January, 2015, Friedman Law

Nursing Homes seek Guardianship over Residents to Collect Debts

Posted on: January 26th, 2015 by Mark R. Friedman

The New York Times ran an article today on nursing homes filing for guardianship over incapacitated residents in an effort to collect on nursing home bills, even when other family members are available to serve as guardian.

The Times article covered a woman with a dementia in a Manhattan nursing home that filed to have a stranger appointed as her guardian, even though her husband visits her every day and holds power of attorney for her. The husband’s representative claimed that the guardianship was an effort to intimidate the family into paying back-owed bills. Guardianship is meant to allow someone to provide for an incapacitated person’s care and best interests, so if guardianships really are being brought to strong-arm people into paying debts, it is a troubling development.

In New Jersey, I hear of nursing homes applying for guardianship where no family member is available to serve, but I haven’t seen a nursing home seek guardianship when a family member is available. (I have seen nursing homes sue family members who co-sign the resident’s admission agreement as “responsible party”). And in New Jersey, the nursing home would have difficulty being appointed as guardian where a devoted husband is available to serve, because NJ’s guardianship statute gives preference to family members over others.

Indeed, a court evaluator in the Times case recommended that the resident’s husband be appointed as guardian. Still, the husband claimed the case cost him $10,000. The legal bill in and of itself in a contentious guardianship case may be enough to intimidate a family into paying back bills.

A guardianship application is a serious matter that involves taking away a person’s autonomy. The guardian has a fiduciary obligation to the ward and is supposed to put the ward’s best interests first. It is not a process with which to be trifled unscrupulously.

Special Needs Trust vs. ABLE Account

Posted on: January 15th, 2015 by Mark R. Friedman

At the end of 2014, the Achieving a Better Life Experience (ABLE) Act became law in the United States, allowing people with disabilities to create ABLE accounts.

ABLE accounts allow a person who became disabled before age 26 to create a special bank account. Money in the account is not counted towards Medicaid and SSI resource limits, and won’t disqualify the owner from receiving these benefits. The money has to be used to pay for “qualified disability expenses” such as education and transportation.

ABLE accounts serve a similar function to special needs trusts, but do not replace them, for two important reasons.

First, an ABLE account can’t hold more than $100,000 without affecting Medicaid and SSI eligibility. There is also an annual limit on how much you can contribute to an ABLE account, equal to the federal gift tax exclusion (which is $14,000 in 2015). A special needs trust is usually used for lump sum payments, such as an inheritance or a lawsuit settlement. With the $14,000 annual contribution limit, an ABLE Account wouldn’t be able to accept a sizable inheritance or settlement, so unless the remainder of the funds were held in a special needs trust, the person with disabilities would lose his benefits. (There also is no restriction on how a special needs trust must be spent, while an ABLE account must be spent on qualified disability expenses.)

Second and more importantly, ABLE accounts involve a trap for the unwary. An ABLE account must repay Medicaid for assistance on the disabled person’s death, and then pay the remainder to the state. So if any money is left in the ABLE account when the owner dies, it has to go to the government instead of the owner’s family. By contrast, a third-party special needs trust need not repay Medicaid, and the remainder can be left to other family members. A third-party trust is typically used for gifts or an inheritance, so if you intend to leave money to your child that may last beyond his lifetime, it should be held in a special needs trust and not an ABLE account.

ABLE accounts are a welcome development, and very useful for certain things. ABLE accounts can be great to hold modest payments, such as small gifts from family or income from part-time work. But ABLE accounts do not replace special needs trusts.

Archive for January, 2015

Nursing Homes seek Guardianship over Residents to Collect Debts

Special Needs Trust vs. ABLE Account