October 11

U.S. Court Rules That Assets Transferred to Testamentary Trust Are Subject to Penalty Period

A federal court rules that Colorado’s Medicaid agency acted properly when it imposed a penalty period on a nursing home resident’s benefits after she transferred her share from the sale of a residence to her late husband’s fully discretionary testamentary trust. Kadingo v. Johnson et al (U.S. Dist. Ct., D. Col., No. 15-cv-02835-NYW, Aug. 14, 2007).

In 2011, nursing home resident Lilafern Kadingo applied for Medicaid benefits. At the time, Mrs. Kadingo was the sole beneficiary of a fully discretionary testamentary trust established by her late husband’s will after his death months earlier. Mrs. Kadingo also owned a residence, which she sold in 2013, placing the proceeds into the trust.

In 2014, the Colorado Department of Health Care Policy and Financing, the state’s Medicaid agency, determined that Mrs. Kadingo had received an overpayment of $98,703.52 in Medicaid benefits. Mrs. Kadingo appealed and an administrative law judge (ALJ) determined that there had been a transfer without fair consideration that warranted a 14-month penalty period. The agency upheld the decision.

Mrs. Kadingo appealed, but before a final agency decision was issued she filed a lawsuit against the agency. Mrs. Kadingo argued that the agency’s policy, which presumed that the failure of a surviving spouse to elect a share of a spouse’s estate is a transfer without consideration, violated her rights insofar as federal Medicaid law excludes testamentary trusts established by the individual or the individual’s spouse from the rules governing the treatment of trusts in eligibility determinations. The agency countered that the rules do not wholly exempt assets contained in testamentary trusts and that because Mrs. Kadingo placed the proceeds from the sale of the residence into the trust and failed to take an elective share of her husband’s estate, it amounted to a transfer without fair consideration. Mrs. Kadingo and the agency filed competing motions for summary judgment.

The United States District Court, D. Colorado, grants the agency’s motion for summary judgment, finding that “…nothing in the [law] suggests that once a testamentary trust is excluded as an exempt trust for the purposes of Medicaid eligibility, later-acquired assets placed in that Trust cannot be considered as some other type of asset for eligibility purposes at all simply because of where they are deposited.” [emphasis in original] The court explains that, if followed, Mrs. Kadingo’s interpretation would undermine the law and allow a recipient to “transfer assets she is legally entitled to under the auspices of the testamentary trust exception while concomitantly avoiding any transfer penalty and enjoying both continued Medicaid benefits as well as the use of the transferred assets.”

October 10

Union County, NJ Surrogate James S. LaCorte – A Notice Regarding Bank Policy

Union County Surrogate James S. LaCorte has provided Union County residents with the following alert on bank policy impacting the orderly processing of estates:

As some of you may know the Surrogate’s Office is responsible for assisting residents in the orderly process of estates after the death of a Union County Resident. As Surrogate of Union County, one of my obligations is to alert residents of potential problems with the processing of residents estates.

Recent events concerning Bank of America, Chase and Wells Fargo Banks compel me to warn residents that their loved ones may confront severe problems when they attempt to manage their deceased loved ones assets at the time of their death. Chase Bank has displayed in the recent past a refusal to follow New Jersey Law and instead follow their own bank instituted policy which adds expense and delay to the orderly processing of the decedents estates. Bank of America and Wells Fargo have acted in a similar manner on many occasions.

I am therefore advising Union County Residents that commencing or continuing a banker-customer relationship with Bank of America, Chase and Wells Fargo Banks may cause several unforeseen impediments with the timely processing of your estate after your death or the death of a loved one.

Please remember this alert when deciding to commence or continue a financial relationship with Bank of America, Chase Bank or Wells Fargo Bank.

The Surrogate’s Office is established under Constitution of the State of New Jersey. The Surrogate is responsible for assisting residents in the orderly process of estates after the death of a Union County resident, and is obligated is to alert residents of potential problems with the processing of estates.

For information on the programs and services of the Surrogate’s Office, visit online at ucnj.org/surrogate or call 908-527-4280.

October 6

Pennsylvania Appeals Court Rules Agent’s Transfer of Property to a Medicaid Trust Violates Power of Attorney

A Pennsylvania appeals court rules that an agent under a power of attorney did not have authority to create a Medicaid trust and transfer her mother’s property to the trust because the power of attorney allowed her to transfer property only to a trust that was created before the power of attorney was signed. In Re: Sellers (Pa. Super. Ct., No. 329 EDA 2017, Sept. 19, 2017).

Eva Sellers named her daughter, Elizabeth Fischer, as agent under a power of attorney. With regard to estate and trust transactions, the power of attorney granted Ms. Fischer the ability to transfer property to a living trust that she created before the power of attorney was signed. Ms. Sellers entered a nursing home and Ms. Fischer and her brothers consulted an elder law attorney who recommended creating an irrevocable income-only trust. Ms. Fischer created the trust and transferred Ms. Sellers’ property to the trust.

Ms. Sellers died and one of her sons died soon after her. Her son’s estate filed a claim against Ms. Fischer, arguing that she did not have authority under the power of attorney to transfer the property to the trust. The trial court granted summary judgment to the estate, and Ms. Fischer appealed. She argued that the terms of the power of attorney were ambiguous and her two brothers agreed with the transfer at the time.

The Pennsylvania Superior Court affirms, holding that under the plain language of the power of attorney, Ms. Fischer did not have authority to transfer property to a trust that was not already in existence before the power of attorney was signed.

For the full text of this decision, go to: http://www.pacourts.us/assets/opinions/Superior/out/j-s47033-17m.pdf#search=%22sellers%22

Article Courtesy of Elder Law Answers for Attorneys

October 5

Massachusetts to Force Disable Seniors to Make a Difficult Choice

Hundreds of disabled seniors in Massachusetts may soon face a daunting choice if they want services under the state’s Medicaid program: Ditch the trusts they set up to pay for extras, such as dental work and a home health aide, or risk losing public benefits.

MassHealth, the state’s Medicaid health insurance program for nearly 2 million low-income and disabled residents, is considering changes in eligibility requirements that would make it harder for residents older than 65 to establish special-needs trust accounts and still qualify for nursing home care and other health services from state and federal government agencies.

Massachusetts officials say the proposed changes are aimed at ensuring the state’s Medicaid rules comply with 2008 federal Medicaid guidelines, and lessen the strain on the $15 billion MassHealth budget.

The revisions under consideration would require disabled seniors to spend down their personal financial resources — including held money in a trust — before tapping into MassHealth.

“As part of our regulations review, MassHealth proposed some clarifications to its eligibility regulations to ensure compliance with both federal and state law,” said Sharon Torgerson, a spokeswoman for MassHealth.

But advocates for disabled seniors argue the changes would deny some residents small comforts that improve their quality of life and could cost the state more money by forcing those living independently into more expensive nursing home care financed by taxpayers.

“This is not a shelter for the affluent,” said Pamela Tames, executive director for the Plan of Massachusetts and Rhode Island Inc., a nonprofit that administers trusts. “It’s not a luxury. This is recognition that our public benefits don’t meet the needs of our disabled elders.”

The organization manages trusts for about 900 people with special needs, mostly in Massachusetts. In 2015, about 85 percent of those who opened trust accounts were 65 or older, Tames said.

The average account balance is $60,000 — usually proceeds from the sale of a house or money received through an inheritance, Tames said.

Individuals must get approval from the Plan of Massachusetts and Rhode Island to spend money, and they are required to submit bills for various expenses, including for dental work not covered under Medicaid, health aides, clothing, and utilities, Tames said.

Christopher Armstrong, 81, said that a decade ago he helped set up a trust for his 82-year-old brother Peter, who is partially paralyzed, funding it with money from the sale of his brother’s Springfield condominium. Over the years, he said, the $50,000 trust has helped pay for dental care and clothes, as well as for an elder companion to visit Peter at a nursing home once a week to take him to lunch at Friendly’s or Olive Garden — expenses not allowed under MassHealth.

As he has gotten older, Armstrong said, he hasn’t been able to make the trip from his Newburyport house to visit his brother in a Chicopee nursing home as often, so he relies on elder-companion visits. “It provides [Peter] one bit of entertainment outside the walls of the nursing home,” Armstrong said.

If his brother had been forced to use up the profits from his condo to pay for his nursing home care before becoming eligible for Medicaid, Armstrong noted, he would have burned through the money in a matter of months.

Last year, the median annual cost for a shared room at a nursing home facility in Massachusetts was nearly $135,000, according to an annual survey conducted by Richmond-based Genworth Financial Inc.

Trusts have long been a way for disabled seniors and their families to plan for long-term care, especially if they have complex needs and don’t have children to shoulder some of the expenses, said Susan H. Levin, who cochairs the public policy committee for the Massachusetts chapter of the National Academy of Elder Law Attorneys.

To qualify for MassHealth, which is funded by both the state and federal governments, individual assets such as bank accounts can’t exceed $2,000, and monthly income is limited to $100. Trust money had traditionally been exempt from those calculations.

But in 2008, the federal Centers for Medicare & Medicaid Services clarified the rules, telling states that, in general, disabled individuals over 65 couldn’t transfer money into a pooled trust without a penalty. Essentially, that meant they couldn’t go on Medicaid until they had used up their assets.

But officials say other factors also determine Medicaid eligibility, including how much money is in a trust and why it was deposited.

“Pooled trusts and transfers are complicated issues, and such transfers do not automatically make someone ineligible for Medicaid,” said Helen Mulligan, a spokeswoman for the Centers for Medicare & Medicaid Services.

Massachusetts health officials in December held a hearing on the proposed changes. Torgerson said they are considering comments from the public before deciding.

Story courtesy of Deirdre Fernandes of the Boston Globe

Deirdre Fernandes can be reached at deirdre.fernandes@globe.com. Follow her on Twitter @fernandesglobe.

October 4

Federal Medicaid Law Preempts Florida’s Reimbursement Statute, U.S. Court Rules

A federal district court rules that federal law prohibits the state of Florida from seeking reimbursement for Medicaid payments it made on a recipient’s behalf from portions of the recipient’s personal injury settlement that are allocated to future medical expenses. Gallardo v. Dudek (N.D. Fla., No. 4:16-cv-116-MW/CAS, April 18, 2017).

In 2008, then 13-year-old Gianinna Gallardo was struck by a vehicle after getting off of a school bus, leaving her in a persistent vegetative state and unable to care for herself in any manner. Her parents filed a lawsuit against the driver of the vehicle, the school bus driver and the school district. The case eventually settled for $800,000, or about 4 percent of the case’s $20 million value. Because Medicaid had provided $862,688.77 in medical payments on Gianinna’s behalf, her attorney advised the Agency for Health Care Administration (AHCA), Florida’s Medicaid agency, of the settlement. The attorney also advised the agency that $35,367.52 of the settlement represented past medical expenses that were recoverable by AHCA.

Florida’s reimbursement statute uses a uniform formula in which the recipient’s gross settlement is first reduced by 25 percent to account for attorney fees, the remainder is divided in half, and AHCA is then entitled to recover the lesser of its total medical payments or one half. Under this formula, AHCA would recover $323,508.29 in medical payments from Gianinna’s settlement.

Gianinna’s parents filed suit against the agency in federal court seeking an injunction and a declaration that Florida’s reimbursement statute violates federal law inasmuch as it allows the state to recover from the portion of her settlement beyond that allocable to past medical expenses. AHCA countered that it was entitled to satisfy its lien from the portion of the settlement representing compensation for both past and future medical expenses. The parties filed cross motions for summary judgment.

The U.S. District Court, N.D. Florida, grants the Gallardos’ motion for summary judgment and denies AHCA’s motion. The court finds that, consistent with the U.S. Supreme Court’s decision in Arkansas Department of Health and Human Services, et al. v. Ahlborn (547 U.S. 268 (2006)), AHCA is entitled to recover for past medical payments it made on Gianinna’s behalf only from that portion of the settlement allocated to past medical expenses. The court rules that where, as here, the state reimbursement law explicitly allows for recovery from the portion of the settlement attributable to future medical care, that portion of the state law violates, and is preempted by, federal Medicaid law.

Article Courtesy of Elder Law Answers for Attorneys

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