Category

Medicare Set-Asides: Make an Informed Decision

If you’re a plaintiff in a personal injury lawsuit, and you get Medicare or expect to get it soon, then you need to be aware of your obligations to Medicare.

Under the Medicare Secondary Payer Act (MSPA), Medicare doesn’t pay for healthcare where someone else has primary responsibility, such as a defendant in a lawsuit.  For example, if you get into a car accident and need healthcare, and the other diver’s insurer is supposed to pay for your healthcare, Medicare will not pay for healthcare for which the insurer should pay.

The MSPA is complicated and confusing – probably too complicated to explain in a short blog post.  However, it’s extremely important that you understand your MSPA obligations, because if you don’t fulfill them, Medicare may refuse to fund some care for  you.  If Medicare decides that the defendant paid you damages (money) that was meant to cover your healthcare, and instead you spent it on something else, Medicare may refuse to pay for further accident related healthcare for you until you pay the damages for accident related care. If the money’s already spent, you might be stuck with no money, no Medicare, and no way to get Medicare.

The best way to fulfill the MSPA obligation is with a Medicare set-aside arrangement.  This is a legal instrument through which a portion of your settlement is set aside to pay for your healthcare.  The disadvantage is that once money is put into a Medicare set-aside arrangement, it can’t be used for anything other than healthcare.  For this reason, may people would rather not have a Medicare set-aside arrangement.  That is their decision, but in doing so, they risk losing their Medicare benefits and ending up with no way to pay for needed healthcare.

The Centers for Medicare and Medicaid Services (CMS), which administers Medicare, hasn’t yet issued rules for Medicare set-aside arrangements in personal injury / liability cases, so some lawyers and plaintiffs ignore MSPA obligations.  In my view, that’s a mistake that puts both the lawyer and plaintiff at risk.  At the very least, plaintiffs should be informed about how Medicare set-asides work, obligations under the MSPA, and the potential consequences of not fulfilling your obligations.  Plaintiffs should at least be able to make an informed decision about whether they want a Medicare set-aside.

At FriedmanLaw we do MSPA consulting on personal injury cases, advise clients whether a Medicare set-aside is necessary and help clients create Medicare set-asides where appropriate.  Call or email us today for information on how the MSPA applies to your case.

Nursing Home Debts are subject to Fair Debt Collection Practices Act, according to 2d Cir.

A nursing home debt is subject to the Fair Debt Collection Practices Act (FDCPA), according to the Second Circuit federal appeals court in New York.

In Eades v. Kennedy, PC, a Pennsylvania nursing home resident died with an unpaid bill owed to the nursing home. The nursing home hired a debt collection law firm, which contacted the resident’s daughter in New York and put pressure on her to pay her mother’s debt, claiming that her wages could be garnished and a lien could be put on her father’s home.

As a sidenote, the nursing home’s claim rested on Pennsylvania’s “filial responsibility” laws, and on the fact that the resident’s husband signed an admission agreement as responsible party. We’ve written about attempts to hold children liable previously, and it bears repeating that you should approach admission agreements with great caution. It’s worth having your own attorney review the admission agreement before you sign.

The Second Circuit held that law firm’s attempt to collect the nursing home debt was subject to the federal FDCPA law. This is significant because the FDCPA provides important protections to consumers. The FDCPA forbids debts collectors from making misrepresentations, making unrealistic threats of legal action, making harassing phonecalls, calling outside reasonable hours, using profanity, etc. It creates a procedure that debt collectors are required to follow.

While the Second Circuit decision isn’t controlling in New Jersey (since New Jersey is within the Third Circuit), this decision is a strong indication that the FDCPA does apply to efforts to collect nursing home debts. That is good news for anyone with a close relative in a long term care facility. These days, it seems that attempts to collect unpaid facility fees against family members are becoming more common. The FDCPA grants consumers valuable protections in collection attempts.

Key Considerations in Settling an Estate

Administering an estate can be a daunting task.  Where the decedent leaves a will, the person(s) named as executor(s) must probate the will and fulfill the duties of the estate personal representative.   Where there is no will, the Surrogate’s Court appoints an administrator to fulfill these obligations.  Either way, the executor/administrator must settle the decedent’s debts and obligations, safeguard income and assets, file required tax returns, address guardianships/trusts for minors and beneficiaries with special needs, and distribute the estate according to law.  It can be a lot of work– even more so if trusts are involved.

Although New Jersey has some of the country’s most user friendly will and estate laws, the process is anything but intuitive.  For instance, an executor/administrator can have personal liability if he distributes before the creditor claim limitation period runs and even, thereafter, if distributions aren’t wholly correct.

New Jersey law requires an executor/administrator to obtain and file a refunding bond before distributing.  The executor/administrator also must obtain a qualifying child support judgment search and resolve any child support judgments that turn up.  An executor/administrator who ignores these obligations risks substantial personal liability.  In addition, to foreclose claims down the road, the executor/administrator should obtain releases from beneficiaries or settle an account in court.

Depending on estate beneficiaries, assets, income, deductions, and tax deposits, the executor/administrator of an estate may be liable to pay tax and file estate tax returns and/or inheritance tax returns as well as final income tax returns for year in which decedent died and fiduciary income tax return thereafter.  As estate attorneys, we normally prepare our clients’ estate tax returns and inheritance tax returns and determine tax. Where appropriate, we can suggest strategies [such as disclaimers] that can reduce tax.

Federal tax laws require IRAs and many other retirement plans [401(k), pension, profit sharing, SEP. government plans, and other benefit arrangements] to distribute required minimum distributions (RMD) once an individual reaches age 70.5 and thereafter. Thus, unless a decedent has taken the full RMD, an estate may have to take RMDs for the year in which a decedent dies. Beneficiaries may face RMDs thereafter. When RMDs aren’t made, expensive tax penalties can arise.

While I could go on and on about tasks that must be performed to administer an estate properly, the point of this article is to show that what may first appear to be a simple task carries with it many less obvious obligations.  At FriedmanLaw, we apply our years of experience in trust and estate law to guide executors/administrators through the steps needed to settle an estate.  We also take obligations (such tax compliance) off our clients’ hands.

In short, if you may become an executor/administrator, we would look forward to working with you to settle the estate correctly and limit your workload.

The Dangers of DIY Medicaid Planning

There is a lot of information floating around out there regarding Medicaid and long term care.   People write books and articles about “Medicaid secrets” and protecting against nursing home costs.  Information is a good thing, but sometimes people who act on limited information make big mistakes.

We occasionally see clients who have tried to do their own Medicaid planning.  They have made large gifts to their children or put their house into a sibling’s name.  Problem is, in doing their own planning they’ve often lost opportunities to save much more with professional planning, and sometimes have made things much worse.  Medicaid has a 60-month “look back” period, so gifts made within five years of the application can incur a hefty penalty unless they meet certain exceptions.  People who are in a nursing home who make gifts without proper planning could end up with Medicaid refusing to pay the bill and no other money available to pay.  In that situation, nursing homes may be able to go after family members for unpaid bills.

You can read a book about how the heart works, but you (hopefully) wouldn’t try to do heart surgery afterwards.  Medicaid planning can be the legal and financial equivalent of heart surgery – it can be just as complex and important.  To do Medicaid planning right, you should understand complicated federal and state laws and regulations (e.g.), and that understanding can’t be gleaned by reading a newspaper article or listening to what a friend tells you.

Nursing homes in New Jersey typically cost $10,000 or more, so the costs quickly add up for mistakes or missed opportunities that delay Medicaid eligibility.  With the stakes that high, doing your own Medicaid planning is penny wise and pound foolish.

 

Mark Friedman nominated as Legislative Coordinator of Elder Law Section

I’m excited to announce that I’ve been nominated to serve legislative coordinator of the New Jersey State Bar Association, Elder Law and Disability section.  If approved, I’ll review proposed laws from the New Jersey legislature to see how they would impact seniors and people with disabilities, and advise on whether the Bar Association should support or oppose those laws or take another stance.

It’s a position that Larry Friedman and a lot of other great attorneys have held before me, and I look forward to it with gusto.

My spouse has Alzheimer’s – Now what?

An Alzheimer’s diagnosis is a difficult thing. If your husband or wife has just received one, you may be feeling overwhelming and lost, wondering what to do next.

When someone has early or mid-stage Alzheimer’s, there is a good chance they will need long term care in the near future. With most NJ nursing homes costing $10,000 / month or more, it’s very important for the spouse to take measures to protect himself / herself from long term care costs.

If your spouse has early Alzheimer’s, you should immediately make sure he has a good Power of Attorney document. That is because protecting against long term care costs often involves transferring assets, selling property or making purchases. Having a Power of Attorney means that someone else can manage your spouse’s property if he loses the mental capacity to manage it himself, which often happens as Alzheimer’s disease progresses. Once your spouse loses capacity to understand what he is signing, he can no longer create a Power of Attorney, so it’s important to do it now.

It is also usually a wise idea to update your will, to leave the smallest amount possible to your spouse. Likewise, joint property and beneficiary designations should be changed accordingly. That is because if your spouse is getting long term care, any property that goes to him when you die will be eaten up by long term care costs. Most people prefer that when they die, their property go to their children instead of their spouse’s nursing home, so it is wise to update your estate plan.

Beyond those immediate steps, after an Alzheimer’s diagnosis, it’s a good idea to consider long term care planning. That involves qualifying for Medicaid to pay for your spouse’s long term care, while preserving as much of your assets and income as possible. Long term care planning can be the difference between maintaining your lifestyle and becoming impoverished, and typically, the earlier you start planning, the more you can save.

An Alzheimer’s diagnosis can be difficult and overwhelming, but FriedmanLaw is here to make things slightly easier. Call or email us today.

NJ Medicaid Raises Penalty Divisor for Gifts

NJ Medicaid issued a notice that effective today, April 1, 2015, the penalty divisor has been increased to $332.59 / day.

What is the penalty divisor?  It arises when someone is seeking long term care Medicaid (i.e., Medicaid that pays for a nursing home, assisted living facility or home care aides) and has made gifts.  A gift is any transfer of property to any person other than your spouse (or certain other exceptions like a disabled child) for less than fair market value.  For example, if you give $50,000 in cash and securities to your children, that would be a gift.  Or, if you sell your house to your son for $50,000 when the fair market value is $300,000, then you have given a $250,000 gift.

(If you can prove the transfer was for a purpose other than to qualify for Medicaid, e.g. a wedding gift, then the transfer may not be counted as a gift.  But doing so is difficult.)

If you’re applying for long term care Medicaid, and you’ve made gifts in the last five years, then Medicaid calculates the total amount of your gifts (by reviewing your financial records) and assigns a transfer penalty.  A transfer penalty (aka “penalty period”) is a time period of Medicaid eligibility.  I.e., during the penalty period, Medicaid will not pay for your nursing home, and you must foot the bill yourself.

The transfer penalty is calculated using the penalty divisor.  So under the new transfer penalty of $332.59 / day, if you have made $50,000 in gifts, then you divide 50,000 by 332.59, for a penalty period of 150 days (roughly 5 months).

Since gifts are often an integral part of Medicaid planning and asset protection, an increased penalty divisor is a very good thing for New Jerseyans who need long term care.  FriedmanLaw is pleased that the increased penalty divisor will allow us to better help our clients protect their savings and their families from enormous long term care costs.

Medicare will Change how it Rates Nursing Homes

The federal government is changing how it rates nursing homes.

Medicare publishes ratings on every nursing home in the country in a database called Nursing Home Compare.  It makes available a variety of information, and assigns a “star rating” similar to a restaurant or hotel, from one to five stars.

In August 2014, the New York Times reported that many nursing homes had received a five-star rating despite serious complaints about inadequate care at those facilities.  The thrust of the report was that Medicare did not examine nursing homes rigorously enough, and the star ratings could therefore be misleading.

Now, Medicare has released a new version of its database that it calls “Nursing Home Compare 3.0.”  The Centers for Medicare and Medicaid Services (CMS) says that the nursing home ratings will now consider standards on prescribing anti-psychotics, set higher standards for assigning a five-star rating, adjust how it considers staffing levels, and expand the use of targeted surveys to verify information that facilities self-report to CMS.

I applaud these measures, and hope they will make Nursing Home Compare more useful for seniors and their families grappling with the difficult decision on whether and where to enter into a long term care facility.  In particular I applaud the expanded use of surveys.  If CMS follows through on that point, it would go a ways towards addressing the heart of the problem with the nursing home ratings, which is that they rely too heavily on unverified data reported by the facilities themselves.

These developments are particularly welcome since Medicare has announced that it will begin assigning star ratings to hospitals.  Hopefully the standards for hospitals will be more rigorous.

Folks who are researching facilities may find it useful to examine ProPublica’s nursing homes violation database as well (although this is based on CMS data), including its New Jersey chart.

Medicaid should Cover Advance Care Planning

New Jersey State Senator (and former Governor) Richard Codey has proposed that NJ Medicaid reimburse doctors and nurses for advanced care planning. That is, meeting with a patient to discuss what sort of medical treatment she wants at the end of her life, and setting forth those preferences in legal and medical documents like advanced healthcare directives and POLST orders.

Sen. Codey also introduced a resolution urging the federal government to allow Medicare to reimburse medical professionals nation-wide for advanced care planning. That idea was initially proposed in 2010 as part of the Affordable Care Act, but was nixed when political figures began heralding the creation of “death panels.”

In my opinion, this proposal should be welcome to anyone who thinks that Americans should have more control over how they die. Most people say they want to die peaceful and comfortable deaths, in their homes surrounded by family. Yet far too many people die protracted deaths in hospitals, hooked up to life support, after undergoing multiple surgeries with little chance of success. And despite medical advances and a push for hospice, a recent study by the Institute of Medicine shows that end-of-life suffering has become more common in the past decade, not less.

Healthcare directives, POLST orders and other advanced care planning allow patients to state whether they would want artificial life support, heroic surgeries, palliative care, etc., so that medical professionals can follow these instructions if the patient cannot communicate. Hopefully by putting more control into patients’ hands, the reality of end-of-life care will become more in line with what people say they want for themselves.

It is hard to imagine a moment in life more intimate than its end. Patients should be able to set forth their wishes for end of life care, and know that those wishes will be honored.

NJ Miller Trusts leave little room for Trustee Fees

New Jersey Medicaid recently began permitting the use of Miller trusts (aka Qualified Income Trusts).  People with incomes above the Medicaid income limit (currently $2,199) can use a Miller trust to qualify for Medicaid in a nursing home, assisted living facility or in the community with home care aides.

While Miller trusts are an excellent development that will help a lot of New Jerseyans afford long term care, there are still some significant flaws to work out in the State’s plan.  One of the biggest is that Medicaid’s rules effectively do not allow a trustee to take a fee.

New Jersey’s Miller Trust template lists on page 4 the order of permitted trust disbursements.  In theory, the trustee (the person managing the trust) is permitted to take a fee of 6% of monthly trust income.  E.g., if the beneficiary (the person who needs long term care) assigned $1,000 of income the trust each month, the trustee is entitled to a fee of 6%, or $60 per month.

However, the trustee can only take a fee after the beneficiary’s other required monthly expenses are paid, including the beneficiary’s share of the long term care cost.  For people in a nursing home or assisted living facility, the share of cost will almost always exceed the monthly income, leaving no money to pay the trustee.  This means that in practice, if the beneficiary is in a facility, the trustee will not be paid a trustee fee.

That’s fine for people who have family members willing to serve as trustee.  A child or spouse can usually be expected to serve without taking a fee.  But what about people who don’t have family members available to serve?  A Miller trust must be managed by a trustee, but if you don’t have close family members and can’t hire someone, who would take on that responsibility for free?

It’s certainly a gap in the Miller trust rules.  Banks and businesses won’t serve as trustee without a fee, and I don’t think non-profits will be willing to take on that role for free either.  The only answer in this situation may be that facilities (nursing homes and assisted living facilities) will have to serve as trustee.  They certainly have a vested interest in seeing the beneficiary’s income get paid out, since the bulk of it will go to them.  There exists some inherent conflict of interest, but the Miller trust rules are very rigid.  Administering the trust should be pretty mechanical, which minimizes the conflict.  In cases where no one else is available to serve as trustee, I think facilities will have to fill that role.

For more information on Medicaid and Miller trusts, call or email us today.

Nursing Homes seek Guardianship over Residents to Collect Debts

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.

What’s your New Years Resolution?

Happy New Year!  This is the time of year when people make resolutions, and a good one for 2015 may be to get your legal affairs in order.

The could mean creating an estate plan, or updating an old one.  Having a quality will, power of attorney and healthcare directive in place is important in case something happens to you in the coming year.  And having a well-crafted estate plan can bring you a certain peace of mind knowing that if something happens, your family will be protected.

A lot of people delay unpleasant things until after the holidays.  Perhaps you have a parent whose mental capacity or ability to care for herself is starting to slip.  Maybe that became clear when you visited for the holidays.

If a loved one may soon need long term care, now is right time to start planning for it.  We can help you figure out how to obtain proper care and how to pay for it.  With nursing home costs in New Jersey around $10,000 per month, long term care is exceedingly expensive.  But with Medicaid planning we can help you avoid impoverishment and keep assets within the family instead of losing them to care costs.

Perhaps you have a child with disabilities who is growing up.  At age 18, every child becomes an adult and has the legal authority to make decisions for himself, regardless of whether he’s disabled or lives with his parents.  Banks, hospitals, schools, government agencies and other institutions have to listen to your child’s instructions instead of yours.  If you want to continue caring for your child after age 18, it’s important to apply for guardianship.

Now is the perfect time to get your legal affairs in order, and FriedmanLaw is here to help.  If you’re interested in knowing more about any of the above or other legal matters, call or email us.

Can You be Paid to Care for Your Parent?

A parent who becomes frail or starts to develop dementia rarely can be alone full time even if not yet ready for long term care in a facility. While an elder law attorney may arrange for Medicaid to fund some care at home, an adult child may need to care for [and possibly live with] the parent. Should that child be paid, and if so, how?

There is no one size fits all answer because both needs and services vary from family to family. Where the parent only needs light assistance, the child may be able to continue to work and socialize, but in other situations, a child may give up career and social life to take care of mom or dad. So what should families do?

It may prove fair to base parent- child financial arrangements on what the child gives up to care for mom or dad. Thus, a child who just helps with shopping and paying bills might be reimbursed for out of pocket costs or receive a small stipend. Parents who need substantial care may give the caregiver child an hourly or weekly fee or an extra share under their wills.

Sometimes payment involves funding an addition to a child’s home or the child coming to live with mom. These kinds of arrangements can alleviate many concerns and save a lot of money but they require counsel to address tax concerns and head off major issues if a parent seeks Medicaid later. For instance, in paying for an addition to a child’s home or transferring dad’s home to a child, dad makes a valuable gift that can lead to Medicaid gift penalties. In contrast, an elder law attorney may avoid Medicaid gift penalties by designing the arrangement as a caregiver child transfer or purchase of a life estate. These kind of techniques likely will elude a lay person because they involve complex rules rather than common sense.

Like so many family situations, it is best for parents to discuss the options with all of the children and come to an agreement before embarking on the new arrangement. Reaching agreement on long term care compensation is just the first step. To avoid misunderstandings, arguments, and even law suits down the road, the agreement should be put to paper in language that will hold up in court. Care arrangements can impact tax and Medicaid planning. An elder law attorney also can help families develop defenses that will stand up in court should a disgruntled child later attack a care arrangement as unfair; improper; or the product of undue influence, over reaching, or even fraud.

What about taxes? When a child is paid and provides services to a parent, the payments can constitute either income or gifts.

Payments tied directly to the services [such as hourly or weekly pay] probably are taxable income to the child and subject to payroll tax and withholding. Unfortunately, the parent doesn’t get a corresponding deduction because individuals generally can’t deduct payments for personal services. This increases the after tax cost. However, not treating payments as taxable income can prove even more costly.

I’m often asked why families shouldn’t just ignore taxes; who would even know? First and foremost, the law requires compensation to be reported as taxable income and tax evasion can lead to criminal charges and civil penalties. In addition, payments from parent to child that aren’t income must be gifts.

Medicaid authorities typically treat as gifts payments from parent to child that parent and child don’t report as taxable income. As discussed throughout www.SpecialNeedsNJ.com, most gifts made within the Medicaid look-back period trigger a penalty period, which depends on the amount given. The look-back period goes forward starting sixty months before applying for Medicaid. However, because the penalty doesn’t start until the donor applies for Medicaid and satisfies Medicaid income cap and resource cap, an application that isn’t timed correctly can delay the start of a penalty for years longer than necessary. Therefore, whenever gifts may occur it is essential to consult an elder law attorney before applying for Medicaid. This brings us back to the question why pay taxes on compensation from parent to child?

As unpleasant as taxes may be, it can be far cheaper for a child to pay tax on a parent’s compensation than for mom to incur Medicaid gift penalties. If the child doesn’t work beyond caring for mom, the tax rate probably will be modest. In addition, the child may be able to deduct expenditures to provide care, and possibly even take a home depreciation deduction. However, it is best to get legal advice on what may and may not be deductible.

Even if the family treats payments from parent to child as taxable income, Medicaid regulations may impose gift penalties unless the payments are pursuant to a legally binding written agreement. A well designed care compensation arrangement can dovetail nicely with traditional planning to qualify for Medicaid if dad eventually needs care in a nursing home or assisted living facility or home health aides. Payments per a binding care agreement should reduce resources toward Medicaid limits without triggering gift penalties. In addition, careful planning may even allow a parent to transfer a valuable home to a caregiver child but avoid Medicaid penalties.

Families should work with an elder law attorney to ensure smooth implementation of a family care agreement and take advantage of Medicaid planning opportunities. In addition to a written care agreement, a new will, trust, deed, or power of attorney may prove important to implement the agreement and allow for potential Medicaid planning. For instance, without a power of attorney that authorizes Medicaid planning, an expensive guardianship proceeding may be your only option whereas our firm often helps clients accomplish their goals with no need for guardianship.

If a family care arrangement in your future we’d be happy to help you “get it right.” Please call or email us today.

Anti-Psychotics as Chemical Restraints in Nursing Homes

“Chemical restraints” – the use of anti-psychotics in nursing homes to control resident behavior – may be dangerous, illegal, and widespread.

Today, NPR covered one family’s experience with chemical restraints in a nursing home. The practice involves facility doctors prescribing anti-psychotic drugs to sedate residents who create problems for the facility due to Alzheimer’s disesase, vascular dementia or other illnesses that affect behavior.

Many anti-psychotic drugs are not intended for use with dementia patients, but they can make unruly nursing home residents more pliable and easier for staff to manage. However, blunting the senses with anti-psychotic drugs can put residents at greater risk of injurious falls and bone fractures, and exacerbate health problems. And excessive anti-psychotic use can dull emotions, sap away personality and put the resident into a “stupor.”

The use of anti-psychotics as chemical restraints, without medical need and for the convenience of staff, is illegal under federal regulations. But according to a government investigation, questionable anti-psychotic use is widespread in nursing homes [link] across the country.

The NPR story linked above includes a tool that it says was drawn from data from the Centers for Medicare and Medicaid Services (CMS). Using the tool, you can look up data on the percentage of residents at a nursing home who receive anti-psychotic medication, and how that percentage compares to the state and national average. The New Jersey rate of 14.9% is lower than the national average of 19%.

It’s cliche to point out that in the United States we have an aging population. But as more people check their parents and spouses into nursing homes and enter facilities themselves, I believe the use of chemical restrains will have to recede. It’s a nightmarish practice, and as more people experience it and a brighter spotlight is shone, families won’t stand for it.

If you believe a facility may be using chemical restraints by prescribing anti-psychotic drugs inappropriately to your loved one, you should know about your rights and how to enforce them. FriedmanLaw is here to help; call or email us today.

New Jersey Medicaid begins allowing Miller Trusts / Qualified Income Trusts

As of December 1, New Jersey has begun allowing Miller trusts / Qualified Income Trusts (QIT’s) to be used to establish Medicaid eligibility.

With a Miller trust, income that would put Medicaid applicants over the long term care income limit (which in 2015 is $2,199) is deposited into a special bank account, where it is paid out in accordance with Medicaid rules.  Applicants accept restrictions on how the money can be used, and Medicaid does not count the trust money towards the applicant’s income limit, allowing the applicant to qualify for Medicaid.

Miller trusts are only used for long term care, in a nursing home, assisted living facility or with home care aides in the community.  Miller trusts cannot be used to qualify for non-long-term-care Medicaid.

The implementation of Miller trusts means that New Jersey is ending its Medically Needy program for long term care.  People who currently receive assistance under Medically Needy are “grandfathered” and will continue receiving assistance, but may have to establish a Miller trust if their circumstances change.  It’s not clear whether people with pending Medicaid applications, who qualified for Medically Needy when they applied, will have to establish a Miller trust to qualify.  My view on the matter: better safe than sorry.

The main advantage of Miller trusts / QIT’s is that they allow people with higher incomes to receive long term care outside of a nursing home.  Previously, folks with income above the limit could only qualify for Medically Needy assistance in a nursing home.  People who could have received care in an assisted living facility or at home with aides, couldn’t, because their incomes were too high to qualify for ordinary Medicaid (but too low to pay the exorbitant cost of long term care).  Now, these people can put their excess income in a Miller trust and receive care in the most appropriate setting.

New Jersey Medicaid officials seem to expect that initially, the use of Miller trusts will cost the state money.  Reportedly the state has set aside $90 million to cover the cost of new Medicaid enrollees who qualify for the first time using Miller trusts.  However, many people who work in this area, including me, believe that ultimately this program will save the state money.  It costs much more to provide care in a nursing home than in other settings, so allowing people to receive care in less restrictive environments makes economic sense for the state.

If you’re interested in using a Miller trust to qualify for Medicaid, we would be happy to speak with you.  Call or email us today.

Think shopping for gifts is hard? Try shopping for healthcare!

Happy Thanksgiving!

Thanksgiving and Black Friday mark the unofficial start of the holiday shopping season.  But what about shopping for healthcare?  Prices for TV’s and computers are clearly marked, but prices for healthcare are completely opaque.  It’s very difficult to find out how much you’ll pay for a procedure until you get the bill, and almost impossible to comparison-shop.

This is becoming a problem as more people are buying “high-deductible” insurance sold under the Affordable Care Act (aka Obamacare).  These are plans in which the insured pays more of their healthcare costs until they reach the deductible amount, which may be over $2,000.

For consumers, the price of healthcare matters.  And different providers offer wildly different prices for the same services, based on insurance contract rates that seem arbitrary and bear little relation to quality or patient outcomes.  The same procedure may cost four times as much between one provider and another.

Price transparency in insurance was a cornerstone of the Affordable Care Act, which gave consumers the ability to easily comparison-shop for insurance through exchanges like healthcare.gov.  More price transparency and comparison-shopping are needed in healthcare.  Efforts are being made – Massachusetts has just started requiring insurers to post the cost of procedures between different providers online.  California public broadcasting is even crowdsourcing healthcare prices, building a database by asking patients how much they paid.  But in New Jersey, obtaining this information is difficult.  The New Jersey Hospital Association has an online tool, but it is difficult to use for laypeople unfamiliar with medicine.

For the holidays this year, I want more price transparency in healthcare.

Will You Be Liable for Your Parent’s Nursing Home Bill?

Will you be liable for your parent’s nursing home, assisted living, long term care, or other health care costs?  You probably are thinking, “No way!”  And that may be true if you work proactively with a good elder law attorney to plan in advance.  But if you aren’t careful filial responsibility laws or even ordinary care facility contracts could make you liable for a parent’s care.

How can that be?  While it’s one thing to charge a parent for a minor children’s health care costs, children don’t expect to be hit with charges for a parent’s care.  However, 29 states have filial responsibility laws on the books that make a child in decent financial shape cover essential costs for an indigent parent.  Since health care is a necessity, filial responsibility laws can ensnare children in states that have filial responsibility laws. While filial responsibility laws traditionally have been something of a paper tiger, that may be changing.

In 2012, a court held that Pennsylvania’s filial responsibility law required a son to pay his mother’s $93,000 nursing home bill even though the son said he couldn’t afford to pay.  Health Care & Retirement Corporation of America v. Pittas (Pa. Super. Ct., No. 536 EDA 2011, May 7, 2012). To make matters worse, the son bore full responsibility because his initial response to the lawsuit didn’t raise claims against other family members who could have shared the obligation.  While the case occurred in Pennsylvania, it may have repercussions throughout the country.

Even children in states without filial responsibility laws can take on liability by signing a care facility agreement without fully understanding the effect. Although nursing homes can’t require a child to guaranty a parent’s bill, courts can enforce a guaranty that is considered voluntary.  This can be a major issue where a child signs documents to admit a parent to a care facility without consulting a lawyer.

A lawyer also can make sure a child doesn’t agree to other unfavorable contract terms that are hard to understand or even notice. In Cook Willow Health Center v. Andrian (Conn. Super. Ct., No. CV116008672, Sept. 28, 2012), the court held that a child can be liable to ensure a nursing home is paid if the child signs a care facility admission contract as “responsible party.”  Because the child signed the agreement without counsel, she didn’t understand that she was taking on this obligation.

How can children avoid liability?  Simple, follow two golden rules.  Don’t sign any admission papers or care contract until it has been reviewed by an elder law attorney. Since filial liability only kicks in when a parent is indigent, work with an elder law attorney to qualify the parent for Medicaid if the parent becomes indigent. FriedmanLaw often helps clients understand facility agreements and negotiate more favorable terms. We also help people qualify for Medicaid to pay for care instead of leaving children saddled with their parents; nursing home bills.

The moral of these cases  is pretty simple: consulting elder law counsel early on can yield major savings down the road.

NY gift incurs Medicaid penalty even when used to pay for care

A New York appeals court ruled that a mother’s gift to her daughter incurred a Medicaid transfer penalty, even when the daughter used part of the money to pay for her mother’s care.

Petitioner Martha Weiss gave $78,237 to her daughter, who used the majority ($41,600) of the money to pay her mother’s care costs in an assisted living facility.  New York Medicaid rules provide that where a portion of assets that were gifted are returned to a Medicaid applicant, the transfer penalty period can be reduced for the returned portion.

However, the Court took a narrow reading on what constitutes a return of assets.  The regulation says an asset is returned if it’s used to pay for the applicant’s “nursing facility services.”  The NY Medicaid agency took the position that care in an assisted living facility is not “nursing facility services,” and the Court agreed.  Ms. Weiss was hit with the full penalty period.

It seems to me an overly technical position.  However, it’s worth noting that in New Jersey, the Petitioner wouldn’t have even gotten that far.  Under NJ Medicaid rules, the penalty period is reduced only for a full return of assets.

Elder law attorney pleads guilty to stealing client funds

South Jersey elder law attorney Barbara Lieberman reportedly plead guilty today to stealing millions of dollars from her clients.

According to the American Bar Association: “Prosecutors said Lieberman… used fake powers of attorney… to steal from clients who often had no close family members to intervene. All told, victims were bilked of millions between 2006 and 2013, the government contended… Lieberman put her name on client bank accounts, wrote checks for her own personal expenses, transferred assets into her law firm’s accounts, helped clients draft wills and then stole more while serving as executrix… according to the attorney general’s office.”

According to the Philadelphia Inquirer: “Lieberman paid off six-figure credit-card bills, while Van Holt bought a Florida condominium and two Mercedes-Benzes, authorities said.”

Lieberman will reportedly forfeit $3 million, her law license and a BMW, and faces up to ten years in prison.

FriedmanLaw has no independent knowledge of the facts surrounding this case, but if the government’s allegations are true, then this is a very sad situation.

As elder law attorneys, our job is to protect some of society’s most vulnerable members. Our clients put their trust in us.  We work hard to deserve the trust of seniors and people with disabilities, who rely on our help. When one lawyer takes advantage of clients’ trust, it affects us all.

Lawrence Friedman was invited to give a presentation on elder law ethics to New Jersey’s Office of Attorney Ethics, the state agency charged with regulating the legal profession. We hope that our contribution will help the state ensure that this doesn’t happen again.

Social Security rates rise in 2015

The Social Security Administration (SSA) announced today that social security rates will rise by 1.7% in 2015, as a cost-of-living adjustment.

In addition to social security retirement benefits that most seniors get, this rate increase will also benefit people who receive Social Security Disability Insurance (SSD) and Supplemental Security Income (SSI).

The maximum federal SSI benefit will be raised from $721 (2014) to $733 (2015), although in New Jersey the rate will be slightly higher because of a modest state supplement.

This increase also benefits seniors and people with disabilities who seek Medicaid for long term care, in a nursing home or other facility or with home care aides.  The income limit for long term care Medicaid is three times the federal SSI rate, so in 2015 the income limit should be $2,199.  However, the income cap is somewhat less important than it was previously given that NJ Medicaid will soon allow the use of Miller trusts.

For more information on social security, disability benefits or Medicaid, call or email us today.

The Trouble with Legal Forms

E-commerce is seeping into everything these days, including estate planning.  Online for-profit companies offer to generate a Power of Attorney document for you, using pre-fabricated forms that you plug your information into without ever consulting an attorney.

On the non-profit side, hospitals and other providers offer form Healthcare Directive documents that you write your information into, at no cost.  The State of New Jersey even offers a free form online.
This is all fine, until it isn’t.  The problem is that form power of attorney (POA) and healthcare directive documents often are inadequate when you really need them.

A POA and healthcare directive allow your loved ones to manage your affairs if you lose mental capacity, due for example to progressive dementia, Alzheimer’s or a stroke or coma.  Once you lose capacity, it’s too late to make a new POA or healthcare directive, so it’s very important to get it right the first time.

Yet most generic form documents I see don’t include important provisions.  New Jersey’s proxy directive says nothing about HIPAA privacy rights or visitation rights, which could leave loved ones with no right to access patient information or visit the patient.  And I’ve yet to see a POA form document that includes the provisions necessary to do Medicaid planning.  In other words, if you use a form POA and lose capacity, your loved ones couldn’t use the POA to preserve your nest egg from long term care costs, which is an important goal for many of our clients.

Everyone should have a healthcare directive and consider a POA, and form documents are better than nothing.  But if you lose capacity, then your family will rely on these documents to make things easier during a very difficult time.  For something that important, in my view it’s worth consulting an expert who can make sure your goals are met.  I wouldn’t trust it to a form.

Visiting your Grandchildren after a Divorce

The relationship between a grandchild and grandparent can be very special, but when the child’s parents divorce or die, tension can arise between the grandparents and surviving parent or other decision maker. In that case, an NJ senior may want to seek visitation rights to preserve a relationship with a grandchild. While New Jersey law provides for grandparent visitation, obtaining such rights is not so simple.

Visitation rights can only be granted in a court order. However, because competent parents have a due process right to decide how to raise their child, a grandparent who applies for visitation can be seen as meddling. Thus seniors must tread lightly when seeking grandchild visitation rights. A senior seeking grandparent visitation should be prepared to convince a judge that the child could be harmed if the grandparent doesn’t visit but court mandated visitation will not impair the relationship between parent and child. A delicate balance should be the order of the day.

The New Jersey Supreme Court is currently considering the issues inherent when a New Jersey senior seeks grandparent visitation rights and should rule this term.

What You should Know about Miller Trusts in New Jersey

Note:  See our Miller Trust page for more current information on Miller trusts / Qualified Income Trusts (QIT’s).

Miller trusts are coming to New Jersey. We’ve covered the basics in previous posts, and now I want to cover some current issues with Miller trusts and Medicaid that consumers and practitioners should be aware of. Here’s what you need to know:

Miller trusts won’t be up and running on November 1, but will hopefully be up by the end of 2014. The Centers for Medicare and Medicaid Services (CMS) has yet to approve New Jersey’s Medicaid State Plan Amendment.

When Miller Trusts start, Medically Needy will end. The Medically Needy program will cease to take new applicants, and people with high income will instead apply using Miller trusts. However, folks who currently receive assistance under Medically Needy will be grandfathered in, and won’t have to switch to Miller trusts.

Miller trusts can be used in a nursing home, assisted living facility or for home care. Since Medically Needy only covers care in a nursing home, this creates new options for seniors and disabled people with higher income.

It’s not clear yet whether Miller trusts can be used to obtain DDD services. New Jersey’s Division of Developmental Disabilities (DDD) has said that people who seek group home care and other expensive services must obtain Medicaid through the Community Care Waiver. It’s not clear yet whether Miller trusts can be used to do that for people with higher incomes. Medicaid officials have said no, DDD officials have said yes. My suspicion is yes, but stay tuned.

NJ Miller trusts limit how beneficiaries can use income. NJ miller trusts allow trust funds to be used to pay the beneficiary’s personal needs allowance, spousal allowance, and medical costs. This is more limited than other states. Arizona, for example, allows broad medical expenses, special needs allowances and guardian and trustee fees. New Jersey is much more limited, for now.

It is unclear who will serve as trustee for beneficiaries without family support. A Miller trust requires a trustee to manage the trust and distribute income. In most cases, beneficiaries will rely on their spouse or children to serve in this role. But for people who don’t have family support, it’s not clear who would serve as trustee. Nursing homes have an inherent conflict of interest, it’s outside the statutory mandate of New Jersey’s Office of Public Guardian and most non-profits don’t want the job. New Jersey does allow a very modest trustee fee, and my guess is that private businesses will rise up to fill this role.

DMAHS now has a Miller trust website. The website includes FAQ’s and a trust template. However, a word of caution: Don’t try this at home. Medicaid laws are exceedingly complex, and if you try to do Medicaid planning without understanding the rules you could end up being disqualified from Medicaid for a long time or losing a big chunk of your assets. For something this important, it’s worth working with an expert.

We will post more information on Miller trusts as it becomes available. Stay tuned, or call or email us today for specific information on your situation.

Medicare Advantage plans may not be Advantageous

Medicare open enrollment begins on Wednesday. To kick off the season, the New York Times reported over the weekend that federal officials have repeatedly criticized and fined Medicare Advantage health plans for violations, including improper rejection of claims for medical services and unjustified limits on coverage of prescription drugs.

Medicare Advantage plans are private health plans that consumers may choose instead of getting Medicare directly through the government. These plans are offered by private insurers like Horizon BCBS and Aetna, and typically provide the same benefits as Medicare Part B and D through a private network. Medicare Advantage plans may be attractive to seniors because they offer a different cost structure than traditional Medicare, and may save you money on things like prescription drugs.

However, these plans won’t save you money if insurers unfairly deny coverage for things they’re supposed to cover, as federal officials charge. It’s a message to seniors to be wary shoppers when selecting between original Medicare and a Medicare Advantage plan, and to all of us that sometimes the law is only as good as its enforcement.

Child Can be Liable for Parent’s Health Care Costs

Pennsylvania (like many other states) has a filial responsibility law that generally requires children with means to support an indigent parent. While it may seem unfair, a Pennsylvania court recently enforced the law to hold a son liable for his mother’s $93,000 nursing home bill despite the son’s claim that he couldn’t afford to pay. Health Care & Retirement Corporation of America v. Pittas (Pa. Super. Ct., No. 536 EDA 2011, May 7, 2012). In addition, the son bore full responsibility because his initial response to the lawsuit didn’t raise claims against other family members who could have shared the obligation.  While the case occurred in Pennsylvania, it may have repercussions throughout the country.

Another fairly recent case illustrates what can go wrong when a child signs a care facility agreement without fully understanding its terms and their ramifications.  Nursing homes may not require a child to guaranty a parent’s bill, but courts sometimes say a guaranty is enforceable because it is voluntary.  This situation typically arises where a child signs documents to admit a parent to a care facility but doesn’t have a lawyer explain the document.  In addition to so-called voluntary guaranties, care facility contracts may have other unfavorable provisions that can be difficult to understand or even notice.  Nevertheless, courts can enforce a contract against an individual who later claims he/she didn’t realize that the contract imposes undesirable obligations.

In Cook Willow Health Center v. Andrian (Conn. Super. Ct., No. CV116008672, Sept. 28, 2012), the care facility claimed the resident’s daughter’s signature on the admission papers required the daughter to take steps to pay the facility with her mother’s assets or qualify the mother for Medicaid but the daughter didn’t follow through.  The daughter tried to avoid liability based on the prohibition of guaranty requirements, but the court held that there was no guaranty.  Instead, the court said in signing the admission contract as “responsible party,” the daughter  voluntarily agreed to take steps to have the nursing home paid and the facility had a right to rely on that undertaking and sue the daughter for breach of contract.

How could the daughter have avoided liability?  First and foremost, she should have had a lawyer review the admission papers so she could make informed decisions and not agree to obligations she wasn’t prepared to honor.  While most states don’t automatically make a child liable for a parent’s health care costs, children also should be proactive to make sure parents don’t run up high bills in light of the Pittas case discussed above.   That shouldn’t be difficult since a person with little money and major health care needs often can qualify for Medicaid, although legal guidance can be essential

So what IS the take away from these two cases?  It is crucial to consult a lawyer before signing any care facility agreement (or other contract). 

A lawyer can explain the impact of admission documents and may try to negotiate changes.  For instance, FriedmanLaw often helps clients understand facility agreements and negotiate more favorable terms.  Since ignorance of contract terms doesn’t excuse their breach, it is risky to sign any contract without first consulting a lawyer.  In addition elder law attorneys like FriedmanLaw often can help people qualify for Medicaid to pay for care instead of leaving children to be saddled with high nursing home bills.  The moral of these cases  is pretty simple; consulting elder law counsel early on can yield major savings down the road.

Further information on funding long term care without going broke and other subjects is available throughout SpecialNeedsNJ.com. To subscribe to our frequent blog updates, click on “Subscribe RSS” at the top of the side bar to the left.

Miller Trusts Lift NJ Medicaid Income Cap for Assisted Living & Home Health Aides

For many years New Jersey’s medical assistance program (“Medicaid”) could help seniors and disabled people with modest incomes fund long term care in nursing home, assisted living facility, or residence with home health aides. However, New Jersey’s Medicaid income cap ($2,163 per month in 2014) limited seniors and disabled people with incomes above the Medicaid income cap to long term care Medicaid in nursing homes. This meant seniors and disabled people exceeding New Jersey’s Medicaid income cap couldn’t get long term care Medicaid for assisted living or home health aides. Fortunately, for New Jersey seniors and disabled people who can receive long term care outside a nursing home, “the times they are a changing.” (apologies to Boy Dylan).

Beginning Nov. 1, 2014, New Jersey seniors and disabled people can use Miller Trusts to bypass the Medicaid income cap and obtain long term care Medicaid in nursing home, assisted living facilities, or residence with home health aides. Originating in the case Miller v. Ibarra, 746 F. Supp. 19 (D. Colo. 1990) Miller Trusts are now memorialized in federal law 42 U.S.C. 1396p(d)(4)(B) in states without Medically Needy Medicaid long term care programs.

Until this fall, Medically Needy Medicaid funded long term care in New Jersey, but only in nursing homes. Even though New Jersey limited long term care Medically Needy Medicaid to nursing homes, New Jersey seniors couldn’t use Miller Trusts for Medicaid in assisted living or with home health aides. Thus, Medicaid couldn’t pay for fund long term care outside a nursing home even if a person with income above the Medicaid income cap could live in a less restrictive environment. However, New Jersey has modified its Medicaid program to eliminate the bar to Miller trusts. Now New Jersey seniors and disabled people with incomes beyond the Medicaid income cap can use Miller Trusts to qualify for Medicaid funded long term care care at home with aides or in an assisted living facility.

This is good news for seniors, people with disabilities and other folks who may need long term care. Miller Trusts give FriedmanLaw a powerful new tool to help our clients receive care in the most appropriate setting– whether nursing home, assisted living, or at home with aides.
For more information on Medicaid and long term care, please see our Practice Areas and Q&A pages, or call us at (908) 704-1900.

Supreme Court will hear Idaho Case on Medicaid Reimbursement Rates

The U.S. Supreme Court will decide whether states can be sued to raise Medicaid reimbursement rates, in a case that will undoubtedly impact the future of Medicaid.

Armstrong v. Exceptional Child Center arises out of a lawsuit by Idaho healthcare providers who contended that Idaho was unfairly keeping Medicaid reimbursement rates too low for state budget reasons, in violation of federal law.

The healthcare providers won in lower courts, and Idaho has appealed to the Supreme Court, arguing that private healthcare providers can’t sue to force the state to increase its Medicaid rates. 27 other states have joined Idaho in its appeal, including Pennsylvania (but not New Jersey or New York).

Higher Medicaid reimbursement rates mean more choices for consumers, since more doctors will accept Medicaid patients if Medicaid pays more. However, it’s a balancing act, since Medicaid can be a major drain on state budgets.

However, the impact of this case will be somewhat blunted in New Jersey, at least for now. That is because New Jersey no longer pays healthcare providers directly, instead paying private HMO’s who pay their own rates to healthcare providers. New Jersey is even transitioning long-term care patients to this model.

Nonetheless, the Supreme Court’s decision promises to have a deep impact on Medicaid generally, on how states balance state budget concerns with obligations to care for citizens, and on the influence private parties have on state policy.

Power of Attorney, Capacity and Dementia

After watching the film Amour, about an elderly gentleman who becomes caretaker to his wife after a stroke, I feel compelled to share some information on powers of attorney.

A power of attorney is a legal document in which you give someone power to manage your financial affairs. The person you appoint is called your attorney-in-fact. You can give your attorney-in-fact broad or limited powers, over all your assets or just a portion, and starting immediately or only after a certain condition (such as a stroke).

Together with an advance directive for healthcare, a power of attorney is how you appoint a loved one to manage your affairs if you become disabled. The trouble is, you can only create a power of attorney or healthcare directive if you still have mental capacity to understand serious decisions. If a person has suffered a stroke or is in later stages of Alzheimer’s or dementia, it is often too late to make a power of attorney.

Without a power of attorney and healthcare directive, then the only way anyone can manage your affairs is to apply for guardianship, a process that is often expensive and emotionally painful.

In addition, with a power of attorney and healthcare directive, you appoint an agent to act on your behalf. You can give or withhold from your agent whatever powers you want, and provide advance instructions to your agent on how you want your affairs managed. A guardian’s powers, on the other hand, are set by the court, with far less control by you. With an agent you appoint by power of attorney or healthcare directive, you have power over your agent. But a guardian has power over you.

With diseases like dementia and Alzheimer’s, mental capacity often seeps away over time. That is why it’s important to put these documents into place while you are healthy. In addition, if you may need long term care in the future (e.g., in a nursing home), then it is important to include provisions in your power of attorney related to Medicaid planning.  At FriedmanLaw, we will work with you to create a thorough power of attorney. Call us today at (908) 704-1900 to make an appointment.

End-of-Life Care in America

A committee appointed by the National Academy of Sciences found that the U.S. healthcare system is poorly designed to meet the needs of patients near the end of life, the New York Times reported.

For people at the end of their life, our healthcare system provides incentives for doctors to perform complex, invasive, expensive procedures in the hospital, when what most dying people really want is pain relief and care at home, the committee reportedly found.

In surveys of doctors about their own end-of-life preferences, “a vast majority want to be at home and as free of pain as possible, and yet that’s not what doctors practice,” said Dr. Phillip Pizzo, a committee co-chairman.

The committee made recommendations on aligning the healthcare system closer to end-of-life patients’ goals, including changes to what Medicare and Medicaid pay for.  Many of the recommendations involve making palliative care more affordable and accessible.  Palliative care is healthcare that seeks to relieve the patient’s pain, rather than cure the patient’s illness.

The committee also stressed the importance of advance healthcare planning, and recommended that Medicare pay doctors to discuss advance planning with patients.  At FriedmanLaw, we also believe in the importance of planning, including having an advance directive for healthcare.

New Jersey Supreme Court’s Saccone Opinion Creates Special Needs Trust Opportunities and Pitfalls

To qualify for Supplemental Security Income (SSI) from the Social Security Administration (SSA), Medicaid, and other government disability benefits, an individual’s income must be within program limits. Pensions and most other payments typically throw a disabled person’s income over SSI and Medicaid income caps. However, pensions and other payments don’t count against income caps for SSI, Medicaid, and various other benefits when paid into a special needs trust under 42 U.S.C. 1396p(d)(4)(A), (commonly called d4A special needs trust or d4A SNT). These d4A special needs trusts are further explained in the Practice Area and Q&A pages of www.SpecialNeedsNJ.com.

New Jersey provides survivor pensions to surviving spouse and children of police officers and fire fighters. A retired New Jersey fire fighter sought to ensure that the benefit for his disabled son would be paid into a special needs trust under 42 U.S.C. 1396p(d)(4)(A), commonly called d4A special needs trust or d4A SNT. When pension administrators rejected his request that any survivor benefit for the disabled son be paid into a d4A special needs trust, the retired New Jersey fire fighter appealed.

In Saccone v. Board of Trustees of the Police and Firemen’s Retirement System (__ NJ __, Sept. 11, 2014), the New Jersey Supreme Court ruled that the benefit could be paid into a d4A special needs trust for the disabled child. The New Jersey Supreme Court cited New Jersey’s strong public policy favoring special needs trusts as reflected in New Jersey Statutes 3B:11-36 & 37, which were authored by FriedmanLaw attorney Lawrence A. Friedman on behalf of the New Jersey State Bar Association.

The New Jersey Supreme Court further held that a d4A SNT is “the equivalent of” the d4A SNT beneficiary– and therein could lie an unintended can of worms. The Supreme Court says New Jersey law now provides that a d4A special needs trust is the equivalent of the beneficiary. Therefore, one has to wonder whether the Social Security Administration and perhaps Medicaid will take the next logical step and claim amounts in a d4A SNT should be considered resources of the trust beneficiary. If so, the d4A SNT would cause the beneficiary’s resources as well as income to exceed SSI and Medicaid limits. While that would seem contrary to the Court’s goal in Saccone, it could be a logical consequence– especially since SSA is not obligated to further goals of the New Jersey Supreme Court.

Finally, since the Supreme Court holds that the firefighter himself can’t designate a beneficiary for his pension survivor benefit, the surviving spouse or child must ask that the spouse or child survivor benefit be paid to a d4A special needs trust or SNT. However, court approval is required to transfer assets of a minor or incapacitated disabled person into a d4A special needs trust. Therefore, court approval should be required to cause a survivor’s benefit to be paid into a d4A SNT where the surviving spouse or child lacks capacity and didn’t give appropriate power of attorney (POA) while the surviving spouse or child had capacity.

While the concerns noted above may never arise, they could wreck havoc with special needs planning if they do. Stay tuned; it should be interesting.

Further information on special needs, estate planning, long term care, and other subjects is available throughout SpecialNeedsNJ.com. To subscribe to our frequent blog updates, click on the “Subscribe to RSS” button at the top left of this page and then click on “subscribe to this feed.”

Miller Trusts to come to New Jersey Medicaid in November

New details have emerged about New Jersey Medicaid’s shift to Miller trusts.

The state has indicated the Miller trust program will begin on November 1, 2014. People who use Miller trusts will reportedly be eligible for Medicaid in the month after the trust formation. So folks who qualify for Medicaid through a Miller trust created in October would be eligible in November.

The state will reportedly launch a website in October with more information on Miller trusts.

Although New Jersey is expected to end its Medically Needy program for institutional-level applicants, the state indicated it has received approval from the federal government to grandfather in all current Medically Needy beneficiaries. In other words, if you currently receive Medically Needy assistance in a nursing home, you would not need to do anything.

As we covered in previous blog posts, a Miller trust is a legal instrument that allows people with income higher than Medicaid limits (currently $2,163) to qualify for assistance. Currently, these folks can only qualify for the Medically Needy program, which pays for long term care only in a nursing home.

Previously, folks with higher incomes could only receive medical assistance in a nursing home, even if they were capable of living in a less restrictive environment. With Miller trusts, for the first time, New Jersey Medicaid beneficiaries with higher incomes are expected to be able to receive long term care at home or in an assisted living facility.

This is good news for seniors, people with disabilities and other folks who may need long term care. Come November, we expect that FriedmanLaw will have a powerful new tool to help each of our clients receive care in the most appropriate setting.

For more information on Medicaid and long term care, please see our Practice Areas and Q&A pages, or call us at (908) 704-1900.

New Jersey Guardianship for a Vulnerable Adult

When seniors suffer from Alzheimer’s, dementia or other mental ailments, they can become vulnerable to exploitation.

We have seen folks have their accounts drained by new “friends” and lovers, become the victim of obvious scams, make terrible financial decisions on the advice of self-serving salesmen, and plow through their savings buying needless items from home shopping outlets.

The thing is, usually these are folks who have always been responsible in the past. They don’t recognize that their judgment is now being clouded by illness. They worked hard to make their money, and they won’t have anyone else tell them what to do with it.

If any of this sounds familiar with your parent or spouse, then you may wish to apply for guardianship.

A guardianship is a protective arrangement ordered by a court, in which a guardian is appointed to make decisions for a ward. The guardian can take control of the ward’s finances or prohibit certain people from visiting.

To appoint a guardian, the court must find that the ward lacks capacity. “Capacity” means having the mental wherewithal to make serious decisions and understand their consequences. Not having capacity due to an illness is called being “incapacitated.”

If you are seeking guardianship over someone, you will have to prove he is incapacitated. You must submit affidavits from two doctors who have recently examined the person (the court can order an examination if the person refuses). The court will assign the person his own lawyer, who will interview him and advocate for what he wants.

Appointing a guardian is a radical measure that takes away a person’s autonomy, so courts do so only where necessary, and in the least restrictive manner possible. The court can create a limited guardianship – for example, where the guardian only has power over certain financial accounts, or limited amounts. In an emergency situation, the court can also freeze bank accounts and appoint a temporary guardian.

If you are interested in applying for guardianship for a vulnerable adult, we are here to help. Call us today at (908) 704-1900 for more information.

Medicare to Assign Star Ratings to Hospitals

Medicare will soon begin assigning hospitals star ratings, similar to nursing homes.

Medicare maintains a database with data for most hospitals in the United States, similar to its nursing home compare database. But unlike nursing homes, Medicare does not assign a star rating to hospitals. That is set to change later this year.

Last week, the New York Times published several pieces highly critical of Medicare’s star rating system for nursing homes. The Times criticized the ratings for being too reliant on data submitted by the nursing homes themselves, and for ignoring important information collected by the states, and concluded that the star ratings could mislead consumers. The Times proffers the example of a nursing home in California that was given the highest rating despite numerous problems.

One has to wonder whether the hospital ratings will be plagued by similar problems. Medicare’s hospital database provides more robust information than its nursing home database, probably because hospitals are more closely monitored than nursing homes.

Now, the hospital database provides raw data from which consumers can draw their own conclusions. With star ratings, a conclusion is drawn for consumers. I’m concerned that given the problems with the nursing home ratings, hospital ratings might make things less clear for consumers, not more clear.

Critics say Medicare’s Nursing Home Ratings are Deeply Flawed

The New York Times released a report and editorial this week criticizing Medicare’s nursing home ratings system, saying Medicare’s nursing home ratings were deeply flawed and could mislead consumers.

Medicare maintains a database called Nursing Home Compare, that assigns star ratings similar to hotel reviews, with one star being lowest quality and five stars being highest.

The ratings take into account metrics like staffing and quality statistics. However, the Times says that these statistics are reported by the nursing homes themselves, who obviously have an incentive to report more favorable statistics, and are taken more or less at face value by Medicare.

The Times also criticizes Medicare’s ratings for failing to take into account negative information collected by the states. For example, the ratings consider fines imposed by federal regulators, but not state regulators. The Times cites as an illustration a nursing home in California, which has had no federal fines, but was fined $100,000 by state regulators for causing the death of a resident, and for which the state has received more than 100 complaints. Medicare awarded the nursing home a five-star rating.

My advice to consumers looking for an appropriate nursing home for a loved one, is that Medicare’s database may be a good starting point, but take it with a grain of salt. The database includes detailed information on inspection reports and federal violations, but it is missing quite a bit of important information. You should always tour a nursing home, speak with staff, and observe how residents are treated. You may also find it helpful to work with a geriatric care manager.

(Consumers may also wish to look at ProPublica’s nursing home violations database, including ProPublica’s New Jersey nursing home violations chart. ProPublica’s database is based on Medicare’s data, so the same caveats apply.)

If you or a loved one may soon need long term care in a nursing home or other facility, we are happy to work with you to find and fund appropriate placement.  See our Practice Areas and Q&A pages for more info, or call us today at (908) 704-1900 to make an appointment.

NJ Bill would require Hospitals to Instruct Family-Caregivers on Patient Care

New Jersey may soon require hospitals discharging patients to educate their caregivers. When a patient is sent home, medical professionals would have to provide instructions on how to care for the patient to a loved one whom the patient designates.

So says a caregiver education bill before the New Jersey legislature. The bill has been approved by the Assembly, but is reportedly being held up in Senate, with hospitals requesting time to negotiate certain provisions. (Many hospitals already provide instruction to caregivers, but the bill would make it mandatory for all New Jersey hospitals.)

The bill is intended to ensure that family-caregivers (such as the patient’s spouse or children) are equipped with the knowledge required to care for their loved ones at home. In doing so, the bill seeks to reduce costly hospital admissions that could be prevented by competent care, and save money for patients and the Medicare and Medicaid programs.

We think this is an excellent idea, where possible. However, many patients’ needs will be beyond the capabilities of family-caregivers. For people who require twenty-four hour supervision, have complex medical needs, or do not have family members capable of caring for them, then care at home is probably infeasible. Long term care in a nursing home or assisted living facility may be necessary. If that is the case, Medicaid can pay for your long term care, and FriedmanLaw can help you obtain Medicaid in the most favorable manner.

Medicare will Coordinate Care for Chroncially-ill Patients

Next year, Medicare will start paying doctors to coordinate care for patients with chronic illnesses. The decision will benefit patients with two or more chronic illnesses, who account for 93 percent of Medicare spending, according to the New York Times.

Coordinated care is meant to prevent inefficiency. For example, a patient who is very sick might receive care from ten different doctors over the course of a year. With so many providers in play, important information about the patient might be lost between offices. Follow-up with the patient may also be lacking – if he has surgery to make him healthy, then goes home and neglects to take his medicine or resumes unhealthy habits like bad eating, it defeats much of the purpose of the surgery.

With coordinated care, patients can sign up to have a doctor create a comprehensive plan of care. The care coordinator might assess the patient’s social needs that are affecting health outside the hospital; check whether the patient is taking medicine as prescribed; monitor care provided by other doctors; and help the patient transition home after hospital visits.

Coordinated care will cost roughly $500 per year, with patients footing 20% of the bill. This holistic approach to care is meant to keep patients healthier while saving money for the Medicare program, by reducing patients’ need for expensive surgeries and other procedures.

It seems likely that this approach will keep patients healthier, but whether it will reduce costs for Medicare remains to be seen. In a Medicare pilot program, coordinated care was successful at keeping patients out of the hospital, reducing patient hospital visits by as much as one-third. However, in the best cases the initiative was cost-neutral and failed to save Medicare money.  Nonetheless, the government will try its hand at an approach that has already been embraced by the private sector (many private Medicare Advantage plans already offer care coordination).

It is worth noting that the concept of coordinating care for the sickest patients was pioneered in Camden, New Jersey. Dr. Jeff Brenner and the Camden Coalition of Healthcare Providers have shown that care coordination can be successful in bettering patient outcomes and reducing costs. Hopefully, Medicare will find similar success in its care coordination program.

Third Circuit Rules on Medicare Repayment in New Jersey

In Taransky v. U.S., the Third Circuit ruled that Medicare can recover conditional payments despite New Jersey’s collateral source rule.

Medicare has a right to repayment when it pays for healthcare for a Medicare beneficiary, who then recovers those healthcare costs from a tortfeasor.  For example, if Jane, a senior who receives Medicare, is hit by a drunk driver, Medicare will pay her medical costs arising from the incident.  But if Jane later recovers for those medical costs in a lawsuit against the drunk driver, then she has to reimburse Medicare for the expenses it paid for which the drunk driver is responsible.  These are called Medicare conditional payments.

However, under New Jersey’s Collateral Source Rule (N.J.S.A. 2A:15-97), a plaintiff cannot recover medical costs from a tortfeasor when those costs have been paid by another source (i.e., a collateral source).  So if Jane’s medical care from the car accident were paid by her health insurance, then her damages against the drunk driver would be reduced by the amount her health insurance paid, to prevent a windfall double recovery to Jane.

The Third Circuit found that the Collateral Source Rule doesn’t apply to Medicare conditional payments since they have to be repaid.  To illustrate the principle, if Jane has to repay the money she received from another source anyway, then she is not getting a double recovery, and she can recover full damages against the drunk driver.

Since federal law (the Medicare Secondary Payer Act) gives Medicare a right to repayment, Medicare conditional payments are not a collateral source and Medicare must be reimbursed from a plaintiff’s recovery despite New Jersey’s collateral source rule.

The opinion also sheds light on how courts will examine settlement arrangements to determine liability to Medicare.  Plaintiff’s claim in this case sought medical damages, and when the claim settled, plaintiff released defendant from liability for all claims, including medical damages.  Plaintiff then persuaded the New Jersey Superior Court to issue an allocation order finding that no portion of the settlement was for medical damages, and claimed she had no obligation to repay Medicare.

The Third Circuit held that because the settlement releases the defendant from liability for medical damages, plaintiff is liable to repay Medicare.  The Third Circuit gave little weight to the allocation order, finding that because the order was unopposed and the “product of a pre-arranged agreement” between the plaintiff and defendant, the order was not on the merits and not binding.

In sum, Taransky provides significant guidance on how Medicare conditional payments should be handled in New Jersey.

For more info on Medicare in the context of a lawsuit, please see our Practice Areas and Q&A pages, and this article from Larry Friedman on conditional payments and Medicare set-asides.

New Jersey Medicaid to Allow Miller Trusts

New Jersey residents with higher incomes may soon have new options for long term care.

New Jersey Medicaid announced it intends to clear the way for Miller trusts.  NJ Medicaid will request approval from the federal government to discontinue its Medically Needy program for long term care.  This would allow Medicaid applicants who seek long term care to begin using Qualified Income Trusts, or “Miller” Trusts (named after Miller v. Ibarra, 746 F. Supp. 19 (D. Colo. 1990)).

A Miller Trust is a legal arrangement in which the Medicaid applicant directs income in excess of the Medicaid limit to an irrevocable trust, which uses trust assets to pay the applicant’s long term care costs.

Practically, this decision affects people with incomes above the Medicaid limit, which in 2014 is $2,163.  Currently for these folks, Medicaid only pays for long term care in a nursing home, limiting options.  Healthier people who could have received care in an assisted living facility or at home, instead must enter a nursing home or forego long term care.  But we expect that with Miller Trusts, people with higher incomes (such as from Social Security or a pension) will be able to receive Medicaid in these settings.

Federal law (42 USC 1396p(d)(4)(B)) prohibits the use of Miller Trusts in states that have a Medically Needy program, which is why New Jersey is seeking to discontinue Medically Needy institutional Medicaid.  Notably, Medicaid has not proposed discontinuing Medically Needy Medicaid for people receiving non-institutional or “community” Medicaid – i.e., people in the community who use Medicaid for acute care, such as doctor and hospital visits.  The proposal only affects Medicaid applicants who need long term care.

We expect that when Miller Trusts are implemented in New Jersey, FriedmanLaw will have a powerful new tool to help our clients obtain long term care in the most comfortable and appropriate setting.

For more information on Medicaid, long term care planning, protecting assets or other elder law issues, please see our Practice Areas and Q&A pages, call us at (908) 704-1900, or email at LAF@SpecialNeedsNJ.com.

Pennsylvania Legalizes Same-sex Marriage

This week, New Jersey’s neighbor Pennsylvania became the 19th state to legalize same-sex marriage.

On May 20, 2014, federal Judge John E. Jones III of the Middle District of Pennsylvania threw out the state’s ban on same-sex marriage, writing that, “We are a better people than what these laws represent, and it is time to discard them into the ash heap of history.”

On May 21, 2014, Governor Tom Corbett of Pennsylvania said he would not appeal Judge Jones’s decision. How same-sex marriage played out in Pennsylvania bears some similarity to New Jersey, where same-sex marriage also was legalized by a judicial decision and made more concrete when a Republican governor decided not to pursue an appeal.

While the implications of this decision are not yet fully clear, we hope it means that married same-sex couples in New Jersey can now cross the Delaware River without fear of losing their rights under state law.

Marriage has an impact on taxes, estate planning, guardianship, Medicaid, long-term care planning, healthcare and many other areas of concern to our clients. For more information on legal concerns for same-sex couples, please see Mark Friedman’s article Estate Planning for Same-sex Couples.

Plan Your Estate to Benefit Your Loved Ones– Not the Taxman

[The following article is by guest blogger Julie Donald, a freelance writer with a strong background is finance.  Julie obviously knows her stuff and FriedmanLaw/SpecialNeedsNJ.com are proud to feature her work.]

While we’ve come a long way since The Beatles sang about the 95% tax rate England then charged certain high earners, Estate tax planning still is an important part of financial planning. Since New Jersey has an inheritance tax as well as a separate estate tax, understanding when these taxes apply is an important step toward minimizing the amount you will have to pay when a loved one dies. Estates with a value of $675,000.00 or more are subject to the estate tax. The inheritance tax applies to any estate. The rate depends on the relationship of the beneficiary to the person who has passed away.

When an Estate Tax Return is Required

When a New Jersey resident leaves an estate with a gross value of $675,000.00 or more, the executor of the estate must file an estate tax return. Federal estate tax returns are only required if the estate is worth more than $5.25 million (inflation adjusted after 2013). New Jersey estates of non-residents are not subject to the NJ estate tax.

The gross value of the estate is calculated by adding up all the assets a person owned as of the date of his or her death, including the following:

  • New Jersey real estate
  • Funds held in bank accounts or certificates of deposit
  • Investment accounts and securities
  • Funds from retirement accounts
  • Cars, trucks, and personal property
  • Any small business interests (small corporation, sole proprietorship, limited liability company)

Tax is based on the total assets less most property that is left to a spouse or civil union partner, debts, and certain expenses.

Proceeds from life insurance policies may be taxable even if the decedent did not own the policy. By the same token assets that pass outside probate may be subject to New Jersey inheritance and estate tax. However, FriedmanLaw can help you develop an estate plan that avoids or minimizes tax on life insurance and other assets.

Paying Estate Tax

If a New Jersey estate tax return is required, it must be filed within nine months after the date of a person’s death.  While the filing date can be extended, if the estate tax isn’t fully paid within the nine-month period, interest will be charged at the rate of 10 percent per year from the nine month anniversary of the date of death until the amount is paid. The Director can choose to extend the time for filing the estate tax return but not the time for paying the tax. Rather than having the amount of the estate reduced by the amount of the estate tax, some people may choose to fund a financial product which will pay this amount on their death. A separate life insurance policy could be bought and the proceeds used toward the estate taxes.  However, these life insurance and other tax funding products will generate additional tax unless properly designed.  Therefore, it is advisable to get legal advice before making a purchase.

New Jersey Inheritance Tax

Under state law, close relatives are exempt from the inheritance tax. They are classified as Class A. The following people are included in this group:

  • Spouse, civil union or domestic partner
  • Parent or grandparent
  • Child (includes biological or adopted) or other descendant stepchild

Class B was eliminated when the law was updated.

Class C includes the following:

  • Brother or sister
  • Spouse or civil union partner of the deceased’s child
  • Surviving spouse or civil union partner of the deceased person’s child

For Class C relatives, the first $25,000.00 in property is not taxable. For amounts over $25,000.00, the tax rates are as follows:

  • Next $1,075,000: 11%
  • Next $300,000: 13%
  • Next $300,000: 14%
  • Over $1,700,000: 16%

Anyone else is placed in the Class D category, for which there are no special exemptions. The tax rates are 15 percent on the first $700,000.00 and 16 percent on any amounts higher than that.

Gifts Made During a Person’s Lifetime

Any gifts transferred in the three years before a person’s death are presumed subject to the state’s inheritance tax unless the recipient is exempt from having to pay. The gifts will not be taxed if it can be shown that the person did not transfer the money or property “in contemplation of death.”

Since New Jersey inheritance tax laws and estate planning matters can be very complicated, you should consider options very carefully to avoid leaving your beneficiaries with a large tax bill.  FriedmanLaw has years of experience helping families plan estates to minimize tax and accomplish non-tax goals.  We look forward to working with you.

Social Security Amends POMS Governing Special/Supplemental Needs Trust Expenditures

People with serious disabilities often qualify for government benefits like Supplemental Security Income (SSI) and Medicaid that limit eligibility based on finances.  Thus personal injury recoveries attributable to a disabled person often are placed in trust to minimize benefit reduction.  However, federal and state law provide that trusts containing assets of the disabled beneficiary or the beneficiary’s spouse may be disqualifying unless the trust satisfies a safe-harbor exception.

Social Security Administration (SSA) Program Operations Manual System (POMS) SI 01120.201 says that to satisfy a safe-harbor exception, a trust must be for the exclusive benefit of the trust’s disabled beneficiary.  While a safe-harbor trust may pay reasonable amounts for goods and services routinely provided to the disabled beneficiary, other trust payments can prove suspicious.  For instance, where a trust pays family to provide services to the beneficiary, the trust should be prepared to prove the payments are reasonable and have a sole purpose to benefit the trust’s disabled beneficiary rather than family.

New POMS provisions issued in 2011, caused an uproar among the disabilities community and families with special needs trusts by dramatically tightening the exclusive benefit rule.  The 2011 POMS provided that a trust violates the exclusive benefit requirement if the trust authorizes payments for the beneficiary’s family to visit the disabled beneficiary because trust payments of travel costs benefit the family.  Compounding the concern, SSA staff orally stated that payments to family to care for a trust’s disabled beneficiary also may be disqualifying in common situations.

While SSA’s goal to guard against diversion of trusts that should be administered to benefit a disabled trust beneficiary, the SSA pronouncements triggered great concern and impeded trust flexibility to provide legitimate benefits to disabled people..  Reacting to these undesirable side effects, SSA withdrew the travel provision from the POMS, agreed to study the exclusive benefit rule, and invited the disabilities community to work with SSA to resolve the issue.

On May 15, 2013, SSA announced a series of POMS changes designed to ensure that safe-harbor trusts operate for the sole benefit of the trust’s disabled beneficiary without unduly precluding legitimate expenditures to aide the disabled beneficiary that also impart incidental benefits to family or others.  The POMS now provide that when a trust purchases durable goods like a car or house, the trust or beneficiary must receive appropriate equity interest.  It is unclear whether this requirement will be triggered where a trust funds accessibility improvements that don’t increase value.  The POMS also now permit a trust to pay a third person’s travel costs when necessary for the trust’s disabled beneficiary to get medical treatment or to visit the trust beneficiary in a long term care facility, group home or other supported living arrangement in which persons other than family are paid to provide or oversee the living arrangement and the travel is to ensure safety or health.  While the POMS don’t say trust payment of third party travel costs in all other situations will be disqualifying, that is a major risk and generally should be avoided unless facts are extremely favorable.

The new POMS go a long way to protecting rather than hampering disabled trust beneficiaries.  While they still leave questions open, they are a major improvement over the POMS issued in 2011.

Further information on special needs planning, elder law, long term care, wills, trusts, and estates is available throughout SpecialNeedsNJ.com. To subscribe to our frequent blog updates, click on “Subscribe to this Blog” in the Meta box to the left and then click on “subscribe to this feed.”

Signing a Care Facility Contract Without Counsel Costs Wife Big Bucks

While it always is dangerous to sign any contract without first consulting a lawyer, it is especially risky to sign papers provided by a nursing home, assisted living facility, or other care center upon a loved one’s admission.  First, you likely will be under substantial stress and not in a frame of mind to give the contract the deliberate attention needed.  Second, care facility contracts typically contain jargon foreign to lay persons.   I can almost guaranty that you’d be surprised to learn all the obligations you undertake when signing as ”responsible party” for a nursing home or assisted living resident.

What can go wrong if you sign on the dotted line as ”responsible party?”  Plenty!  For instance, do you really want to risk your own house and savings if the facility doesn’t get paid and you haven’t promptly and properly applied for Medicaid [a daunting task on its own]?  I didn’t think so, but, nevertheless, you may incur personal liability if you you don’t obtain legal advice before agreeing to be “responsible party.”

Care facilities may not require you to guaranty a parent’s bill but courts have been known to enforce a so-called “voluntary” guaranty.  When you sign as “responsible party” are you voluntarily guarantying your loved one’s bills?  I would argue not, but wouldn’t you rather avoid the risk entirely by having us negotiate more favoarable contract terms before you sign.

Our Oct. 29, 2012 blog entry illustrates the risks of signing a care facility agreement without counsel.  Cook Willow Health Center v. Andrian (Conn. Super. Ct., No. CV116008672, Sept. 28, 2012).  In signing as “responsible party” the resident’s daughter agreed to arrange payment to the facility from the resident’s assets or Medicaid, but apparently the daughter didn’t follow through.  Since the daughter signed the admission agreement, the daughter is obligated to take the actions to which she agreed as “responsible party” and the nursing home could sue the daughter for the unpaid bills.

Even more recently the New York courts held a wife liable for her husband’s nursing home costs in Sunshine Care Corp. v. Warrick (N.Y. Sup. Ct., App. Div., 2nd Dept., No. 2011-02193, Nov. 28, 2012).  In signing the admission agreement as “designated representative” for her husband in a nursing home, the wife agreed to pay the facility from her husband’s resources and be personally liable if the nursing home wasn’t paid due to the wife’s actions or omissions.  The court held that the contract obligates the wife for her husband’s unpaid bills because she had access to her husband’s funds but didn’t pay the nursing home.

As the cases referenced above show, signing a care facility agreement without counsel can be very costly.  In addition to leading to personal responsibility for a loved one’s bills, signing an unfavorable agreement can force you to spend on your loved one’s care costs amounts you otherwise lawfully could preserve through Medicaid planning.  While many facilities routinely include in a care contract terms that may frustrate Medicaid planning, I typically negotiate out those provisions before my clients sign a contract.

So, what should you do when a loved one needs long term care?  Consult an elder law attorney BEFORE signing anything.  Thousands of dollars [or more] may be at stake.  FriedmanLaw frequently helps clients understand complex care facility contracts and negotiate away unfavorable provisions.

Further information on finances, elder law, funding long term care without going broke and other subjects is available throughout SpecialNeedsNJ.com. To subscribe to our frequent blog updates, click on “Subscribe to this Blog” in the Meta box to the left and then click on “subscribe to this feed.”

Is a Reverse Mortgage Right for You

Reverse mortgages can provide income to cash-strapped older homeowners, but they aren’t a panacea.  They can be a quick source of cash but come with a price.  To determine whether a reverse mortgage can help you meet your goals, consider the plusses and minuses.

How reverse mortgages work

Meant for homeowners age 62 and older, reverse mortgages are a special type of loan because the lender pays the homeowner while the homeowner continues to live in their home. The two main types of reverse mortgages are the Home Equity Conversion Mortgages (HECM) offered by the federal Department of Housing and Urban Development (HUD), and Proprietary Reverse Mortgages offered by some banks, credit unions, and other financial companies for higher value homes. (About 95% of the the reverse mortgages out there are HECM loans.) The HECM program offers two types of reverse mortgages: the traditional HECM Standard loan, and the HECM Saver loan which has lower upfront charges but also lower payouts.

The amount of the loan is determined by factors such as the borrower’s age; the amount of equity in the home; and in the case of HECM loans, a national limit imposed by HUD. Payments may be taken as a lump sum; line of credit; fixed monthly payments – for a specific period, or for as long as the borrower lives in the house; or a combination of payment options.

The loan must be repaid in full when the homeowner no longer lives in the home as the principal residence or fails to meet the obligations of the mortgage.

What reverse mortgages cost

A primary negative to reverse mortgages can be comparatively high costs.  Reverse mortgages have closing costs just like traditional mortgage loans, but they can prove more costly. These expenses can include: an origination fee, an appraisal, a title search and insurance, surveys, inspections, and recording fees. HECM Standard loan borrowers must also pay a mortgage insurance premium up to 2% of the value of the home. Total fees are limited by federal regulations, but they can still add up. The HECM origination fee is capped at $6,000, and the minimum fee is $2500. Most of these costs, however, can be paid as part of the reverse mortgage loan.

 

Benefits of reverse mortgages

A reverse mortgage is a way to tap home equity but remain in the home.  As such it gives up future access to value (and perhaps the children’s inheritance) in exchange for cash now.  The cash from the reverse mortgage can help seniors remain in their homes by paying for extra help with their daily living or medical needs. It can be used to pay off the existing mortgage or other debts, or it can supplement the homeowner’s monthly income for a more comfortable lifestyle or to fund emergencies.  However, since there aren’t limitations on how a borrower uses reverse mortgage proceeds, they also are available for less weighty purchases such as a trip, home modernization, new car, etc.

Reverse mortgages can be part of a sound financial plan for older homeowners, but must be carefully considered. Before using this device, which draws on the built-up equity in the home, homeowners should explore other programs which supplement a limited income. Many public and private benefits exist to help with expenses like property taxes, home energy, meals, and medications. The National Council on Aging (NCOA), a nonprofit advocacy organization for seniors, provides tools, information, and counseling on reverse mortgages and alternative options on their website ncoa.org/HomeEquity.  Additional information about reverse mortgages appears at our Aug. 30, 2012 entry on this blog.

A big thankyou to FriedmanLaw’s paralegal Nancy Hochenberger for contributing to this article.

 

To subscribe to our frequent blog updates, click on “Subscribe to this Blog” in the Meta box to the left and then click on “subscribe to this feed.”

Don’t Become Liable for Your Parent’s Long Term Care Costs

Nursing homes may not require a child to guaranty a parent’s bill although some courts  may enforce a so-called “voluntary” guaranty.  Of course, in the stress filled admission of a parent to a care facility, a child may not realize that he/she is agreeing to a “voluntary” guaranty.  Care facility contracts frequently have other unfavorable provisions that can be difficult to understand or even notice.  Nevertheless, courts often enforce contracts against an individual who later claims he/she didn’t realize that the contract imposes undesirable obligations.

A recent case illustrates what can go wrong when a child signs a care agreement without fully understanding its terms and their ramifications.  Cook Willow Health Center v. Andrian (Conn. Super. Ct., No. CV116008672, Sept. 28, 2012).  The care facility alleged that a resident’s daughter signed an admission contract in which she agreed to take steps to pay the facility with her mother’s assets or qualify the mother for Medicaid.  Apparently the daughter didn’t follow through, as the nursing home sued the daughter for its unpaid bill.  The daughter tried to side step liability citing the prohibition of guaranty requirements, but the court held that there was no guaranty.  Instead, the court said in signing the admission contract as “responsible party”the daughter  had voluntarily committed to certain actions that should get the nursing home paid and the facility had a right to rely on that undertaking and sue the daughter for breach of contract.

How could the daughter have avoided liability?  A child doesn’t normally have an obligation to spend a parent’s money or apply for Medicaid– but see our May 8, 2012 blog post regarding state laws that may make a child liable for a parent’s health care costs.  Therefore, the daughter shouldn’t have agreed to these obligations unless  she was prepared to honor them.  Of course, the facility may have refused to admit the parent without a contract and the obligations weren’t inherently unreasonable.

Thus, it is crucial to consult a lawyer before signing any care facility agreement (or other contract).  A lawyer should explain the ramifications of a proposed contract and possibly recommend changes.  For instance, FriedmanLaw often helps clients understand facility agreements and negotiate more favorable terms.  Since ignorance of contract terms doesn’t excuse their breach, it is risky to sign any contract without first consulting a lawyer.

To subscribe to our frequent blog updates, click on “Subscribe to this Blog” in the Meta box to the left and then click on “subscribe to this feed.”

How Old is Too Old to Drive?

Of course, it’s a “trick question.”  There is no bright age line between those who should and shouldn’t be driving.  As we all know, many factors beyond age influence whether an individual should drive.  As a car or other motor vehicle is a lethal weapon that can harm both the driver and others, nobody whether age 20 or 80 should drive unless he/she has the ability to handle the vehicle safely and is reasonably rested, alert, and attentive.  However, there is no basis to preclude an individual from driving merely because he/she has reached a particular age.   Nevertheless, since reflexes, vision, and acute hearing naturally decline when we age, it’s not surprising that we may need to change our driving habits as we age.  Fortunately, the federal government has studied this question in detail and produced a helpful and informative tool.

A new online resource from the National Institute of Health, (NIH) National Institute on Aging (NIA) at NIH and the U.S. Department of Transportation’s National Highway Traffic Safety Administration (NHTSA) can help older drivers and their families address this often sensitive topic. The Older Drivers webpage addresses ways in which aging affects driving–such as physical and cognitive changes, and changes in driving habits. Also discussed are common driving errors that seniors make, ways to avoid such mistakes, and general information on preventing accidents.  This thorough resource provides tips for safe driving as well as important safety features to look for in vehicles. It reviews the regulations many states have adopted to keep older drivers and those around them safe on the road. Finally, the Older Drivers webpage offers suggestions for how to assess when an older driver’s skills change, information on refresher courses, and alternative ways to get around when driving is no longer an option. Check out this valuable new resource at NIH’s website http://nihseniorhealth.gov/olderdrivers/howagingaffectsdriving/01.html

A big thankyou to FriedmanLaw’s paralegal Nancy Hochenberger for contributing to this article.

To subscribe to our frequent blog updates, click on “Subscribe to this Blog” in the Meta box to the left and then click on “subscribe to this feed.”

Is a Reverse Mortgage Right for Most Seniors?

Reverse mortgages often are marketed as a way for seniors to get extra cash.  While they can be a godsend to some, they also come with negatives.  Reverse mortgages are available only to homeowners age 62 or above with significant home equity.   Thus, a senior isn’t likely to qualify for a reverse mortgage if the home already is subject to substantial mortgage debt.   On the other hand, a valuable home with little or no mortgage debt can be a good candidate for a reverse mortgage.

To take out a reverse mortgage, a senior homeowner applies for a loan and if approved proceeds to a loan closing.  The senior can choose a reverse mortgage that provides a lump sum, income stream, or credit line, which the senior can spend as he chooses, but someday the senior or his/her heirs will have to pay the piper.  No payments are due on a reverse mortgage while it remains the borrower’s home but when the senior dies or moves out, the loan comes due.

Reverse mortgages come with drawbacks.  Set up costs can be substantial.  With the borrower paying origination fees, mortgage insurance, title insurance, appraisal fees, attorney fees and other costs, a reverse mortgage can be an expensive way to obtain cash.  A reverse mortgage incurs typical mortgage costs like interest, but the no payments are due until the homeonwer dies or otherwise vacates the home.  Thus, a reverse mortgage essentially sells some of a senior homeowner’s equity for an upfront cash agent.  If the homeowner lives in the home for life, the homeowner never need pay against the reverse mortgage, but at the homeowner’s death, the home must be sold to repay the reverse mortgage principal plus interest and other costs.

Is a reverse mortgage the panacea that some ads portray?  Obviously, not, but it can be a good option for older homeowners who need cash but don’t want to have to repay debt while still living in the home.  Because a reverse mortgage is a legal arrangement involving most folks’ primary asset, you should consult an elder law attorney before entering into a reverse mortgage.

Further information on finances, elder law, funding long term care without going broke and other subjects is available throughout SpecialNeedsNJ.com. To subscribe to our frequent blog updates, click on “Subscribe to this Blog” in the Meta box to the left and then click on “subscribe to this feed.”

IRS Cracks Down on IRAs

While IRAs can be a great way to build up savings tax deferred, they also are fraught with traps for the unwary.  Penalties apply when an individual contributes to an IRA more than the Internal Revenue Code permits or fails to take the required minimum distribution.  IRS is turning its attention to IRAs that are out of compliance and should be paying penalties.

IRAs vary between traditional, Roth, and those funded with individual contributions vs. IRAs that contain roll overs of tax qualified employee retirement plan distributions.  Each type of IRA is subject to its own rules.

The Internal Revenue Code caps maximum contributions to IRAs.  For instance, this year the maximum contribution (other than roll over contributions) is $6,000.  However, depending on income, age, and marital status, your contribution limit could be less.  In addition, while all  IRA contributions were tax deductible at one time, they are not anymore.  If you or your spouse participates in a tax qualified retirement plan through work, you may not deduct all or some of your IRA contributions unless total income is no more than moderate.  In 2012, at least some IRA contributions are not deductible when income exceeds $58,000 for single taxpayers and $92,000 for married people who file jointly, but only $10,000 for married individuals who file separately.

Where an IRA contribution will not be deductible, savings can be increased by employing a Roth rather than traditional IRA.  Earnings on Roth IRAs aren’t taxable.  However, you can contribute to a Roth IRA only if your income is within statutory limits.  Different rules apply to conversions of traditional IRAs to Roth IRAs and roll overs of qualified plans to traditional and Roth IRAs.

If you contribute to an IRA more than is allowed, you may be subject to a penalty of 6% for each year the excess contribution stays in the IRA.  However, if you fail to take minimum required distributions from an IRA, a 50% penalty can apply to the amount you should have withdrawn.  Determination of required minimum distributions is complex and since the stakes are so high, it can be worth the cost for professional advice.

Increase in Income Can Lead to Loss of Medicaid

A recent ruling by New Jersey’s Superior Court Appellate Division could cause people who realize increases in income to lose Medicaid unexpectedly.  Because the decision in S.J. v. Div. Medical Assistance (45-2-6607) has been approved for publication, it stands as precedent in New Jersey.

In S.J. v. Div. Medical Assistance, adults whose income rose above the limit for the family care Medicaid they had been receiving sought to transition seamlessly to another Medicaid program that didn’t have similar income limits.  Instead,  the Court held that an individual who loses Medicaid must apply anew when seeking benefits under another Medicaid program.

While Medicaid is the common moniker for several different programs that subsidize health care for people in need, Medicaid actually consists of several distinct programs with somewhat different elilgibility requirements and benefits.  For instance, to participate in New Jersey’s Medicaid Only program an individual’s countable income must be within strict limits.  Even one dollar of excess income is disqualifying.  However, New Jersey’s Medically Needy Medicaid program provides many of the same benefits as Medicaid Only but has far less retrictive income limits.  Nevertheless, both because Medicaid Only provides broader benefits and due to program technicalities people with incomes below the Medicaid Only cap normally receive Medicaid Only even though they also satisfy Medically Needy Medicaid eligibility requirements.  As a result, a Medicaid participant who receives Medicaid Only (perhaps in a nursing home) might become ineligible when a pension kicks in.  Under S.J. v. Div. Medical Assistance, the individual would have to apply for Medically Needy Medicaid, which could prove difficult and costly.

In light of  S.J. v. Div. Medical Assistance, it is important to plan ahead when a Medicaid participant’s income, resources, or circumstances may change.  FriedmanLaw often helps families qualify for Medicaid.

Further information on funding long term care without going broke and other subjects is available throughout SpecialNeedsNJ.com. To subscribe to our frequent blog updates, click on “Subscribe to this Blog” in the Meta box to the left and then click on “subscribe to this feed.”

Poorly Designed Medicaid & Estate Plans Can Harm Divorced Children

Recent New Jersey cases illustrate that poorly drawn Medicaid planning and estate planning gifts actuallly can harm divorced children at times.  In New Jersey, New York, and other states, spouses’ rights to receive or pay alimony and child support depend in part on relative income and assets.  Thus, the custodial parent’s child support might fall if his/her income rises while the non-custodial parent may have to pay more if his/her income rises.  By the same token increases in income may lead to correspondng changes in alimony rights and obligations.  Therefore, estate and Medicaid planning should take a child’s divorce or shaky marriage into account.

The New Jersey Appellate Division just ruled that a family court must consider whether the ex-wife’s alimonly and child support should be cut due to her mother’s Medicaid planning gift of the mother’s home.  Maybury v. Maybury (unpublished A4338-10, May 25, 2012).  The former husband argued that an unencumbered home is a valuable asset that should lead to income being imputed to the former wife.  Although the Appellate Division remanded the case for further fact finding, they agreed with the husband’s argument that receipt of a high value gift like an unencumbered home can be taken into account in fixing alimony and child support obligations.  The Appellate Division also directed the family court to consider whether the transfer satisfied Medicaid requirements in evaluating the divorce impact.  Thus, from a divorce perspective, it would have been desirable for the Medicaid planning gifts to leave the former wife off the list of donees.

A New Jersey Supreme Court decision late last year similarly confirms that estate planning gifts can impact a divorced spouse’s  alimony and child support rights and obligations.  Tannen v. Tannen, 208 N.J. 409 (2011).   Here, the husband sought to limit his child support and alimony obligation to take account of income the ex-wife could expect to receive from a trust established by the former wife’s parents.  The Court ultimately held that the trust at issue shouldn’t impact divorce rights and obligations because the trust didn’t give the ex-wife any right to force the trust to distribute.  However, it is equally clear that a trust that does give a spouse distribution rights could be taken into account in fixing alimony and child support.

In a slightly different vein, Medicaid or estate planning gifts also can impact a recipient’s higher education obligations and financial aid.  In short, when developing and drafting Medicaid and estate plans, it is important to keep the overall picture in mind and avoid tunnel vision.

Don’t Fall Victim to a Social Media Scam

As more of us use social media as an investment tool, scammers are coming up with innovative ways to separate us from our money, and some of these scams target seniors directly.  How can you avoid becoming a victim of fraud?  The first step is to exercise the same kind of caution you would if a stranger asked you for money.

Deals that sound too good to be true usually are.  Legitimate investment offers rarely require an immediate decision.  Just as you likely would be skeptical of door to door sales, unsolicited offers over the internet should prompt caution.  Some scams target affinity groups while other hucksters may play fast and loose with the truth when claiming an arrangement is endorsed by or benefits a well known affinity group or charity.

To keep from sharing personal information that might prove useful to perpetrate identity theft, it’s important to manage your profile and privacy settings wisely on sites like Facebook.  Exhibiting healthy skepticism toward unfamiliar credentials can help safeguard your money.  For instance, to become Certified as an Elder Law Attorney by the National Elder Law Foundation, I had to pass a full day exam and meet stringent requirements regarding ethics, malpractice, continuing legal education, and experience with elder and special needs law, but some fancy sounding titles can be obtained over the internet just by paying a fee.

Your strongest defense against becoming a victim of fraud is your own common sense. Ask questions until you are sure you understand an offer, and it’s worth repeating… if it sounds too good to be true, it probably is.

To bolster your defenses further, see the Securities and Exchange Commission’s bulletin Social Media and Investing Tips for Seniors at http://www.sec.gov/investor/alerts/social_media_seniors.pdf

The internet can be a wonderful tool, but like most other facets of life, it’s important to exercise common sense.

logo
As this website provides general information and isn’t tailored to your particular situation, it doesn’t constitute legal advice and may not take into account rules and exceptions that affect you. Although updated from time to time, this website may not take account of recent legal developments or differences in laws from state to state. For safety sake, obtain individual legal advice before you act! You assume all risk of acting on information contained in this website. This website doesn’t constitute legal advice, and no attorney-client relationship exists unless FriedmanLaw and you execute a written engagement agreement. Please contact us at 908-704-1900 to discuss engaging FriedmanLaw to help resolve your legal concerns.
Homepage photo: Cows grazing at Meadowbrook Farm, Bernardsville, NJ by Siddharth Mallya. October 23, 2012. http://en.wikipedia.org/wiki/File:Autumn_Leaves_13.jpg.
Interior photo: Somerset hills pastoral scene by Lawrence Friedman.