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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.

New Jersey Guardianships for Children with Developmental Disabilities

If you have a child with developmental disabilities, you should consider applying to be his guardian when he reaches age 18. At age 18, a child becomes a legal adult and a parent can no longer make decisions for him, regardless of the child’s disabilities or whether he lives with parents. Without a guardianship, banks, hospitals, schools, government agencies and other institutions will have to follow your adult child’s instructions and not yours.

A guardianship is a protective arrangement ordered by a court, in which a guardian is appointed to make decisions for a ward. The guardian’s judgment is substituted for the ward’s, similar to a parent’s power over a child.

To appoint a guardian, the court must find that the ward lacks capacity. “Capacity” means having the mental ability to make serious decisions and understand their consequences. If a person lacks capacity due to a disability or illness, then the person is “incapacitated.”

Since guardianship involves taking away a person’s fundamental autonomy to make decisions for himself, courts are reluctant to appoint a guardian, and there are safeguards in place. The person who wants to be guardian has to prove that the ward is actually incapacitated. You will have to submit affidavits from two doctors who have recently examined your child. Your child will also be assigned a lawyer, who will interview your child and advocate for what he wants.

If your child is able to make some decisions but not others, the court can create a limited guardianship. For example, the guardian might make serious decisions such as on medical and financial issues, but the ward retains autonomy over everyday decisions. Some guardianships also leave specific powers to the ward, such as the right to vote, marry or make a will. In an emergency situation, the court can appoint an immediate temporary guardian or order a specific transaction or other protective arrangement.

If you are interested in applying for guardianship over your child with developmental disabilities, we are here to help. Call us today at (908) 704-1900 for an appointment.

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.

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.”

Lawrence A. Friedman’s Special Needs Article is Featured in Law School Textbook

“Special Needs Estate Planning” has been included in the new law school textbook Teaching Materials on Estate Planning by Gerry Beyer, Professor of Law at Texas Tech University School of Law. Originally written by attorney Lawrence A. Friedman for N.J. Lawyer magazine, the article explains how to plan your estate to protect your child or other loved one with disabilities. The article isn’t just for legal professionals and can help anyone concerned about a person with disabilities as the article discusses how government benefit programs, special needs trusts, and other estate planning techniques can further the welfare of a loved one with disabilities. To read this and many other articles on the topics of special needs, elder law, wills, trusts, estates, and tax click the Articles tab onthis website.

New Rules Condition Division of Developmental Disabilities Housing Aid on Qualifying for CCW Medicaid

People with severe, chronic disabilities that are manifest by age 22 and substantially limit at least three kinds of major life activities are developmentally disabled and potentially eligible for services from the New Jersey Department of Human Services Division of Developmental Disabilities (“DDD”). For many families, the most important DDD benefit is residential housing aid (“Residential Services”). Without DDD assistance, few people with developmental disabilities could afford a group home or even a semi-independent household.

Newly issued DDD regulations now require people with developmental disabilities to qualify for Medicaid or forfeit Residential Services. To obtain Medicaid, an individual must be aged, blind, or disabled and meet financial requirements. Because resource and income caps are quite low for most Medicaid programs, wages or Social Security Disability benefits often push people with developmental disabilities over regular Medicaid financial limits.

Medicaid financial rules are too complex to address in detail in a short article. However, most income and resources are Medicaid countable if they can be used to satisfy an applicant’s needs for food and shelter. Thus, cash, food or shelter provided in-kind, and valuables that can be liquidated to cash quickly are Medicaid countable unless eligible for very limited statutory exemptions.

There is some question whether DDD may deny Residential Services simply because an applicant can’t qualify for Medicaid. However, that rarely should be an issue because DDD Residential Services clients usually can get Medicaid through DDD’s Community Care Waiver (“CCW”) even if finances exceed regular Medicaid limits.

While CCW uses enhanced income and asset limits, they still are rather modest. Therefore, many people with developmental disabilities will need Medicaid planning to maintain eligibility. Planning may involve a Medicaid payback special needs trust (“SNT”) that complies with complex federal and state rules as well as other Medicaid “spend down” techniques. Some situations call for a new SNT while others cry out to convert a non-qualifying trust to an SNT. With so much at stake though, experienced special needs counsel should assist with SNT formation to avoid the minefield of traps for the unwary. In some cases, a court application may be essential for Medicaid planning and/or to establish a qualifying Medicaid payback trust.

Families may benefit over time if an infusion of federal Medicaid money leads New Jersey to augment current services for people with developmental disabilities. Nevertheless, in the near term, people with developmental disabilities must scramble to comply with the new DDD Medicaid requirement. Fortunately, CCW should allow must people with developmental disabilities to obtain Medicaid, but they may require Medicaid planning to qualify. Expert advice on CCW, Medicaid, and special needs planning is available from FriedmanLaw.

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.”

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.

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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.

Should You Become Guardian for Your Special Needs Child?

[While this article focuses on guardianship for special needs children, similar considerations arise when a spouse, parent, or other loved one’s ability to make important decisions is impaired by dementia, traumatic brain injury, or other condition. We address such guardianships throughout SpecialNeedsNJ.com, particularly in the elder law articles and practice area pages. We also plan a future blog post on that topic.]

Why should you consider putting time and money into applying for guardianship over your son or daughter with disabilities? After all, you are the parent; isn’t that enough? In a word, no.

Parents have the right to make major decisions for the child and obtain confidential information regarding a child’s health, finances, education, etc. while the child is a minor (typically under age 18). However, once your son or daughter becomes an adult (18 and over in most states), you no longer are entitled to most information subject to privacy laws, and health care providers may require your child’s consent to provide non-emergency medical treatments. While this dichotomy is understandable as children without disabilities become adults, how can you protect your child if he/she can’t make significant decisions or give informed consent to medical care or release of records? That’s where guardianship comes in.

A guardian controls health care, residence, and other major concerns of a person for whom he is guardian (“ward”) in similar manner to a parent’s authority over a minor child. However, to become guardian, a parent must prove the child can’t make important decisions. In New Jersey and New York (as well as most other states) a parent who seeks guardianship must apply to the courts and support his/her guardianship claim with doctor/psychologist evaluations. While the child has an opportunity to contest the application, opposition is uncommon and the court typically appoints the applicant as guardian. As court appointed guardian, you can make important decisions to further the safety and welfare of your child with serious disabilities.

Nevertheless, guardianship isn’t for everyone. If your child has only physical disabilities or otherwise can make major decisions guardianship would not be appropriate. If you are unsure whether your child with disabilities needs a guardian, we can guide you through this crucial concern. FriedmanLaw has helped countless families obtain guardianship over a loved one with diminished capacities.

Lawrence Friedman to Moderate New Jersey State Bar Foundation’s Senior Citizens Law Day Conference

For the sixteenth consecutive year, attorney Lawrence Friedman will moderate the New Jersey State Bar Foundation’s Senior Citizens Law Day conference. He also will speak on will, trust, and long term care planning. With nursing homes charging around $10,000 per month for a decidedly institutional setting, care may suffer and families face impoverishment unless they explore all options when long term care is needed, particularly in light of recent changes to Medicaid. The conference will be held 10:00 a.m. on May 10, 2012 at the New Jersey Law Center in New Brunswick. Register for free at www.njsbf.org or call 1-800-FREE-LAW

Should You Buy Long Term Care Insurance?

There is no easy answer to this deceptively simple question. Like other insurance, long term care insurance (“LTCI”) comes with many options and can prove surprisingly complex. For instance, many consumers are uncertain what their LTCI does and doesn’t cover.

First, it’s important to understand that medical insurance rarely covers long term care, and LTCI doesn’t cover routine medical costs. Thus, while Medicare may pay for preventive care and to treat illnesses, it won’t cover long term care in a nursing home or other setting. Neither will most employee and other health insurance. Therefore, if you need long term care, you must look to private resources, Medicaid, or LTCI.

Medicaid’s coverage and availability of facilities varies widely from state to state. In addition, choices of care settings and amenities can be more limited for Medicaid patients than for individuals with quality LTCI. Articles https://specialneedsnj.com/articles.php and Q&As https://specialneedsnj.com/elder_law.php throughout SpecialNeedsNJ.com, further explain Medicaid eligibility requirements and planning options. FriedmanLaw frequently helps families qualify for Medicaid without exhausting life savings.

Second, you should recognize that LTCI only covers care within the policy terms. LTCI usually pays a fixed daily benefit for a limited period of time after the insured has been unable to care for him/herself for a set period of time. Once the insured satisfies the elimination period, LTCI pays the daily rate toward long term care costs. For instance, LTCI with a $100 daily benefit and 90 day elimination period would pay up to $100 per day for long term care once the insured has met the policy’s benefit criteria (typically needing assistance with enumerated activities of daily living) for 90 days. The greater the daily benefit and maximum benefit term and the shorter the elimination period, the greater the LTCI premium. However with New Jersey nursing homes often charging over $10,000 per month, LTCI will be of little use unless it is sufficient to cover monthly LTCI costs less Social Security and other available private funds.

LTCI boosters tout the peace of mind that can come with knowing your care costs should be covered. But, the operative word is “should” because depending on the policy, LTCI can be very broad or fraught with limitations. Generally, when purchasing LTCI from a quality insurer, you get what you pay for. In other words broader coverage typically leads to higher prices and policies with low ball premiums probably won’t meet your needs. LTCI premiums vary with age, sex, health, and policy options.

LTCI usually can’t be purchased once an individual needs long term care and LTCI premiums are more manageable if you buy your insurance while younger. Therefore, you may want to consider buying LTCI while in your fifties or sixties instead of waiting until your seventies.

LTCI comes in many flavors, all of which impact benefits and costs. For instance, LTCI may be available with compound inflation protection, simple inflation protection, or no inflation protection. Compound protection is worth more and costs more than simple cost of living increases, but the benefit may be very valuable for younger purchasers. Thus, some consumers may do well to trade a longer elimination period for greater inflation protection. Other options may combine life insurance with LTCI, provide refundable premiums, or integrate husband and wife coverage.

When comparing LTCI options, your top concerns should be to understand the coverages and limitations offered by each policy; whether, when, and why premium can rise; whether the insurer is sound; and the insurer’s reputation for paying or denying reasonable claims. Finally, you also may want to consider a public/private partnership LTCI policy. [See “Public-Private Long Term Care Insurance Medicaid Program Protects Savings & Funds Long Term Care” at https://specialneedsnj.com/article.php?id=26]

Because LTCI can be so complex, professional advice can be crucial. FriedmanLaw has helped many families unravel the complexities of LTCI.

Further information on this 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.”

Protecting Medicare Eligibility When Settling Personal Injury or Worker Comp Claim

Will settling your personal injury or worker compensation claim cost you your Medicare? It shouldn’t, but it easily could if you and your personal injury lawyer don’t protect Medicare’s rights.

Generally, Medicare coverage is secondary to others who may have responsibility for your health care costs. Therefore, when settling nearly all personal injury and worker compensation claims, Medicare expects Medicare participants to repay Medicare’s pre-settlement expenditures for accident related care and spend damages that compensate for post-accident care costs incurred after settlement (“Future Medicals) on Future Medicals rather than submit claims for Future Medicals to Medicare. You must protect Medicare’s secondary payer interests if you are on Medicare when your claim settles or reasonably should expect to get Medicare within the 30 months following settlement for reasons such as having reached age 62.5, applied for Social Security Disability benefits (even if denied by an appeal is anticipated), or contracted end stage renal disease

Why should you care? Failing to protect Medicare’s rights can forfeit your own Medicare! What if you need costly surgery due to your accident, Medicare says you must pay for Future Medicals, but you’ve already spent your entire settlement? To make matters worse, Medicare may require you to spend more on Future Medicals going forward than they would if you’d made a good faith effort to protect Medicare’s secondary payer rights when settling your case.

What should you do? Medicare prefers you set aside Future Medicals damages in a Medicare Set-aside Arrangement (“MSA”). An MSA is a share of your damages that is calculated to cover Future Medicals for the rest of your life expectancy and is set aside solely to pay for Future Medicals. The appropriate amount to place in an MSA is based on Medicare guidelines and your post-accident medical records. However, an MSA satisfies your obligations to Medicare only if limited to paying for Future Medicals at rates acceptable to Medicare. Professional administrators can help meet these requirements. If the MSA is funded and administered in accordance with Medicare requirements, Medicare will pay for any Future Medicals that arise after the MSA is exhausted. If your actual Future Medicals turn out to be less than anticipated, the excess can pass to your beneficiaries.

FriedmanLaw can work with you and your personal injury or worker compensation lawyers to design a cost effective MSA that avoids interruption of your Medicare coverage. Contact us today at 908-704-1900.

Further information on this 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.”

Eighth Circuit Shoots Down Medicaid Appeals To Federal Court

In our June 21, 2011 SpecialNeedsNJ.com/blog entry, we noted that 1971′s, Younger v. Harris, 401 U.S. 37 (1971) United States Supreme Court decision generally requires federal courts to abstain from certain cases that implicate important state concerns, but a case then pending in the United States Court of Appeals for the Eighth Circuit would test whether the Younger doctrine precludes federal courts from considering Medicaid appeals.

Last month, the Eighth Circuit ruled in Hudson v. Campbell (8th Cir., No. 10–3025, Dec. 15, 2011) that United States District Court should not consider a Medicaid applicant’s appeal from Medicaid denial where the applicant goes directly to federal court without going through Medicaid’s fair hearing process. Applying the Younger doctrine, the Eighth Circuit held that abstention is appropriate where the Medicaid applicant hasn’t exhausted her administrative remedies because the state has an important interest in administering Medicaid. The Medicaid applicant’s attorney, Nathan Forck maintains that the Eighth Circuit ruling conflicts with a ruling in a United States Court of Appeals for the Tenth Circuit case involving similar circumstances. Thus, the issue eventually may end up at the Supreme Court. The Medicaid applicant’s initial brief can be accessed at http://tinyurl.com/Hudson-Brief while the applicant’s reply to the Medicaid agency’s brief is available at http://tinyurl.com/Hudson-Reply-Brief

Further information on this and other subjects is available throughout SpecialNeedsNJ.com. To subscribe to our frequent blog updatres, click on “entries RSS” in the Meta box to the left and then click on “subscribe to this feed.”

Medicare Announces Set Asides Unnecessary in Some Personal Injury Settlements

An individual who currently receives Medicare or reasonably expects to become eligible for Medicare in the next 30 months must protect Medicare’s interests when resolving a worker compensation (WC) or personal injury (PI)claim. In other words WC and PI recoveries rather than Medicare must fund care necessitated by a work accident or other injury.

Medicare recipients must repay Medicare payments occasioned by a work accident or personal injury when the WC or PI award is paid. Otherwise, Medicare can recover from the Medicare recipient personally and/or from others involved in the case such as Medicare recipient’s attorney. A few years ago, Congress clarified the Medicare Secondary Payer Act to make this repayment obligation crystal clear.

In addition to reimbursing Medicare for prior expenditures, an individual who recovers at least $25,000 (current Medicare participant) or $250,000 (reasonably expected to be eligible for Medicare in next 30 months) must pay for future care occasioned by the work or other injury to the extent of damages for medicals. Unless the individual includes reasonable arrangements to protect Medicare’s future interests in resolution of his/her claim, Medicare may treat an entire redovery as damages for medicals. Therefore, it is foolish to ignore Medicare’s future interests when settling WC and PI claims.

Because it can be tricky to anticipate whether an arrangement reasonably protects Medicare’s future interests, Medicare has developed a complex rubric to determine an appropriate amount to set aside from WC recoveries for future care. While there is no similar procedure for PI recoveries, the WC guidance can serve as a starting point in both kinds of cases. In addition, on Sept. 30, 2011, Medicare issued a memorandum stating that Medicare will not require any set aside or other arrangement where the Medicare participant’s treating physician certifies in writing that treatment for the injury giving rise to the PI recovery has been completed as of the recovery date and no future care will be required. Medicare’s memorandum is available at http://www.cms.gov/COBGeneralInformation/Downloads/FutureMedicals.pdf. To subscribe to this blog, click on one of the RSS buttons to the left and then click on the subscribe button.

Federal Court Supports Special Needs Trusts

Federal law provides that trusts containing assets of a disabled beneficiary generally disqualify the beneficiary for Medicaid, Supplemental Security Income, and various other disability benefits. However, amounts in certain pooled special needs trusts and individual special needs trusts are not subject to this general rule.

Pennsylvania enacted various restrictions on pooled special needs trusts limiting beneficiaries to people under age 65, requiring beneficiaries to demonstrate a need for the trust, limiting permissible expenditures, and limiting the amount pooled trust sponsors may retain to benefit other disabled people when a beneficiary dies. In the recent case of Lewis v. Alexander, 2011 U.S. Dist. LEXIS 95109, U.S. District Court Eastern District of PA, Case 2:06-cv-03963-JD Document 73 Filed 08/23/11, a federal court invalidated all these restrictions as violating federal law. While the case is in Pennsylvania, it may prove relevant in New Jersey because Pennsylvania and New Jersey are in the same federal circuit and if the State should appeal and lose, the decision may be considered authoritative by other courts.

New Class Action Gives People with Autism Their Day in Court

Federal court in Potter v. Blue Cross Blue Shield of Michigan has authorized a class action against Blue Cross and Blue Shield of Michigan. Plaintiffs claim that Blue Cross and Blue Shield of Michigan improperly denied health benefit claims for applied behavior analysis therapy on grounds that it is investigative or experimental. The decision is procedural in that it simply allows plaintiffs to assert their claims on behalf of themselves and others who are similarly situated. However, full court proceedings are required to determine whether the claim has merit. Thus, barring an unusually quick settlement, the case is unlikely to be resolved for some time. While the case only affects Blue Cross and Blue Shield of Michigan claimants directly, it could help others bring similar claims. For further information on issues affecting people with autism and other serious disabilities see SpecialNeedsNJ.com special needs articles tab https://specialneedsnj.com/special_needs_trusts_articles.php and special needs FAQs https://specialneedsnj.com/special_needs_trusts.php

New Class Action Gives People with Autism Their Day in Court

Federal court in Potter v. Blue Cross Blue Shield of Michigan has authorized a class action against Blue Cross and Blue Shield of Michigan. Plaintiffs claim that Blue Cross and Blue Shield of Michigan improperly denied health benefit claims for applied behavior analysis therapy on grounds that it is investigative or experimental. The decision is procedural in that it simply allows plaintiffs to assert their claims on behalf of themselves and others who are similarly situated. However, full court proceedings are required to determine whether the claim has merit. Thus, barring an unusually quick settlement, the case is unlikely to be resolved for some time. While the case only affects Blue Cross and Blue Shield of Michigan claimants directly, it could help others bring similar claims. For further information on issues affecting people with autism and other serious disabilities see SpecialNeedsNJ.com special needs articles tab https://specialneedsnj.com/special_needs_trusts_articles.php and special needs FAQs https://specialneedsnj.com/special_needs_trusts.php

Medicaid Appeals at Risk

In 1971′s, Younger v. Harris, 401 U.S. 37 (1971) decision, the United States Supreme Court held that federal courts should abstain from certain cases that implicate important state concerns.  A case currently in the United States Court of Appeals for the Eighth Circuit, Hudson v. Campbell, tests whether the Younger doctrine should apply to certain Medicaid appeals.  The Medicaid applicant’s attorney, Nathan Forck says, “If the Eighth Circuit rules against us, it would essentially foreclose Medicaid applicants’/beneficiaries’ right to appeal procedural due process violations that occur within the context of a state fair hearing to a federal district court.”  Such a ruling could create a conflict between circuits that ultimately may land at the United States Supreme Court.  The Medicaid applicant’s initial brief can be accessed at http://tinyurl.com/Hudson-Brief while the applicant’s reply to the Medicaid agency’s brief is available at  http://tinyurl.com/Hudson-Reply-Brief

Poorly Drafted Special Needs Trusts May Not Prove “Special”

Calling a trust special needs trust or supplemental needs trust doesn’t prevent it from disqualifying the trust beneficiary from government aid like SSI, Medicaid, and free group home placement.  So-called SNTs will prove disqualifying unless drafted and administered properly.  At a minimum, an SNT must not have any obligation to fund the beneficiary’s support or distribute at fixed times, and the trust beneficiary must not have the right to terminate the trust and capture the amounts in it.  Although not stated explicitly, such disqualifying obligations and rights can be implied from poorly drafted trust terms as sometimes arise when the person drafting a so-called SNT lacks expertise in this arcane area of the law.  In addition, a trust containing amounts attributable to the trust beneficiary (such as a personal injury recovery, outright inheritance, or divorce share) must contain numerous provisions mandated by complex Medicaid regulations.  Finally, even a well drafted trust can disqualify the beneficiary for government aid if it isn’t administered properly.

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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.
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