New Protections for Nursing Home Residents

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New Obama-era rules designed to give nursing home residents more control of their care are gradually going into effect. The rules give residents more options regarding meals and visitation as well as make changes to discharge and grievance procedures.

The Centers for Medicare and Medicaid finalized the rules — the first comprehensive update to nursing home regulations since 1991 — in November 2016. The first group of new rules took effect in November; the rest will be phased in over the next two years.

Here are some of the new rules now in effect:

  • Visitors. The new rules allow residents to have visitors of the resident’s choosing and at the time the resident wants, meaning the facility cannot impose visiting hours. There are also rules about who must have immediate access to a resident, including a resident’s representative. For more information, click here.
  • Meals. Nursing homes must make meals and snacks available when residents want to eat, not just at designated meal times.
  • Roommates. Residents can choose their roommate as long as both parties agree.
  • Grievances. Each nursing home must designate a grievance official whose job it is to make sure grievances are properly resolved. In addition, residents must be free from the fear of discrimination for filing a grievance. The nursing home also has to put grievance decisions in writing. For more information, click here.
  • Transfer and Discharge. The new rules require more documentation from a resident’s physician before the nursing home can transfer or discharge a resident based on an inability to meet the resident’s needs. The nursing home also cannot discharge a patient for nonpayment if Medicaid is considering a payment claim. For more information, click here.

CMS also enacted a rule forbidding nursing homes from entering into binding arbitration agreements with residents or their representatives before a dispute arises.  However,a nursing home association sued to block the new rule and a U.S. district court has granted an injunction temporarily preventing CMS from implementing it.  The Trump Administration is reportedly planning to lift this ban on nursing home arbitration clauses.

In November 2017, rules regarding facility assessment, psychotropic drugs and medication review, and care plans, among others, will go into effect. The final set of regulations covering infection control and ethics programs will take effect in November 2019.

To read the rules, click here.

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Medicaid Benefits – House Transfer: Deed Does Not Conflict

Reservation of Power of Appointment in Deed Does Not Conflict With Conveyance of Property to Children

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A Massachusetts appeals court rules that as part of Medicaid planning, a woman could reserve a power of appointment in a deed conveying property to her children while reserving a life estate for herself. Skye v. Hession (Mass. App. Ct., No. 16-P-282, Apr. 28, 2017).

Margaret Hession sought legal assistance to protect her house in the event she might need Medicaid benefits. As part of the Medicaid planning, she executed a deed transferring her house to her children. The deed reserved a life estate for her and granted her a special power of appointment that allowed her to appoint the property to any person except herself, her creditors, her estate, or her estate’s creditors. Ms. Hession decided her daughter Deaven Skye should inherit less than her other children. She wrote a will that exercised her power of appointment and reduced Ms. Skye’s interest in the property from one-third to 5 percent.

After Ms. Hession died, Ms. Skye objected to the will and argued that the power of appointment was void. The trial court dismissed Ms. Skye’s objection and admitted the will to probate. Ms. Skye appealed, arguing that the provisions in the deed granting the remainder interests and reserving a power of appointment are irreconcilably repugnant to each other.

The Massachusetts Court of Appeals, rules that the reservation of the power of appointment is consistent with the other provisions of the deed. According to the court, “because of the reservation of the life estate, the deed conveyed not present possessory estates but rather remainder interests; and, because of the reservation of the power, the remainder interests were defined, in part, by this limitation.” The court specifically does not express a “view on the effect of the reserved power of appointment on [Ms. Hession’s] strategy of avoiding MassHealth look-back period regulations.”

READ THE TOP 8 MISTAKES IN MEDICAID PLANNING HERE>

A Medicaid Applicant’s Purchase of Life Insurance Policy Is Transfer for Less Than Market Value

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An Illinois appeals court rules that a Medicaid applicant’s purchase of a life insurance policy was a transfer for less than fair market value because the applicant did not receive any benefit from the policy. Moore v. State of Illinois (Ill. App. Ct., 4th Dist., No. 4-16-0414, April 11, 2017).

Nursing home resident Elda Buckley applied for Medicaid. On the same day, she purchased a whole life insurance policy for $15,000 that named Christine Moore as the beneficiary. The state approved Ms. Buckley’s Medicaid application, but it determined that the purchase of the life insurance policy was a transfer for less than fair market value and imposed a penalty period.

Ms. Buckley appealed, arguing that she purchased the life insurance policy for fair market value, so the transfer should not be subject to a penalty period. The state and the trial court affirmed the penalty period. Ms. Buckley appealed.

The Illinois Court of Appeal, 4th District, affirms, holding that the purchase of the life insurance policy was a transfer for less than fair market value because Ms. Buckley did not receive the benefit of the policy. According to the court, the “apparent purpose of [Ms.] Buckley’s purchase of the insurance policy, of which she would receive none of the proceeds, was to shelter assets from Medicaid while ensuring [Ms.] Moore received the benefits of her assets.”

For the full text of this decision, go to: http://www.illinoiscourts.gov/Opinions/AppellateCourt/2017/4thDistrict/4160414.pdf

 

READ THE TOP 8 MEDICAID PLANNING MISTAKES HERE>

Top 10 Elder Law decisions of 2016

Below, in chronological order, is ElderLawAnswers’ annual roundup of the top 10 elder law decisions for the year just ended, as measured by the number of “unique page views” of our summary of the case.

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1. Medicaid Applicant’s Irrevocable Trust Is an Available Resource Because Trustee Can Make Distributions

An Alabama appeals court rules that a Medicaid applicant’s special needs trust is an available resource because the trustee had discretion to make payments under the trust. Alabama Medicaid Agency v. Hardy (Ala. Civ. App., No. 2140565, Jan. 29, 2016). To read the full summary, click here.

2. Trust Is an Available Asset Because Trustees Have Discretion to Make Distributions

A New York appeals court rules that a Medicaid applicant’s trust is an available asset because the trustees have discretion to make distributions to her. In the Matter of Frances Flannery v. Zucker (N.Y. Sup. Ct., App. Div., 4th Dept., No. TP 15-01033, Feb. 11, 2016). To read the full summary, click here.

3. Medicaid Applicant Who Transferred Assets in Exchange for Promissory Note May Proceed with Suit Against State

A U.S. district court holds that a Medicaid applicant who was denied Medicaid benefits after transferring assets to her children in exchange for a promissory note may proceed with her claim against the state because Medicaid law confers a private right of action and the Eleventh Amendment does not bar the claim. Ansley v. Lake (U.S. Dist. Ct., W.D. Okla., No. CIV-14-1383-D, March 9, 2016). To read the full summary, click here.

4. Mass. Court Bridles at Allegations in Request for Reconsideration in Irrevocable Trust Case

In a strongly worded response to a Medicaid applicant’s request for reconsideration of an unsuccessful appeal involving an irrevocable trust, a Massachusetts trial court strikes the applicant’s pleadings after it takes great exception to the tone of the argument.  Daley v. Sudders (Mass.Super.Ct., No.15-CV-0188-D, March 28, 2016). To read the full summary, click here.

5. Caretaker Exception Denied Because Child Did Not Provide Continuous Care

A New Jersey appeals court determines that the caretaker child exception does not apply to a Medicaid applicant who transferred her house to her daughter because the daughter did not provide continuous care for the two years before the Medicaid applicant entered a nursing home. M.K. v. Division of Medical Assistance and Health Services (N.J. Super. Ct., App. Div., No. A-0790-14T3, May 13, 2016). To read the full summary, click here.

6. State Can Place Lien on Medicaid Recipient’s Life Estate After Recipient Dies

An Ohio appeals court rules that a deceased Medicaid recipient’s life estate does not extinguish at death for the purposes of Medicaid estate recovery, so the state may place a lien on the property. Phillips v. McCarthy (Ohio Ct. App., 12th Dist., No. CA2015-08-01, May 16, 2016). To read the full summary, click here.

7. Attorney Liable to Third-Party Beneficiary of Will for Legal Malpractice

Virginia’s highest court rules that an intended third-party beneficiary of a will may sue the attorney who drafted the will for legal malpractice. Thorsen v. Richmond Society for the Prevention of Cruelty to Animals (Va., No. 150528, June 2, 2016). To read the full summary, click here.

8. Nursing Home’s Fraudulent Transfer Claim Against Resident’s Sons Can Move Forward

A U.S. district court rules that a nursing home can proceed with its case against the sons of a resident who transferred the resident’s funds to themselves because the fraudulent transfer claim survived the resident’s death. Kindred Nursing Centers East, LLC v. Estate of Barbara Nyce (U.S. Dist. Ct., D. Vt., No. 5:16-cv-73, June 21, 2016). To read the full summary, click here.

9. Irrevocable Trust Is Available Asset Because Medicaid Applicant Retained Some Control

New Hampshire’s highest court rules that a Medicaid applicant’s irrevocable trust is an available asset even though the applicant was not a beneficiary of the trust because the applicant retained a degree of discretionary authority over the trust assets. Petition of Estate of Thea Braiterman (N.H., No. 2015-0395, July 12, 2016). To read the full summary, click here.

10. NY Court Rules that  Spouse’s Refusal to Contribute to Care Creates Implied Contract to Repay Benefits

A New York trial court enters judgment against a woman who refused to contribute to her spouse’s nursing home expenses, finding that because she had adequate resources to do so, an implied contract was created between her and the state entitling the state to repayment of Medicaid benefits it paid on the spouse’s behalf. Banks v. Gonzalez (N.Y. Sup. Ct., Pt. 5, No. 452318/15, Aug. 8, 2016). To read the full summary, click here.

Feel Free to contact me to see how any of these decisions may affect your personal situation.

-Brian A. Raphan, Esq. 

Will Gifting a Car Cause a Medicaid Penalty Period?

The answer is probably “yes,” but it depends on the circumstances. Are we talking about a 10-year-old Toyota Corolla or a brand new Mercedes?

There will be more scrutiny for the latter. Is your mother buying a new car, or stopping driving altogether? If she’s still healthy and alert enough to drive, you have a good argument that the gift has nothing to do with Medicaid planning. Does your mother have substantial assets other than the car, or is that her major asset? If the transfer doesn’t affect her eligibility because she still has a lot more to spend down, it’s less likely to be a problem. Unfortunately, this is one of those gray areas where the answer depends on whether you can convince the Medicaid intake worker that the gift to your daughter was not for Medicaid planning purposes. It will depend on the circumstances, on how such a transaction is treated in your state, and perhaps on the particular intake worker.

READ THE TOP 8 MEDICAID PLANNING MISTAKES: click here: 

NY Court Rules that Community Spouse’s Refusal to Contribute to Care Creates Implied Contract to Repay Benefits

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A New York trial court enters judgment against a woman who refused to contribute to her spouse’s nursing home expenses, finding that because she had adequate resources to do so, an implied contract was created between her and the state entitling the state to repayment of Medicaid benefits it paid on the spouse’s behalf. Banks v. Gonzalez (N.Y. Sup. Ct., Pt. 5, No. 452318/15, Aug. 8, 2016).

Evelyn Gonzalez’ spouse was admitted to a nursing home and received $28,235.56 in Medicaid benefits from the Department of Social Services of the City of New York.  At the time of her spouse’s Medicaid application, Ms. Gonzalez’ assets exceeded the community spouse resource allowance.  However, she signed a declaration refusing to make her income or resources available to pay for her spouse’s care.

After a letter to Ms. Gonzalez demanding repayment of the cost of Medicaid benefits paid on behalf of her spouse went unanswered, the agency filed suit.  Ms. Gonzalez did not respond to the summons and complaint nor to the agency’s motion for default judgment.

The Supreme Court of New York, New York County, grants the motion and enters default judgment against Ms. Gonzalez for the cost of benefits provided to her spouse.  The court notes that in cases such as this where Ms. Gonzalez has the income and resources but refuses to contribute to her spouse’s care, state law creates an implied contract between her and the state allowing recovery of the cost of the benefits provided during the preceding 10 years.

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Testamentary Trust & MEDICAID…

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Testamentary Trust Qualifies As SNT Despite Support Language

The Supreme Court of Connecticut rules that the state Department of Social Services improperly denied a Medicaid application after counting assets in a testamentary trust that should have been considered exempt because, the court holds, the trust was a discretionary supplemental needs trust, not a support trust. Pikula v. Department of Social Services (Conn., No. SC 19533, May 10, 2016).

John Pikula died in 1991, leaving behind a testamentary trust for the benefit of his daughters.  The trust gave the trustee the ability to use the trust income and principal for the daughters “as the trustee may deem advisable for [their] maintenance and support”.  In 2012, one of Mr. Pikula’s daughters, Marian Pikula, entered a long-term care facility and applied for Medicaid.  The Department of Social Services (DSS) denied Ms. Pikula’s application, alleging that the assets in the testamentary trust constituted a countable support trust.

Ms. Pikula appealed DSS’s decision, arguing that her father had intended to create a supplemental needs trust and that the discretionary language in the trust met the requirements of such a trust because Ms. Pikula could not compel payments from the trust for her support.  She was denied at an administrative level and on appeal to the trial court.  The Connecticut Supreme Court transferred Ms. Pikula’s appeal from the intermediate appellate court.

The Supreme Court of Connecticut reverses the trial court.  The court determines that “the fact that the trustee is only required to use as much income as he ‘may deem advisable’ to provide for [Ms. Pikula’s] maintenance, indicates that the testator intended for the trustee to have complete discretion in determining what, if any, of the income was to be used for [Ms. Pikula’s] maintenance.”  The court goes on the analyze the circumstances behind the creation of the trust, and it reasons that because the trust was established with a modest amount of money, it was clearly not intended to be used for Ms. Pikula’s long-term support.

Feel free to contact me for information about the type of Trust to suit your needs.

Regards,

Brian

www.RaphanLaw.com

Should My Parents Give Me Their Home?

Many people wonder if it is a good idea to give their home to their children. While it is possible to do this, giving away a house can have major tax consequences, among other results.

When you give anyone property valued at more than $14,000 (in 2016) in any one year, you have to file a gift tax form.  Also, under current law you can gift a total of $5.45 million (in 2016) over your lifetime without incurring a gift tax. If your parents’ residence is worth less than this amount, they likely won’t have to pay any gift taxes, but they will still have to file a gift tax form

While your parents may not have to pay taxes on the gift, if you sell the house right away, you may be facing steep taxes. The reason is that when property is given away, the tax basis (or the original cost) of the property for the giver becomes the tax basis for the recipient. For example, suppose your parents bought the house years ago for $150,000 and it is now worth $350,000. If they give their house to you, the tax basis will be $150,000. If you sell the house, you will have to pay capital gains taxes on $200,000 — the difference between $150,000 and the selling price. The only way for you to avoid the taxes is for you to live in the house for at least two years before selling it. In that case, you can exclude up to $250,000 ($500,000 for a couple) of their capital gains from taxes.

Inherited property does not face the same taxes as gifted property. If you were to inherit the property, the property’s tax basis would be “stepped up,” which means the basis would be the current value of the property. However, the home will remain in your parents’ estate, which may have estate tax consequences.

Beyond the tax consequences, gifting a house to you can affect your parents’ eligibility for Medicaid coverage of long-term care.  There are other options for giving a house to children, including putting it in a trust or selling it to them. Before your parents give away their home, they should consult with your elder law attorney, who can advise them on the best method for passing on their home.

To read more articles about gifting from Brian A. Raphan, P.C. click here.

 

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Probate, Estate Planning, Healthcare Proxies, Medicaid Planning, etc. Get informed and find many of the answers to your existing questions in these guides. Download and save as reference for free.

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Protecting Your House from Medicaid Estate Recovery

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After a Medicaid recipient dies, the state must attempt to recoup from his or her estate whatever benefits it paid for the recipient’s care. This is called “estate recovery.” For most Medicaid recipients, their house is the only asset available.

Life estates

For many people, setting up a “life estate” is the simplest and most appropriate alternative for protecting the home from estate recovery. A life estate is a form of joint ownership of property between two or more people. They each have an ownership interest in the property, but for different periods of time. The person holding the life estate possesses the property currently and for the rest of his or her life. The other owner has a current ownership interest but cannot take possession until the end of the life estate, which occurs at the death of the life estate holder.

Example: Jane gives a remainder interest in her house to her children, Robert and Mary, while retaining a life interest for herself. She carries this out through a simple deed. Thereafter, Jane, the life estate holder, has the right to live in the property or rent it out, collecting the rents for herself. On the other hand, she is responsible for the costs of maintenance and taxes on the property. In addition, the property cannot be sold to a third party without the cooperation of Robert and Mary, the remainder interest holders.

When Jane dies, the house will not go through probate, since at her death the ownership will pass automatically to the holders of the remainder interest, Robert and Mary. Although the property will not be included in Jane’s probate estate, it will be included in her taxable estate. The downside of this is that depending on the size of the estate and the state’s estate tax threshold, the property may be subject to estate taxation. The upside is that this can mean a significant reduction in the tax on capital gains when Robert and Mary sell the property because they will receive a “step up” in the property’s basis.

As with a transfer to a trust, the deed into a life estate can trigger a Medicaid ineligibility period of up to five years. To avoid a transfer penalty the individual purchasing the life estate must actually reside in the home for at least one year after the purchase.

Life estates are created simply by executing a deed conveying the remainder interest to another while retaining a life interest, as Jane did in this example. In many states, once the house passes to Robert and Mary, the state cannot recover against it for any Medicaid expenses Jane may have incurred.

Trusts

Another method of protecting the home from estate recovery is to transfer it to an irrevocable trust. Trusts provide more flexibility than life estates but are somewhat more complicated. Once the house is in the irrevocable trust, it cannot be taken out again. Although it can be sold, the proceeds must remain in the trust. This can protect more of the value of the house if it is sold. Further, if properly drafted, the later sale of the home while in this trust might allow the settlor, if he or she had met the residency requirements, to exclude up to $250,000 in taxable gain, an exclusion that would not be available if the owner had transferred the home outside of trust to a non-resident child or other third party before sale.

Contact me to find out what method will work best for you.

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