The Department of Human Resources just released an update changing the document requirements for a Medical Assistance application. The changes for what is required in the initial application is a profound change in terms of the financial statement documentation that is initially needed. Instead of a full five years worth of documentation, what would be needed initially is a snap shot of statements covereing the eligiblity month and then the previous years statements but only for the anniversary month (i.e. if you are seeking eligiblity for July 2011, then you would need financial statements for July 2010, July 2009, July 2008, July 2007, and July 2006). However, an additional item that will be needed are tax returns for the previous five years. These new provisions take effect for all applications beginning May 1, 2011.
A Power of Attorney Holder’s Breach of Fiduciary Duty
There is no question that a financial power of attorney holds what is called a “fiduciary duty” to act in the best interests of the grantor. But what if that power of attorney holder breaches that duty and takes “mom’s” funds for herself? What if her taking of mom’s funds caused mom to be disqualified from Medical Assistance (i.e. Medicaid)? Can she be found liable?
An interested case in Indiana answered that quesion in the affirmative.
An Indiana appeals court rules that a woman breached her fiduciary duty to her mother when, among other things, she refused to cash out a life insurance policy in order to qualify her mother for Medicaid and later profited from the policy. Shaw v. Covenant Care Waldron Home (Ind. Ct. App., No. 73A04-1005-SC-317, March 2, 2011) (unpublished).
Joni Shaw admitted her mother to a nursing home. Ms. Shaw signed the admission agreement on behalf of her mother as her attorney-in-fact. Ms. Shaw applied for Medicaid on her mother’s behalf, but the application was denied due to a life insurance policy. Ms. Shaw refused to cash out the policy, and the Medicaid application was never approved. In addition, Ms. Shaw withdrew funds from her mother’s account and deposited them into her sole account. After her mother died, her brother, who was the beneficiary of the life insurance policy, gave her $8,000 from the proceeds of the policy.
The nursing home had an outstanding balance of $5,709.40, which Ms. Shaw refused to pay. The nursing home sued, alleging breach of contract and breach of fiduciary duty. It argued that an attorney-in-fact who breaches a duty to the principal is liable to third parties as though he or she were the principal. The small claims court found in favor of the nursing home, and Ms. Shaw appealed.
The Indiana Court of Appeals affirms, holding that Ms. Shaw breached her fiduciary duty to her mother. According to the court, because Ms. Shaw profited from refusing to cash in the life insurance policy and she transferred funds from her mother’s account to her own account, it was clear that Ms. Shaw was acting in her own self-interest to the detriment of her mother.
The interesting question from a Maryland point of view is what right does the nursing home have to sue the attorney-in-fact. Can other interested family member’s sue on behalf of mom? The answer to that question is “yes.” However, court action will need to be started to give that family member standing to recover the stolen assets.
Congress passed and President Obama has signed into law the deal extending the Bush tax cuts that he struck with Congressional Republicans. The legislation restores the estate tax for two years at a 35 percent tax rate, with estates up to $5 million exempt from paying any tax ($10 million for couples). If Congress does not change the law in the interim, in 2013 the estate tax will revert to what it was scheduled to be in 2011 — a 55 percent rate and a $1 million exemption.
The new $5 million estate tax exemption and 35 percent rate are retroactive to January 1, 2010. The heirs of those dying in 2010 will have a choice between applying the new rules or electing to be covered under the rules that have applied in 2010 — no estate tax but only a limited step-up in the cost basis of inherited assets. This will benefit the heirs of tens of thousands who died in 2010 with relatively modest estates and who would have been subject to capital gains tax on inherited assets above a certain threshold.
The law makes the estate tax exemption “portable” between spouses. This means that if the first spouse to die does not use all of his or her $5 million exemption, the estate of the surviving spouse could use it.
The law unifies the estate, gift and generation-skipping transfer tax exemptions at $5 million. (For 2010 there is no generation-skipping tax, while the gift tax exemption has been $1 million for a number of years.) A 35 percent tax rate will apply to gifts or transfers over the $5 million threshold. (There is no change in the $13,000 annual exclusion amount for gifts.)
Normally, for every $6,800 transferred out of a Medical Assistant’s name or their spouse, it will result in a penalty of one month of ineligibility. However, a frequent question is what happens if my parent transferred funds when they were healthy but during the five year look back period?
Maryland case law on this is silent. However, a New Jersey case highlights, at least in New Jersey, how the court ruled in favor of the applicant with a $100,000 transfer.
“A New Jersey administrative law judge finds that a Medicaid applicant who was healthy at the time he transferred funds to his daughter transferred the funds for a reason other than to qualify for Medicaid. R.C. v. Division of Medical Assistance and Health Services and Hudson County Board of Social Services (N.J. Office of Administrative Law, Hudson County, OAL DKT. NO. HMA 08047-10, Oct. 22, 2010).
While R.C. was healthy he transferred $100,000 to his daughter to help with her financial problems. A year later, R.C. suffered a stroke and his health began to deteriorate. He was eventually admitted to a nursing home.
R.C. applied for Medicaid benefits. The state denied benefits, finding that R.C. had made an uncompensated transfer of assets to his daughter. R.C. requested a hearing.
The administrative law judge (ALJ) reverses, finding that the transfer was made exclusively for a purpose other than establishing Medicaid eligibility. The ALJ concludes that because R.C. was employed and in good health when the transfer occurred and the stroke was unexpected, R.C. provided convincing evidence that he did not transfer the money in order to qualify for Medicaid.” From Elderlawanswer.com.
Federal law and the Maryland Medical Assistance Manual allow this exception. However, in practical terms, there is a huge gray area concerning which facts fit within this exception. If this exception were to be utilized in a Maryland Medical Assistance application, expect the application to be denied and the issue to be decided on appeal.
Metlife recently released their study confirming that nursing and assisted living rates increased nationwide between 2009 and 2010. For Maryland, in the Baltimore region nursing home costs for semi-private rooms ranged from $6,200/month to $8,742/month. Nursing home costs for private rooms ranged from $6,510/month to $11,005/month. Statewide, assisted living costs in 2010 ranged from $2,800/month to $$8,250/month with the average assisted living cost at $4,122/month.
Use of Medicaid Recipient’s Income to Pay Existing Nursing Home Expenses
The Department of Health and Mental Hygiene released a critical Medical Assistance eligibility update (MR 154). The changes in this update are profound. It now allows a nursing home Medical Assistance recipient to use her income to pay for nursing home related expenses (up to 3 months retroactive) to the extent Medical Assistance does not cover said expenses (i.e. she has resources in excess of $2,500). This is a profound change by the Department and took many years of litigation by another respected elder law attorney to finally achieve this result. Bottom line, however, is that this can be a benefit for many families that are faced with outstanding nursing home expenses with no normal Medical Assistance coverage for said expenses.
The issue is this, your mother has outstanding nursing home bills and when the application was made for Medical Assistance, she did not have enough assets to pay these invoices. Given the size of nursing home costs, the outstanding expenses could well be thousands, even tens of thousands of dollars. The nursing home is going to look for payment of these invoices and may well start the involuntary discharge process unless they are paid. This new Medical Assistance provision allows for mom’s income to be used to offset these expenses for the three months prior to eligibility. Since this is a brand new provision, it is unclear at present at how efficiently such a request will be implemented by the Department of Social Services. If you find yourself in this position, it is best to contact an elder law attorney to guide you through this process.
Update: The Department of Health and Mental Hygiene will likley apply the allowance for three months prior to the application date which will overlap the current retroactive Medical Assistance eligibility period. However, there will be some instances where retroactive Medical Assistance eligilbity may not be available and where this new provision may be of profound help to many individuals.
Once a resident is settled in a nursing home, being told to leave can be very traumatic. Nursing homes are required to follow certain procedures before discharging a resident, but a facility may occasionally attempt to “dump” an undesirable resident by transferring the resident to a hospital and then refusing to let the him or her back in. However, residents can fight back and challenge such discharges.
According to federal law, a nursing home can discharge a resident only for the following reasons:
- The resident’s health has improved
- The resident’s needs cannot be met by the facility
- The health and safety of other residents is endangered
- The resident has not paid after receiving notice
- The facility stops operating
Unfortunately, sometimes nursing homes want to get rid of a resident for another reason–perhaps the resident is difficult, the resident’s family is difficult, or the resident is a Medicaid recipient. In such cases, the nursing home may not follow the proper procedure or it may attempt to “dump” the resident.
If the nursing home transfers a resident to a hospital, Maryland law requires that the nursing home hold the resident’s bed for a certain number of days. Before transferring a resident, the facility must inform the resident about its bed-hold policy. If the resident pays privately, he or she may have to pay to hold the bed, but if the resident receives Medicaid, Medicaid will pay for the bed hold. In addition, if the resident is a Medicaid recipient the nursing home has to readmit the resident to the first available bed if the bed-hold period has passed.
In addition, a nursing home cannot discharge a resident without proper notice and planning. In general, the nursing home must provide written notice 30 days before discharge, though shorter notice is allowed in emergency situations. Even if a patient is sent to a hospital, the nursing home may still have to do proper discharge planning if it plans on not readmitting the resident. A discharge plan must ensure the resident has a safe place to go, preferably near family, and outline the care the resident will receive after discharge.
Transferred to Pooled Trust Can Be Used to Save Assets
For the past number of years there have been questions as to whether Medicaid transfer-of-assets penalties would apply to transfers to pooled trusts by individuals age 65 and older. A Centers for Medicare and Medicaid Services (CMS) memo dated April 14, 2008, from Gale Arden (Baltimore) to Jay Gavens (Atlanta Region IV) stated that “only trusts established for a disabled individual age 64 or younger are exempt from application of the transfer of assets penalty provisions ( see section 1917(c)(2)(B)(iv) of the Act.)” This was followed in May 2008 by a Boston Regional Office bulletin stating that transfers to pooled trusts are subject to transfer penalties.
Not all states are imposing a penalty; some allow transfers to pooled trusts by people of all ages. The latest such state is Maryland. CMS stated that after researching this “complicated and nuanced” area of law, it had concluded that “[a]s a matter of policy, there is no age limitation imposed by existing federal or state law on who may transfer assets into a sub-account of a pooled trust. Accordingly, a disabled beneficiary 65 years of age and older may transfer assets into an approved pooled trust sub-account without penalty”.
According to a recent discussion on the National Academy of Elder Law Attorneys’ listserv initiated by a Georgia ElderLawAnswers member, Maryland joins at least 10 other states that permit transfers by those over 65 to a pooled trust. These states are, in addition to Maryland: Alabama, California, Colorado, Florida, Iowa, Massachusetts, Michigan, Ohio, Utah and Wisconsin. (from www.elderlawanswers.com)
However, the use of pooled trusts is not a panacea for asset protection from nursing home costs. There are restrictions on fund usage, maintenance expenses, and other profound issues. However, for some people, this may be an attractive way to set aside funds to pay for items Medical Assistance will not cover. This policy clarification by CMS is an important, and positive, development for Maryland seniors.
Online Legal Forms Company Sued
LegalZoom, one of the most prominent sellers of do-it-yourself wills and other estate planning documents, is the target of a class action lawsuit in California charging that the company engages in deceptive business practices and is practicing law without a license.
The lawsuit was filed in Los Angeles Superior Court, by Katherine Webster, who is the niece of the late Anthony J. Ferrantino and the executor of Mr. Ferrantino’s estate.
Knowing that he had only a few months to live, Mr. Ferrantino asked Ms. Webster to help him use LegalZoom to execute a will and living trust. Based on LegalZoom’s advertising, Ms. Webster says she believed that the documents they created would be legally binding and that if they encountered any problems, the company’s customer service department would resolve them.
But after the living trust documents were created and signed, Ms. Webster could not transfer any of her uncle’s assets into the trust because the financial institutions that held his money refused to accept the LegalZoom documents as valid. Ms. Webster tried to get help from LegalZoom, with no success. The trust was still not funded when Mr. Ferrantino died.
Ms. Webster was forced to hire an estate planning attorney, who petitioned the court to allow the post-death funding of the trust. The attorney then had to convince the banks to transfer the funds — a more difficult task following Mr. Ferrantino’s death. The attorney also discovered that the will LegalZoom created for Mr. Ferrantino had not been properly witnessed. All this cost Mr. Ferrantino’s estate thousands of dollars.
The lawsuit claims that Ms. Webster and others like her relied on misleading statements by LegalZoom, including that LegalZoom carefully reviews customer documents, that it guarantees its customers 100 percent satisfaction with its services, that its documents are the same quality as those prepared by an attorney, and that the documents are effective and dependable.
“Nowhere in the [company’s] manual do defendants explain that using LegalZoom is not the same as using an attorney and that its documents are only ‘customized’ to the extent that the LegalZoom computer program inputs your name and identifying information, but not tailored to your specific circumstances,” the lawsuit states, adding that “the customer service representatives are not lawyers and cannot by law provide legal advice.”
Ms. Webster is suing not only on her behalf but on behalf of anyone in California who paid LegalZoom for a living trust, will, living will, advance health care directive or power of attorney. The lawsuit estimates this class embraces more than 3,000 individuals.
“LegalZoom’s business is based on nurturing the false sense of security that people do not need to hire a traditional attorney,” says San Francisco attorney Robert Arns, one of the attorneys who filed the lawsuit. “The complaint points out that LegalZoom advertises that you don’t need a real attorney because its work is legally binding and reliable. That’s misleading. Improperly prepared estate planning documents are a ticking time bomb that can result in improper tax consequences and other items that could cost the estate and heirs huge sums.”
“LegalZoom preys on people when they’re at their most vulnerable, when they are of advanced age or poor health and need a will or a living trust,” adds San Francisco elder abuse attorney Kathryn Stebner, Ms. Webster’s lead counsel.
One of the defendants named in the suit is LegalZoom co-founder Robert Shapiro, who appears on the LegalZoom Web page and TV ads and who is best-known for being one of O.J. Simpsons attorneys.
This is not the first suit against LegalZoom. In December 2009, a Missouri man who paid LegalZoom to prepare his will sued the company for engaging in the unauthorized practice of law (Janson v. LegalZoom). The lawsuit is also seeking class action status. LegalZoom is trying to have the case removed from Missouri state court to the United States District Court for the Western District of Missouri.
Maryland Power of Attorney
Upon review of the new financial power of attorney statutory language for both the short and long form, there are many good aspects with the new provisions. There are enforcement provisions in this new law. Before, a bank could refuse to honor your power of attorney and there would be virtually no way to force the bank to honor your power of attorney other than jump through their unique requirements. The agent must keep a record of all receipts, disbursements and transactions. There are other requirements as well. The execution requirements will change. While there is bound to be much confusion when this is enacted on October 1, 2010, overall, this was a good move by the Maryland General Assembly and this a positive development for our seniors. There are more safeguards into its use. There more defined routes to attack misuse. There is language that can be used to make this enforceable.
If you would like to know the background of why the new power of attorney laws are called “Loretta’s Law” please follow this link: