Posts Tagged ‘New Jersey’

Court Ruling on Special Needs Trust Does Not Resolve Medicaid Eligibility

APRIL 22, 2013 VOLUME 20 NUMBER 16
This week we bring you a story that is simultaneously simple yet profound. It involves an arcane corner of law — the intersection of trust administration and Medicaid eligibility. Its simplicity is obvious: it results in a court determination that Medicaid eligibility is determined by the state Medicaid agency and not (at least not in the first instance) by courts. Its profundity is a little less obvious.

“A.N.” is a seventeen-year-old girl, living in New Jersey. She suffers from quadriplegic cerebral palsy, and she requires full-time total care. She gets most of that care from her mother and her maternal grandmother. She is the beneficiary of a special needs trust, established in 2000 with the proceeds from a personal injury lawsuit. Her father is employed, and she is therefore covered under his employer’s health insurance plan. Although the trust was intended to allow her to qualify for New Jersey’s Medicaid plan, she has never applied and has not yet received any coverage under Medicaid.

Her mother owned the home where A.N. lives, but she got behind in making payments on the mortgage. At some point the house was about to be foreclosed, and both parents asked the trustee of the special needs trust to begin making mortgage payments. The trustee did, but asked that the home simply be transferred into the trust’s name — there was little equity, and it appeared to be in A.N.’s best interests to make sure that foreclosure would not be a problem in the future.

It also seemed important to get specific authorization to pay A.N.’s mother and grandmother for taking care of her. Normally, that is the responsibility of a parent — but A.N. received her personal injury settlement (in part) precisely because her care is much more extensive than the care required for other minor children, and her mother is unable to work outside the home to support her — and could never make enough income to cover the cost of the care she is already providing.

Thus far the story is familiar. Though we know nothing much about New Jersey cases, we have heard versions of this story many times. Parents faced with extraordinary caretaking requirements for profoundly injured children, large personal injury settlements that could be used to help cover the high costs of care, houses that lost value during the recent downturn in the real estate market, and special needs trusts intended to maintain eligibility for Medicaid and Supplemental Security Income benefits are all too common in our practice. The only thing unusual in A.N.’s story is that Medicaid is not currently in place — but even that does not change the fundamental questions raised by her case.

This is the dilemma faced by so many trustees and families: should A.N.’s trust purchase her mother’s home, and reduce the cost of living there (because there would not be a mortgage for the mother to pay)? If so, should A.N.’s mother be required to pay rent, either for herself, or for A.N., or for any other children or adults who live in the house? And should A.N.’s mother and grandmother be paid to care for her, even though the law imposes a general responsibility on parents to provide care for their minor children? Finally, what effect would any of those decisions have on A.N.’s eligibility for Medicaid, and who gets to decide that effect?

Because the questions are difficult and the dollar amounts significant, the trustee of A.N.’s trust properly asked the court to make the final decision. The court, after all, is responsible for ultimate oversight of trusts, and this trust was already receiving the court’s attention (it had been set up by court order, after all). The court, in turn, appointed an attorney to represent A.N.’s interest; she argued that buying the house, foregoing rent and paying A.N.’s mother were all in A.N.’s best interests. After hearing the evidence and arguments, the court agreed.

The trustee had given notice of the pending court proceeding to the state Medicaid agency. While the court was considering the final language of its order approving the transactions, the Medicaid agency weighed in with its own comment. In effect, it told the court: “go ahead and decide that it’s in the child’s best interests if you like. But don’t think you can make us later agree that there will be no effect on Medicaid eligibility.”

The Medicaid agency pointed to a section of federal law (arguably not applicable to A.N.’s trust or her prospective future eligibility) that requires that trust distributions be for the “sole benefit” of the beneficiary. In this case, said New Jersey’s Medicaid agency, the court might well determine that the distributions are in A.N.’s best interests, but they benefit A.N.’s mother and grandmother, too — and they might run afoul of the “sole benefit” requirement. But we don’t have to decide that right now, said the Medicaid agency. We’ll wait until someone applies for Medicaid and let you know what we think then.

Not wanting to leave the issue dangling, the court specifically ordered that the proposed payments were for A.N.’s sole benefit. Furthermore, ruled the court, the Medicaid agency could not later object to the payments if anyone made an application for coverage for A.N. The Medicaid agency, not wanting to be bound by the court’s order, formally appeared in the case for the first time just to appeal that result.

The Appellate Division of the New Jersey Superior Court (the intermediate appellate level in New Jersey) agreed with Medicaid. Fine for the trial court to give the trustee directions, said the appellate judges. Fine to decide the payments are in A.N.’s best interests. But you don’t get to decide Medicaid eligibility questions. The agency makes those determinations in the first instance, and if someone appeals, then and only then can the courts get involved. In the Matter of A.N., April 16, 2013.

So what does that mean for Arizonans, for trustees of special needs trusts and for families? A number of lessons can be gleaned from the holding:

  • State Medicaid agencies are not necessarily bound by court interpretations of trust rules, even if they have advance notice of the pending court resolution. The Medicaid meaning of a phrase like “sole benefit” — and, for that matter, its applicability — is first a question for the agency.
  • What is best for a trust beneficiary might not also be the most effective for Medicaid purposes. It’s hard to see how allowing A.N.’s mother to lose her house could ever be in A.N.’s best interests — or even how it could be tolerable. But it doesn’t follow that Medicaid eligibility would be easy to resolve.
  • Medicaid eligibility is typically more restrictive than private insurance. It’s a very good thing for A.N. that her father continues to be covered by his employer’s policy. Time and again we see parents who are locked in to a current job situation precisely because of insurance coverage like A.N.’s father’s.
  • Though unspoken in the New Jersey appellate decision, the effect of the Affordable Care Act (“Obamacare” to both supporters and opponents) will be profound in some special needs trust cases. If A.N.’s trust can purchase insurance equivalent to that provided through her father’s employer, the entire family’s options (and the court’s ability to supervise the trust effectively) will be enhanced. We do not yet know whether that possibility will be completely or even partially realized.

Would the same procedural result be reached by Arizona courts in similar facts? We do not know for certain, but it seems likely that it would. But we are confident that the profound questions — about how to balance parental responsibility for food, housing and care with the availability of significant trust assets in similar circumstances — will continue to challenge us in the administration of special needs trusts.

 

Appellate Court Upholds Orders in New Jersey/Texas Guardianship

JULY 25, 2011 VOLUME 18 NUMBER 27
We have told you about Lillian Glasser before. She is a wealthy New Jersey woman with two children who disagree about where she resides, who should manage her health care and finances, and what should be done about financial actions taken in the months before court proceedings were begun. Much of the dispute centers over whether Texas or New Jersey courts should hear her case. That issue seems to have been put to rest, with New Jersey the victor.

To recap: Ms. Glasser, then worth about $25 million, lived in New Jersey. She occasionally visited her son in Florida (where she also had a rented home) and her daughter in Texas. In 2002, Ms. Glasser was persuaded to execute a new estate plan. She signed a will putting her daughter in charge of her estate, and a new power of attorney in favor of her daughter.

In 2004 and 2005, Ms. Glasser’s daughter fired her mother’s caretaker in Florida, moved Ms. Glasser to Texas, and initiated a Texas guardianship proceeding. In the meantime, she used her power of attorney to create a family limited partnership which she controlled, and transferred the bulk of her mother’s assets into the partnership’s name.

The Texas guardianship proceeding spawned a variety of legal actions. Ms. Glasser’s son, a nephew who was close to her and a family friend all objected in Texas. The litigation costs in Texas exceeded a million dollars, with much of the cost being paid from Ms. Glasser’s assets. The result: the Texas courts authorized her return to New Jersey, where there was more legal action pending.

After Ms. Glasser’s nephew filed a separate New Jersey guardianship proceeding, that state’s Adult Protective Services agency weighed in with a complaint alleging that Ms. Glasser had been subjected to exploitation. Those two actions were consolidated. Meanwhile, the Texas courts decided to wait until New Jersey had completed its review of Ms. Glasser’s situation.

In 2007 the New Jersey court held a 34-day trial on Ms. Glasser’s condition, the transfers of her assets, and the actions of the various players. The result: a judgment finding that Ms. Glasser’s daughter exercised undue influence and behaved in her own interest rather than her mother’s best interest, ordering return of all of the assets transferred into the family limited partnership, and appointing a bank as guardian of Ms. Glasser’s estate and an independent party as guardian of her person. That ruling was the subject of our 2007 update on the Glasser litigation. Ms. Glasser’s daughter appealed that ruling, as did two of the other litigants; much of the appellate argument focused on who should pay the extensive legal costs of the proceedings. The New Jersey Superior Court Appellate Division (that state’s intermediate appellate court) has now — four years after the original court findings — ruled on those appeals.

Spoiler alert: the appellate court affirmed the extensive trial court decision without modifying a single finding or order.

The appellate judges approved the trial judge’s finding that Ms. Glasser’s daughter had exercised undue influence over her mother. They agreed that she should be ordered to put all of her mother’s assets back into Ms. Glasser’s name, to be managed by the bank named as guardian of her estate (what we in Arizona would call her conservator). They confirmed the daughter’s history of inappropriate and evasive actions with regard to Ms. Glasser’s placement and care, and agreed that she was not suitable to manage her mother’s personal OR financial matters.

Then the appellate judges turned to the extensive fees incurred in the various legal proceedings in two states. They confirmed the trial judge’s decisions that:

  • Ms. Glasser’s daughter should pay her own legal fees in both New Jersey and Texas. That meant that she would have to repay the money she had taken from her mother’s assets to fund the Texas proceedings, for which she had paid her attorneys at least $1 million.
  • Ms. Glasser’s estate should pay the legal fees of the lawyer she selected to represent her (the court having found that she had the capacity necessary to hire an attorney of her own choosing). It should also pay the legal fees of her nephew, who filed the guardianship action in New Jersey, without forcing her daughter to reimburse those fees.
  • Ms. Glasser’s son argued that his mother’s estate should pay most or all of his legal fees; the trial judge decided that it would not order her to pay all of his legal fees in Texas, and that (since he hadn’t filed a guardianship petition in New Jersey) he was not entitled to reimbursement for his New Jersey expenditures. The appellate judges agreed, noting that his sister had no standing to object to the amounts allowed in any case.

In the Matter of Lillian Glasser, July 21, 2011.

So how much did Ms. Glasser’s legal predicament cost her, and what was the total cost paid by all of the litigants in protracted proceedings in two states? It may be impossible to calculate exactly, but it is obviously several millions of dollars — after all, her daughter’s legal fees in Texas alone exceeded one million dollars.

Assuming (and the evidence is good) that the outcome is correct, was there a way to prevent the absurd expenditure of millions of dollars, the delay of half a decade, and the angst and anguish associated with this case? A few things might have helped:

  • A carefully created and well-documented estate plan, drafted at a time when Ms. Glasser was clearly competent, might have headed off some of these problems. It might not, however. Ms. Glasser did have an estate plan in place in 2002, at a time when she was competent to make her plans. Her daughter’s undue influence and over-reaching upset that plan over the next few years.
  • If both Texas and New Jersey had adopted the Uniform Adult Guardianship and Protective Proceedings Jurisdiction Act prior to 2005 then considerable cost might have been avoided. That Act would have made clear that New Jersey had jurisdiction and Texas should not act — the very conclusion that the respective judges reached, though only after more than a million dollars in legal fees. Unfortunately, the Jurisdiction Act did not exist in 2005. Since it was first proposed in 2007, about two-thirds of the states have adopted it (including Arizona). So far neither Texas nor New Jersey has. In fairness, adoption of the Jurisdiction Act might have sped the proceedings up by only a few months, and saved only a fraction of the many millions of legal costs.
  • Mediation of the family disputes might have been effective — but it might not have. The appellate judges made reference to Ms. Glasser’s son adopting a “‘take no prisoners’ approach to anyone who disagreed with his views.” Her daughter’s intransigence is pretty clear from her actions and her legal posture. Perhaps they could not have ironed out their differences.

 

High-Stakes Guardianship Case Illustrates Multistate Conflicts

APRIL 9, 2007  VOLUME 14, NUMBER 41

Mark Glasser and Suzanne Glasser Matthews, brother and sister, have spent the last two years battling for physical and financial control over their mother, Lillian Glasser. The 86-year-old Mrs. Glasser, who at one point had an estimated net worth of $25 million, has been the subject of proceedings first in Texas and more recently in New Jersey, where a trial judge heard thirty-four days of testimony and argument last fall.

Nearly six months after the extended proceedings, New Jersey Judge Alexander Waugh has issued his ruling, appointing a guardian of the person and estate for Mrs. Glasser. Rather than appointing any of the family members who might have been candidates, Judge Waugh appointed New Jersey attorney Joseph Catanese as guardian of the person. Mr. Catanese had served as court-appointed counsel for Mrs. Glasser during the trial, and the judge indicated that her condition could worsen if yet another new party was injected into her life.

Judge Waugh also appointed a guardian of the estate (the equivalent of a conservator in Arizona and some other states), turning to the financial management firm Mrs. Glasser and her late husband had used before his death. Mrs. Matthews, her daughter, was ordered to return control of approximately $20 million she had transferred to a family limited partnership just before initiating guardianship proceedings in Texas (see the San Antonio Express-News report), and the judge made clear that at least some portion of the costs incurred by Mrs. Matthews to set up that entity would have to be reimbursed as well.

All of that is very interesting, and Judge Waugh’s written opinion reads like a fictional saga (for more detail and an excellent running commentary on the case, consider Texas Tech College of Law Prof. Gerry W. Beyer’s blog coverage of the case). What the Lillian Glasser case points out even more clearly, however, is a growing problem in guardianship matters—the conflicts that can arise between jurisdictions with the increased mobility of families, support systems, caregivers and assets.

Guardianship proceedings were initiated in Texas when Mrs. Matthews sought appointment as guardian of both her mother’s person and her estate. After Mrs. Matthews’ appointment as temporary guardian, another relative initiated the New Jersey case, arguing that Mrs. Glasser was a New Jersey resident and the question of her capacity—and management of her affairs—should be handled there.

In an earlier ruling Judge Waugh determined that his court should have primary jurisdiction over the guardianship. Luckily, the Texas judge assented, staying the proceedings until a hearing could be completed in New Jersey. Although neither state’s laws include explicit provisions permitting such an action, the two judges’ cooperation saved considerable expense and duplicative legal proceedings.

Arizona law also lacks a provision for resolution of interstate guardianship conflicts. In practice, such conflicts are handled on an ad hoc basis, considering the strength of the proposed ward’s ties to each of the jurisdictions, the location of principal witnesses, and other factors. Frequently the result is that the state where proceedings are first filed has priority, even though the stronger contacts are elsewhere.

The National Conference of Commissioners on Uniform State Laws (NCCUSL), which proposes uniform statutes for consideration by the states, has addressed this growing problem. A provision of the Uniform Guardianship and Protective Proceedings Act, proposed in 1997, would specifically permit the judge in one state to notify and consult with the judge in another state, and to decide whether to accept or decline jurisdiction based on the best interests of the proposed ward (see section 107(b) of the UGPPA).

Another growing problem involves movement of wards after appointment of a guardian or conservator. Under current law and practice, it may be necessary to initiate a whole new guardianship proceeding in the new state after a move, at considerable expense and duplicating much legal effort The proposed uniform law would also address that problem, permitting the final guardianship order of one state to simply be lodged with, and become an order of, the ward’s new state.

Combative Alzheimer’s Patient Not Liable for Injuries to Nurse

APRIL 19, 2004 VOLUME 11, NUMBER 42

Edmund Gernannt suffered from dementia of the Alzheimer’s type. Confusion and agitation sometimes combined in Mr. Gernannt to make him combative. While most Alzheimer’s patients can be easily redirected and ultimately calmed, Mr. Gernannt’s aggressive tendencies got him committed to the county hospital in Bergen Pines, New Jersey. It was there that he assaulted one of the facility’s nurses.

Mary Berberian, the head nurse on the long-term care ward of the geriatric psychiatric hospital, was on duty on November 11, 1997. She had over twenty years of experience working with demented patients, and she knew Mr. Gernannt’s tendency to lash out at staff members. When Mr. Gernannt pushed open the fire escape door and set off an alarm, she rushed to head him off and return him to the unit.

Another nurse was also on the scene, but Mr. Gernannt began hitting her when she tried to escort him back to the unit. Ms. Berberian then extended her hand to try to coax Mr. Gernannt back into his room, but he responded by first pulling her forward, then shoving her back. As a result, the nurse fell and broke her hip.

Ms. Berberian sued Mr. Gernannt for her injuries. She also named Mr. Gernannt’s guardian, alleging that the guardian should not have authorized transfer of Mr. Gernannt to the unit without physical restraints, and the physician in charge of Mr. Gernannt’s care.

The trial court dismissed the lawsuits against the guardian and the physician, but the jury considered whether Mr. Gernannt’s estate (he died before trial) should pay Ms. Berberian’s damages. The court instructed the jury that it could find the estate liable only if it decided that Mr. Gernannt’s behavior fell below the standard that might be expected of a “reasonably prudent person who has Alzheimer’s dementia.”

The jury found that Mr. Gernannt’s estate should not be liable for damages, and Nurse Berberian appealed. The first appellate court agreed that the trial judge had set the correct standard for the jury to apply, and so the nurse appealed again.

The New Jersey Supreme Court agreed that Ms. Berberian should not recover from Mr. Gernannt’s estate, but on a different theory. According to the state’s highest court Mr. Gernannt owed no duty of care to the professionals assigned to care for him. That result was mandated, said the justices, by the very fact that Mr. Gernannt was involuntarily committed to a treatment facility because of his well-known combative tendencies. Nurse Berberian accepted the risk of injury by choosing her profession, not unlike a fireman’s choice to work in a hazardous field. Berberian v. Gernannt, April 6, 2004.

Two Life Insurance Beneficiary Designations Require Litigation

APRIL 28, 2003 VOLUME 10, NUMBER 43

When people consider “estate planning” they usually are thinking about preparing a will. Sometimes the common conception of estate planning includes preparing a trust as well, and often durable powers of attorney are also part of the plan. But two recent cases demonstrate that “estate planning” is really much more—it includes the titling of assets and beneficiary designations as well. The most carefully-considered estate plan may fail if those other issues are not also dealt with at the same time.

Lori Flanigan was divorced and had two children when she married her second husband, Craig Munson. Ms. Flanigan had two life insurance policies through her work totaling $217,600. Her divorce agreement required her to name the children as beneficiaries on her life insurance, but she had not gotten around to completing a beneficiary designation form when she died in 1995.

Her insurance policies provided that they would be paid to a surviving spouse if she had not designated a beneficiary, and so the proceeds were distributed to Mr. Munson. The children’s grandparents (who took custody after Ms. Flanigan died) then filed a lawsuit to impose a constructive trust on the remaining insurance proceeds and Mr. Munson’s home, since he had used some of the proceeds to pay off his mortgage and other debts.

The trial judge denied the grandparents their requested relief, but the New Jersey Supreme Court agreed that the insurance proceeds should go to the children. It ordered the money transferred to the children’s benefit—eight years and thousands of dollars in legal fees after her death. Flanigan v. Munson, April 3, 2003.

Daniel Lambert was not so lucky. He argued that his mother’s life insurance policy should be part of her estate, and that her will specified that he was to receive a portion of that estate. Unfortunately for him, whatever his mother’s intentions might have been she had named her daughter Suella Southard as beneficiary.

Another sibling, brother Steven Powell, was prepared to testify that their mother had always intended that the life insurance policy should be used to pay the costs of handling her estate and then distributed to the children according to her will. He was not allowed to testify, however, because of a long-standing court rule prohibiting testimony about conversations with deceased persons, the so-called “Dead Man’s Statute.” The Indiana Court of Appeals refused to permit imposition of a constructive trust on the life insurance proceeds. Lambert v. Southard, April 1, 2003.

The moral: “estate planning” requires consideration of beneficiary designations and account titles as well as signing of a will, trust and powers of attorney. Even a carefully-drafted estate plan, including a will, a living trust and both financial and health care powers of attorney, can be altered or frustrated by incorrect (or missing) beneficiary designations, joint tenancies, “payable on death,” “transfer on death” or “in trust for” account titles or other, similar arrangements.

©2017 Fleming & Curti, PLC