maness sued to set aside the transaction, alleging that it was fraudulent because it had the effect of depriving her of her statutory right to inherit a portion of her husband’s property. In Tennessee, as in most states, a surviving spouse is entitled to at least a share of the deceased spouse’s estate, and Mrs. Maness argued that the transaction deprived her of that right.

Noting the secrecy with which the deed was cloaked, the Tennessee Court of Appeals agreed with Mrs. Maness. The court also noted that even by a conservative estimate the farm constituted nearly two-thirds of the value of Mr. Maness’ estate, and Mr. Maness’ behavior in hiding the transaction from his wife indicated that he had intended to defraud her of her inheritance rights. 

To read the entire case go here: Maness v. Estate of Maness, Tenn. Court of Appeals, November 12, 1997.

Medicare Premiums and Deductibles for 2016

The Centers for Medicare and Medicaid has announced the Medicare premiums, deductibles, and coinsurances for 2016. As expected, for the third year in a row the standard Medicare Part B premium that most recipients pay will hold steady at $104.90 a month.  However, about 30 percent of beneficiaries will see their Part B premium rise to $121.80 a month.  Meanwhile, the Part B deductible will increase for all beneficiaries from the current $147 to $166 in 2016. 

The Part B rise was supposed to be much steeper for the 30 percent of beneficiaries who are not “held harmless” from any increase in premiums when Social Security benefits remain stagnant, as will be the case for 2016.  But the premium rise was blunted by the Bipartisan Budget Act signed into law by President Obama November 2.  Medicare beneficiaries who are unprotected from a premium increase include those enrolled in Medicare but who are not yet receiving Social Security, new Medicare beneficiaries, seniors earning more than $85,000 a year, and “dual eligibles” who receive both Medicare and Medicaid benefits. For beneficiaries receiving skilled care in a nursing home, Medicare's coinsurance for days 21-100 will go up from $157.50 to $161.  Medicare coverage ends after day 100.  

Here are all the new Medicare figures:

• Basic Part B premium: $104.90/month (unchanged);
• Part B premium for those not “held harmless”: $121.80;
• Part B deductible: $166 (was $147);
• Part A deductible: $1,288 (was $1,260);
• Co-payment for hospital stay days 61-90: $322/day (was $315);
• Co-payment for hospital stay days 91 and beyond: $644/day (was $630);
• Skilled nursing facility co-payment, days 21-100: $161/day (was $157.50).

Higher-income beneficiaries will pay higher Part B premiums:

• Individuals with annual incomes between $85,000 and $107,000 and married couples with annual incomes between $170,000 and $214,000 will pay a monthly premium of $170.50 (was $146.90);
• Individuals with annual incomes between $107,000 and $160,000 and married couples with annual incomes between $214,000 and $320,000 will pay a monthly premium of $243.60 (was $209.80);
• Individuals with annual incomes between $160,000 and $214,000 and married couples with annual incomes between $320,000 and $428,000 will pay a monthly premium of $316.70 (was $272.70);
• Individuals with annual incomes of $214,000 or more and married couples with annual incomes of $428,000 or more will pay a monthly premium of $389.80 (was $335.70).

Rates differ for beneficiaries who are married but file a separate tax return from their spouse:

• Those with incomes between $85,000 and $129,000 will pay a monthly premium of $316.70 (was $272.70);
• Those with incomes greater than $129,000 will pay a monthly premium of $389.80 (was $335.70).

The Social Security Administration uses the income reported two years ago to determine a Part B beneficiary's premiums. So the income reported on a beneficiary's 2014 tax return is used to determine whether the beneficiary must pay a higher monthly Part B premium in 2016. Income is calculated by taking a beneficiary's adjusted gross income and adding back in some normally excluded income, such as tax-exempt interest, U.S. savings bond interest used to pay tuition, and certain income from foreign sources. This is called modified adjusted gross income (MAGI). If a beneficiary's MAGI decreased significantly in the past two years, she may request that information from more recent years be used to calculate the premium. Those who enroll in Medicare Advantage plans may have different cost-sharing arrangements.  The average Medicare Advantage premium is expected to decrease slightly, from $32.91 on average in 2015 to $32.60 in 2016.  

For Medicare’s press release announcing the new  figures, click here.  

For Medicare's "Medicare costs at a glance," click here. 

Resident Who Transferred Assets and Applied for Medicaid Breached CCRC Contract

A New York appeals court held that a continuing care retirement community (CCRC) resident is required to spend the assets disclosed in the CCRC’s admission agreement on nursing home care before applying for Medicaid. Good Shepard Village at Endwell Inc. v. Yezzi (N.Y. Sup. Ct., App. Div., 3rd Dept., No. 520621, Nov. 5, 2015).  The decision means that CCRC resdidents should proceed cautiously with Medicaid eligibility planning.

Hazel and Peter Yezzi moved into a CCRC after signing an admission agreement that disclosed their assets. The contract with the CCRC provided that that the Yezzis could not transfer their assets for less than fair market value if it would impair their ability to pay their monthly fees. Mrs. Yezzi entered the nursing home, transferred her assets to Mr. Yezzi, and applied for Medicaid. The CCRC refused to accept the Medicaid payments.

The CCRC sued Mr. Yezzi (Mrs. Yezzi died in the nursing home) for breach of contract and fraudulent conveyance, arguing that the Yezzis were obligated to use the funds disclosed in the CCRC admission agreement before applying for Medicaid. The trial court granted the CCRC summary judgment, and Mr. Yezzi appealed.

The New York Supreme Court, Appellate Division, 3rd Dept., affirmed, holding that Mrs. Yezzi's transfer of assets for less than fair market value constituted a breach of contract. According to the court, under federal and state law the CCRC "could require a resident to first spend the resources identified upon admission before applying for Medicaid" because "the essence of the CCRC financial model requires a tradeoff between the resident and the facility, in which the resident must disclose and spend his or her assets for the services provided, while the facility must continue to provide those services for the duration of the resident's lifetime even after private funds are exhausted and Medicaid becomes the only source of payment."

Social Security Claiming Rules Changed to Eliminate Beneficial Strategies

President Obama has signed the Bipartisan Budget Act of 2015 which includes important changes to the Social Security retirement system.  Among these changes are Rules that are designed to close "unintended loopholes" in the Social Security Act. These "loopholes" are the "file and suspend" and "restricted application" claiming strategies. These strategies are used by applicants to provide necessary income, but permit social security benefits to continue to grow, permitting later claiming of benefits at larger benefit amounts.  

Under the new law, some groups of Social Security claimants are wholly unaffected, while others will lose all access to available claiming strategies.  If you are not already implementing a claiming strategy, you may find that the strategy is no longer available to you.  

The new law adversely impacts the following groups:

1. Divorcees who were born in 1954 or later;
2. Couples where the person who was previously planning to claim a spousal benefit first then switch to their own benefit later under a restricted application strategy was born after 1953;
3. Couples who are planning to pursue a file and suspend strategy, but wait more than six months to file and suspend.

Divorcees born after 1953 will be able to claim either a spousal benefit or their own retirement benefit (whichever is larger), but they will not be able to switch from one to the other at a later time.  Claimants born after 1953 will not be able to claim one benefit and then switch to another benefit later under the new law, affecting those who intended to employ a restricted application strategy.

The new law allows people to file and suspend for another 180 days after the law goes into effect. If someone waits more than six months, they will not be able to use this strategy. They will be able to pursue a restricted application strategy if the person who claims the spousal benefit was born in 1953 or earlier.

The new law does not affect claiming strategies for the following groups:

1. Single people;
2. Widowers;
3. Divorcees who were born in 1953 or earlier; and
4. Couples who are already pursuing a restricted application claiming strategy (These are couples where the primary beneficiary has already claimed his/her benefit and the spouse has claimed a spousal benefit. The spouse will still be able to switch to their own benefit at a later date.);
5. Couples who are already pursing a file and suspend strategy (These are couples where the primary beneficiary has already filed and suspended, and the spouse has claimed a spousal benefit. The spouse will still be able to claim their own benefit at a later date. The primary beneficiary will also be able to claim his/her own benefit at a later date.);
6. Couples who are planning to pursue a restricted application strategy and the person who plans to claim a spousal benefit was born in 1953 or earlier (These are couples where the primary beneficiary plans to claim his/her benefit in the future- or has already claimed a benefit- but the spouse has not yet claimed a spousal benefit. As long as the spouse was born in 1953 or earlier, the spouse will be able to claim a spousal benefit after reaching 66 and then claim their own benefit later.);
7.  Couples who plan to pursue a file and suspend strategy before sometime in late April or early May of 2016, and the person who plans to claim a spousal benefit was born in 1953 or earlier (The new law provides a window of 180 days after the law becomes effective where couples can still use the file and claim strategy).

Previously Recommended Strategies

If you have received a written strategy, plan, or analysis from a professional, you will need to consult with the professional before implementing the plan.  Generally,  however, the following are suggestions for helping to determine whether previous recommendations are valid:

• If a scenario recommends “file and suspend” it is probably no longer a valid recommendation, unless the the claimant can can sensibly file and suspend no later than about May 1, 2016 (The precise cut-off date is 180 days after the law becomes effective, which appears to be 11/2/15.);
• If the scenario recommends a “restricted application” (and no file and suspend strategy is involved), it is almost surely a valid recommendation if the claimant is born in 1953 or earlier. If a claimant is born in 1954 or later, a recommendation to file a restricted application is no longer valid. NOTE: Whether this statement also applies to ex-spouses is presently unclear.

If you have already implemented a strategy, it is best for you to consult with your financial adviser or professional to ensure that future actions pursuing the plan are not foreclosed by the new law.

The bottom line for those who may be retiring is that the government has now made it more difficult for you to comfortably forestall claiming social security at a later age, where the benefit paid to you is higher and more valuable over your life.  The effect will be that millions will continue to claim social security at the first availability, leaving the government responsible for paying less in social security benefits.