DECEMBER 27, 2010 VOLUME 17 NUMBER 40
Kenneth Boyd established a revocable living trust in 2002. He named his daughter Carol Boyd as trustee, and directed that the trust be divided, upon his death, into three shares. One share each was to go to Carol, to Kenneth’s mother Elizabeth Boyd, and to Carol’s son Ben Scott. So far nothing is remarkable or unusual about Mr. Boyd’s trust arrangements.
Elizabeth Boyd entered a nursing home in November, 2007. Kenneth Boyd died a month later. When it came time to divide the trust estate among the three beneficiaries, Carol Boyd simply wrote checks to each one, and sent Elizabeth Boyd’s share to her in care of the agent under her durable power of attorney.
The agent refused to cash the checks. Putting the money into an account in Elizabeth Boyd’s name, she argued, would simply make her ineligible for Medicaid assistance with her nursing home costs, and assure that a third of Kenneth Boyd’s estate would go to nursing home care for Elizabeth. If Elizabeth Boyd’s share could stay in trust, it could benefit her during her life, allow her to remain eligible for Medicaid, and assure that there would be something to pass on to her heirs on her later death.
It seemed obvious to Elizabeth Boyd’s attorney-in-fact that the continued trust would be in her best interest. Language in the trust could be construed to permit Carol Boyd to do just that — to turn the distribution from the trust into a “third-party” special needs trust. Elizabeth, through her attorney-in-fact, ultimately filed suit in California, asking the court to compel Carol to continue to hold the funds in trust for Elizabeth but not distribute any proceeds outright to her.
Carol Boyd pointed to the language of the trust, which gave her the power to do what was asked but did not direct her to do so. She insisted that her father would have wanted his money to support his mother until her death (or until the money ran out), and she declined to establish a special needs trust. So the legal question became whether Carol had an obligation to do so.
In an unpublished opinion, the California Court of Appeals ruled that Carol did not breach her duty to Elizabeth by failing to segregate her trust distributions into a separate, third-party special needs trust. It was not completely clear to the appellate judges whether such an action would even be effective; in any event, the opinion makes clear that Kenneth Boyd’s trust gave Carol the power, but not the duty, to modify the distribution terms. Boyd v. Boyd, December 16, 2010.
As is so often the case, there were a number of complicating issues in the Boyd case. They help point up the importance of communicating clearly with the lawyer who prepares your estate planning documents, and keeping those documents updated. Among the complications:
Kenneth Boyd’s trust actually left a larger share to his brother, James, who was scheduled to receive 40% of the remaining funds on Kenneth’s death. James, however, died just a year before Kenneth did, and the trust did not provide that his share would pass either to his surviving wife or his step-daughter. Despite the fact that James’ marriage was of long standing, he had never adopted his step-daughter — if he had, she would have taken his share of the trust as his child. Since he died without any legal “issue,” his share lapsed and was divided equally among the other three beneficiaries (Carol, Elizabeth and Ben).
Carol Boyd was actually the adopted daughter of Kenneth Boyd. That makes no legal difference, and probably was explained to the lawyer who drafted the trust at the time. But the adoption had been completed when Carol was 32 years old, and she had never met Kenneth’s mother Elizabeth, his brother James or his wife.
Kenneth and Carol lived in California. Elizabeth, James and his wife lived in New York. Consequently, the California courts had jurisdiction over the trust interpretation — but they had to consider the effect on New York Medicaid eligibility and trust law. Interstate proceedings often create additional confusion and difficulty.
It is extremely hard to know what Kenneth actually would have wanted in the facts as they developed. That is why estate planning lawyers go through the almost ghoulish routine of asking clients to imagine unusual sequences of family deaths and disability. The reality is that Kenneth Boyd died just a year after his brother’s death, and a month after his mother entered the nursing home (and qualified for Medicaid). If he had discussed the family situation with his lawyer during the year after his brother died, he might have made changes in his trust language. At least he might have clarified his wishes, so that the issue would not have to be decided by court proceedings.
This week’s Elder Law Issues was written by our friend and Maryland colleague Ron M. Landsman. He describes the resolution of a class lawsuit he initiated in Maryland, challenging that state’s practice of setting Medicaid patients’ co-payment amount too high to allow them to pay nursing home bills incurred while they were waiting for Medicaid eligibility.
Preliminary approval of settlement of a class action suit in Maryland implements protection for nursing home residents who mess up their Medicaid eligibility and run out of money to pay for their care before they actually qualify for Medicaid benefits.
This is a common problem. The nursing home resident who is spending down misunderstands the rules or is careless, and finds himself with too much to qualify for Medicaid but not enough to pay the current nursing home bill.
The way Maryland was calculating residents’ co-payments, he would not have money to pay the old bill. Federal law requires – and the settlement implements – co-payment calculations that allow the resident to pay the old bill.
The resident is relieved of the risk of discharge for non-payment, and the nursing home gets paid for providing services. Legal Aid Bureau lawyers said they were using the new rules, which have been partly in effect while the suit was pending, to protect their clients from involuntary discharge because it gave them a way to pay the old bills once on Medicaid.
The Maryland class action, Eunice Smith, et al. v. John Colmers, et al., is believed to be the largest settlement ever paid by the Maryland Medicaid agency – up to $16 million in 2010-2012 to nursing homes that were underpaid because of the co-payment miscalculation. The nursing homes will then apply the previous resident co-payments to the old nursing home bills. If there is a shortfall and not enough to pay the old bills, the nursing homes receiving payment will have to forgive those old debts. That may amount to up to $64 million in claims against residents forgiven.
The settlement also requires the Maryland Medicaid agency to make comprehensive changes in the way it calculates co-payments so that it does it correctly in the future.
Cy Smith and Bill Meyer of Zuckerman Spaeder LLP in Baltimore, and Ron Landsman of Rockville, represented the plaintiff class. Landsman obtained the federal agency ruling that Maryland’s old rules for co-payments violated federal law, which then triggered the private lawsuit. Smith and Meyer led the negotiations resulting in a complicated 16-page “protocol” for making claims and payments to nursing homes.
The order signed on March 11 gives the settlement preliminary approval as “fair, reasonable, and adequate.” Notice will be sent to all class members, and they can “opt out” of the class action, if they want, to pursue their own claims for corrected co-payment calculations. But those doing so will be subject to a limit of three months for most old bills, which does not apply to the settlement, and they will not automatically have any unpaid portion of their old bills forgiven by the nursing home.
The settlement is scheduled for final approval on May 12, 2010.
Contrary to public perceptions, will contests are actually rare. In fact, few wills are written in such a way that anyone would benefit from a contest — most wills leave property to the same people who would inherit if there was no will. When there is a will contest, however, the two most common grounds are allegations of (1) lack of testamentary capacity, or (2) undue influence exerted by someone. A recent Texas case highlights the differences between those two allegations.
Evelyn Marie Reno died at age 81. She had been married twice, and left three children from her first marriage and one daughter from the second. The youngest child, Jan LeGrand, did not get along well with her half-siblings. Relationships between Ms. Reno and the three children from her first marriage were also strained — at least partially because two of them had initiated a guardianship proceeding (which was later dismissed) against their mother.
Ms. Reno spent the last year of her life in a nursing home. Ms. LeGrand visited her regularly, paid all her bills, and kept her location a secret from her half-siblings. At some point in the year before she died, Ms. Reno asked her daughter to help her prepare a new will disinheriting her other three children and leaving her entire estate to Ms. LeGrand.
The will was prepared (by Ms. LeGrand), and signed in Ms. Reno’s nursing home room. The witnesses were a hospice worker and chaplain, and the notary public was a nursing home employee. Ms. LeGrand was asked to leave the room while the three non-family members discussed the will and watched her sign it.
After Ms. Reno’s death the will was filed with the probate court by Ms. LeGrand. The three half-siblings proposed an earlier will, which left most of the estate to the four children equally.
The Probate Court ruled that Ms. Reno lacked testamentary capacity at the time the last will was signed, and that she was subjected to undue influence by her daughter. The earlier will (and a codicil) were instead admitted to probate.
The Texas Court of Appeals analyzed the findings of the Probate Court, and modified the basis for its findings — while not changing the result. The evidence, according to the appellate court, showed that Ms. Reno DID have testamentary capacity. Though she was often confused, the two witnesses and the notary agreed that the will was signed on a good day. Evidence of confusion and occasional disorientation on days before and after the will signing was not enough to overcome the testimony that she knew what she was signing, who her children were and what she intended to do at the time she signed the will.
The appeals judges agreed with the Probate Court, however, on the subject of undue influence. A key part of the evidence considered by the Court of Appeals: the fact that the will was actually prepared by Ms. LeGrand. As the Court wrote: “the fact that LeGrand personally prepared teh will without the intervention of an atotrney or other third party is significant.”
Also important to the court’s analysis: Ms. LeGrand had sole access to Ms. Reno for more than a year (during which time their mother’s whereabouts were not shared with the other three children). During that time, noted the Court of Appeals, Ms. Reno was completely dependent on Ms. LeGrand for bill-paying, care management and personal contact.
A more subtle distinction is drawn by the appellate judges with regard to Ms. Reno’s declining mental status. Though her condition at the moment of signing the will did not support the allegations of lack of testamentary capacity, her growing confusion and periodic mental weakness made her susceptible to undue influence.
Finally, the Court of Appeals notes that the will prepared by Ms. LeGrand for her mother was a complete shift from her prior wills. In each of those she made specific bequests to her four children and thirteen grandchildren, plus hospitals, her church and her pastor. The last will, however, left everything to one daughter — and this significant change in her dispositive plan was yet another indication of undue influence.
Though family members often confuse the concepts of testamentary capacity and undue influence, the legal analysis of the two different approaches to will contests is well-developed. It is also important to note that not every attempt to talk someone into making a new will is automatically subject to challenge. As the Reno court opined, in somewhat dry legalistic language: “One may request, importune, or entreat another to create a favorable dispositive instrument, but unless th eimportunities or entreaties are shown to be so excessive as to subver the will of the maker, they will not taint the validity of the instrument.”
The difference between “lack of testamentary capacity” and “undue influence” is legalistic, to be sure, but it is more than just academic. Interestingly, the Texas Court of Appeals noted that there is a difference in the burden of proof borne by the parties in the two different kinds of cases. In a case alleging lack of testamentary capacity the proponent of the will has the burden of proving that the testator understood what she was doing. In an allegation of undue influence, the challenger carries the burden of proof.
That means that each side in Ms. Reno’s case met their burden of proof. That is, Ms. LeGrand showed that her mother understood what she was doing, but the other three children demonstrated that Ms. LeGrand unduly influenced their mother. Estate of Reno, December 18, 2009.
Do you wonder what will happen if you are no longer able to live independently? Will you have to “go into a home?” Is a nursing home the only way to go, or are there other living situations that might allow more independence? What will happen to your spouse? And who will pay for all of this? Medicare? Medigap insurance? Your kids? Is long term care insurance the answer?
Elders whose care is not covered by Medicare (and beware, Medicare covers only a limited period of “skilled” nursing care) have to look to Medicaid for help. Arizona has its own Medicaid program, the Arizona Long Term Care System (ALTCS). Unlike Medicare, which is available to elders above age 65, ALTCS applicants must qualify both medically and financially. The financial eligibility criteria are stringent and complex.
Victoria Blair, one of the partners at Fleming & Curti, PLC, offers a two hour program to address just these sorts of questions on Wednesday, January 27th and Thursday, January 28th. We will serve a continental breakfast and we promise to answer your questions about planning for (and paying for) long term care.
Both programs will include a discussion of the basics of ALTCS. Wednesday’s session will focus on our clients who are considering long term care options for themselves or a loved one. Thursday’s session will be a little more technical, and aimed at case managers, social workers and other professionals who want to better assist their clients. You are welcome to attend either session. There will be no charge for either program, but space is limited and reservations must be secured in advance.
Who should come to ALTCS School? Anyone who is thinking seriously about nursing home care, assisted living or in-home care, or is just curious about the options. Anyone who is contemplating purchasing a long term care insurance policy. Case managers and social workers are welcome (especially at Thursday’s session) and will leave with a clearer understanding and with answers to their questions about the system.
Ms. Blair will explain the medical and financial eligibility criteria for ALTCS. She will review what resources the “healthy” spouse can keep — a house, a car, money to live on — and strategies for “spend down.” She will review the penalties for making gifts (or selling assets for less than their value) to family members. And she will go over long term care insurance policies: what they cost, what they cover, and whether purchasing such a policy makes sense for you and your family.
To attend: contact Yvette in our office at (520) 622-0400 or by e-mailing our office. Please be sure to provide us with contact information and indicate whether you prefer to attend the client/layperson session on January 27th or the social worker/case manager/allied professional session on January 28th.
Who has the obligation to get a proper Medicaid application filed for someone in a nursing home? Can the nursing home resident’s children, spouse, guardian or conservator be forced to pay for care after the patient’s money has run out but before the state Medicaid agency receives the application paperwork in proper order?
The usual answer to that question is a simple “no.” There are exceptions — a spouse may have an obligation of support, for instance, or a child may have separately promised the nursing home that the bills will be covered. The way this question most frequently comes up, though, is when a guardian or a child (and they may sometimes be the same person, though in today’s illustration the guardian was a public agency) has signed the facility’s admission documents but has not followed through with getting Medicaid eligibility established promptly.
That was essentially what happened with Eloise Selby, who resided at Arbor View Healthcare and Rehabilitation Center in St. Joseph, Missouri. Bonnie Sue Lawson, who was the Buchanan County Public Administrator, was appointed as Ms. Selby’s guardian in 2004. A Medicaid application was already pending, but the agency did not have the paperwork necessary to determine the value of two small life insurance policies owned by Ms. Selby. Her new guardian promised to get the missing forms filed.
A month later, with no paperwork in sight, the Medicaid agency denied coverage. A second application filed a month after that included the missing forms, but Ms. Selby was again denied benefits — this time because the value of the two policies exceeded the maximum permissible amount. Yet another month later, another application was filed — and denied for the same reason.
The essential problem with the application became clear at that point: someone would need to cash in the policies, and Ms. Lawson was guardian of the person but not conservator of Ms. Selby’s estate. A conservatorship proceeding was filed, the funds collected, and the final, successful Medicaid application filed a year after the initial involvement of the Public Administrator’s office.
The nursing home then sued the guardian for the fees (and legal costs) it had not collected from Ms. Selby while the failed Medicaid applications were pending. The home’s argument: while Ms. Lawson would not be personally liable for her ward’s nursing home costs in most cases, in this case she had failed to use “due care” in fulfilling her duties.
The trial court agreed, and entered a judgment in favor of the nursing home (and against the Public Administrator) for $16,779.65 — the difference between what the nursing home had collected from Ms. Selby’s income and what it would have collected. The judge also assessed attorney’s fees and costs of $6,597.00 against the Public Administrator.
The Missouri Court of Appeals disagreed, and reversed the finding in favor of the nursing home. In the appellate court’s analysis, Ms. Lawson’s liability for Ms. Selby’s debts was limited to the money in Ms. Selby’s name. Although the admission contract included specific language requiring the Public Administrator to use “due care,” it also included a provision that dealt directly with the possibility of Medicaid eligibility denial. That more specific section limited the facility’s rights to receiving payment from Ms. Selby’s funds; the court agreed with Ms. Lawson that the specific section controlled over the more general provision. Five Star Quality Care v. Lawson, April 7, 2009.
Samuel Paschall apparently posed some risk to himself and to the other residents of The Washington Home in Washington, D.C. From the day of his first admission to the nursing facility he had been closely monitored because he was difficult to handle, and becoming more so as time went on. When he complained of abdominal pain and was admitted to Walter Reed Hospital, the nursing home saw its chance—it issued what it called an “Advance Notice of Discharge” informing Mr. Paschall (and his daughter, who was managing his affairs) that he could not return to The Washington Home.
There were at least two problems with the notice of discharge sent by the Home. First, federal law requires that such notices must usually be given at least thirty days in advance. Second, any discharge notice from a nursing facility must include a description of the location to which the patient will be discharged. The Home’s notice did not meet either of those requirements.
Mr. Paschall’s daughter hired an attorney and challenged the notice with the District of Columbia Department of Health. An Administrative Law Judge heard the case, and agreed that the notice was deficient—although he ruled that the Home could issue a new notice that could comply with the federal and local requirements.
Instead, the Home did what nursing homes around the country too often do—it told Mr. Paschall’s daughter that his bed had been taken by a new patient, and there were no more Medicaid beds available. Mr. Paschall’s attorney returned to the Department of Health and requested an order that he would be entitled to return to the Home as soon as a Medicaid bed opened up. Ruling that Walter Reed Hospital had become the de facto discharge plan for Mr. Paschall, the Administrative Law Judge decided that an order compelling his readmission to the Home could only be issued by the courts. Mr. Paschall was instead released to a nursing home in nearby Maryland.
The District of Columbia Court of Appeals (the District’s highest court) disagreed with the Administrative Law Judge. The appellate court ruled that the Administrative Law Judge could apply the remedy urged by Mr. Paschall, and order his readmission to the Home. Before doing so, however, he would need to schedule a hearing to determine whether Mr. Paschall still wanted to return to the Home, as well as whether he had given up the right to return (as alleged by the Department of Health) by failing to cooperate with efforts to secure him a place. Most importantly, ruled the court, Mr. Paschall would need to establish that his return to the Home could be accomplished without jeopardizing other residents or himself. Paschall v. DC Department of Health, April 7, 2005.
When LPNs Diane Owens and Alisa Main were fired from their jobs with Fayetteville Health and Rehabilitation Center in April, 2000, they were sure their dismissals were retribution. Ms. Owens and Ms. Main had each complained to Kristy Unkel, the Director of Nursing, about the care provided by several certified nurse assistants (CNAs) at the facility. Ms. Owens had even lodged a complaint with the Office of Long-Term Care about what she saw as abuse and neglect of Fayetteville patients.
At least six CNAs had signed a letter to the nursing home administrator, in which they insisted that Ms. Owens created a difficult work environment for them. The CNAs also claimed that Ms. Owens and Ms. Main had themselves abused and neglected patients. According to the CNAs’ complaints, Ms. Owens had failed to document one patient’s fall and fractured hip, and Ms. Main missed a patient’s scheduled medication and spoke harshly to another resident.
One problem with the CNAs’ allegations was that work schedules made their version of the facts difficult to believe, since Ms. Owens had not even signed to work on the day of the patient’s fall. The CNA accusing Ms. Main of missing a patient’s medication was not signed in to work on the date of that alleged incident.
Ms. Owens and Ms. Mains sued Fayetteville and Ms. Unkel, the Director of Nursing. They alleged that they were discharged in retaliation for their complaints, and that their reputations were injured by the false allegations on which the firings were based.
After four days of testimony an Arkansas jury found in favor of Ms. Main and Ms. Owens. The jury awarded damages totaling $332,740 to the two LPNs. The Arkansas Supreme Court upheld the award.
Fayetteville had argued that it had a duty to report allegations of elder abuse, and that it could not be sued for incidents related to its reports against Ms. Owens and Ms. Main. The problem with that theory, ruled the state’s high court, was that the jury had found that Fayetteville did not act in good faith when it filed reports.
The facility also argued that Ms. Owens and Ms. Main were “at-will” employees, and could be fired for any reason or no reason at all. The high court pointed out that public policy considerations require protection for individuals who report abuse or neglect of vulnerable seniors, and employers may not retaliate against employees for such reports. The jury found that the firings were retaliatory and the high court agreed. Northport Health Services v. Owens, April 8, 2004.
As it turns out, Fayetteville’s problems with claims of inadequate care have continued since the firing of Ms. Owens and Ms. Main. In November of 2000–less than a year after Ms. Owens and Ms. Main were discharged–Fayetteville fell so far below the level of care required by the Medicare program that civil penalties were imposed and the facility was denied payment for new Medicare admissions for a two-month period.
Fayetteville’s problems included failing to notify two residents’ physicians about emergency medical conditions, and failure to protect one resident from the possibility of inappropriate administration of medication by a visiting family member. The ruling of the Administrative Law Judge in Medicare’s action against Fayetteville is available online at http://www.hhs.gov/dab/decisions/CR1050.htm. More recent information (still not encouraging as of the most recent survey date) is synopsized on the MemberOfTheFamily.Net website, which includes state-by-state and facility-by-facility information on nursing home survey results.
When someone in a nursing home qualifies for Medicaid, he or she will usually still have to pay a portion of the nursing home bill. In some cases this can mean that the resident must pay more than his or her income—or risk eviction from the nursing home.
Unmarried Medicaid recipients are expected to turn over nearly all their income to the nursing home. They are permitted to hold back a small amount monthly for personal needs (in Arizona the amount is currently $84.60). Premiums for Medicare Part B and other insurance coverage can also be withheld. Everything else usually must be paid to the nursing home.
Take Ervin Mulder, for example. The South Dakota man was receiving $701 per month from Social Security when he entered the nursing home. Medicaid officials ordered him to pay $671 to the nursing home each month (South Dakota only permits Medicaid beneficiaries to retain $30 for personal needs).
Mr. Mulder had gotten divorced a few years earlier, and his ex-wife had a court order directing him to pay $180 per month in alimony. In fact, that amount was being automatically deducted from his checking account each month as soon as the Social Security check arrived. Mr. Mulder simply could not pay $671 to the nursing home each month—he didn’t have it.
Mr. Mulder appealed the Medicaid agency’s determination, but the agency pointed to federal law and regulations. The federal government simply doesn’t provide for deduction of spousal support, for example, from the amount to be turned over. A trial judge ordered Mr. Mulder to pay the higher amount or face eviction from the nursing home.
South Dakota’s Supreme Court disagreed. In a 3-2 vote, the Justices decided that the Medicaid agency’s application of federal regulations was arbitrary and capricious. Mr. Mulder had no choice but to pay his ex-wife’s alimony, and he could not be required to pay the same money to both his wife and the nursing home.
The two dissenting Justices were unmoved. In their view, Mr. Mulder could go back to the state courts to reduce his alimony—though they did not suggest who might pay for those legal proceedings. If that didn’t work, they said, Mr. Mulder’s daughter should be required to come up with the $180 out of her pocket. Mulder v. South Dakota Department of Social Services, January 28, 2004.
Arizona rules are very similar to those in South Dakota. With no court case like Mr. Mulder’s, Arizona Medicaid (ALTCS) recipients are prevented from paying alimony or other debts. Although the result in Mr. Mulder’s case is (and we recognize the pun) appealing, it should not be relied on as precedent in other states.
It must be noted that the rules are different for married couples. A spouse living in the community can usually retain more of the nursing home resident’s income, with the precise amount varying in each case. The rules are also different—and considerably more complicated—for ALTCS recipients who reside in assisted living facilities, adult care homes or their own homes.
Betty Budd spent the last years of her life at Presbyterian Medical Center, a nursing home in Oakmont, Pennsylvania. When she died she owed $96,000 to the facility, and only had $28,000 left in her estate. After collecting that amount, the nursing home filed suit against Ms. Budd’s daughter Elizabeth.
Using a power of attorney, Elizabeth Budd had handled her mother’s finances for the entire time she resided in the nursing home. At one point, with the unpaid bill mounting rapidly, the facility contacted Elizabeth Budd about the delinquency. She insisted that the money was almost gone, and promised that she would spend down the remaining money and make an application with the state Medicaid agency.
Elizabeth Budd never did apply for Medicaid for her mother. If she had her mother would not have qualified. She still had too much money available, even at the time of her death—generally speaking, single Medicaid applicants may not have more than $2,000 in available resources. Even if Elizabeth Budd had simply paid a portion of the nursing home bill her mother would not have qualified if, as the nursing home suspected, Elizabeth Budd had taken $100,000 of her mother’s money and put it into an account in her own name.
The nursing home sued Elizabeth Budd after her mother’s death. Their lawsuit made four different allegations against her. First, it charged that she had agreed to spend down the money and make a Medicaid application, and that she had breached her contract. Second, it alleged that she had defrauded the nursing home by misrepresenting her intentions. Third, the nursing home argued that Elizabeth Budd had fraudulently conveyed her mother’s property to avoid her creditors. Finally, the facility claimed that Elizabeth Budd had a duty to use her own funds to support her ailing and indigent mother.
The Pennsylvania Superior Court dismissed the nursing home’s claims for breach of contract, fraud and fraudulent conveyance. It found that any agreement Elizabeth Budd entered into with the nursing home was really between the home and her mother, and that Elizabeth Budd could not defraud the nursing home because she did not personally owe it any money.
The court did decide, however, that Elizabeth Budd might be liable. Pennsylvania law requires adult children to support their indigent parents, and the court ruled that the nursing home might be able to prove that Elizabeth Budd owed money on her mother’s bill—especially if it appears that the very reason her mother was indigent was that Elizabeth Budd took her money. The case was sent back to the trial court for further proceedings to determine her liability. Presbyterian Medical Center v. Budd, August 29, 2003.
Betty and Elizabeth Budd’s case is in some ways similar to an earlier case reported on in Elder Law Issues. Almost exactly two years ago we described a Connecticut case involving J. Michael Cantore, Jr., who was sued for failing to get Medicaid eligibility for his ward, Diana Kosminer. Because he had been appointed as conservator for Ms. Kosminer, the nursing home brought suit against Mr. Cantore’s bonding company for an unpaid $63,000 nursing home bill. While two cases probably do not amount to a national trend, nursing facilities regularly report problems with getting family members, agents and conservators to properly pay care bills, and at least occasionally must resort to litigation to secure payment.
Qualifying a family member for Medicaid assistance with the cost of nursing home care can be complicated. When Pat Monroe’s mother went into a nursing home in Arkansas, Ms. Monroe had a clever idea: she had her mother buy an interest in her own home. Unfortunately for her it didn’t work as she intended.
Ms. Monroe’s mother, Berniece Groce, had moved into the Clay Cliff nursing home in July. Ms. Monroe held a power of attorney for her mother, and she used it to pay the nursing home expenses for nearly a year.
Ten months later Ms. Monroe took an unusual step. She bought a home for her mother—or at least an interest in a home. Using the last of her mother’s savings she paid $43, 953.13 for a “life estate” in Ms. Monroe’s own home.
The holder of a life estate is entitled to the use of the property for the rest of their lives, but their interest expires automatically on death. It is not uncommon for a property owner to transfer title to children or others, retaining a life estate. By this means the owner can dispose of the “remainder” interest during life while protecting his or her own right to use the property for life. But what Ms. Groce did (through her daughter) was different. She did not retain an interest in property she already owned, but instead purchased the life interest in property she had never owned before.
Because a Medicaid recipient is entitled to retain his or her home, Ms. Monroe reasoned that her mother’s life estate in the residence would be protected. Ms. Groce would qualify for Medicaid, Ms. Monroe could continue to live in the home (with her mother’s permission, of course), and her mother’s interest in the home would automatically disappear at her death.
Unfortunately for Ms. Monroe, the state Medicaid agency saw things differently. In its view, the purchase of the life estate was nothing more than Ms. Groce giving away over $40,000. She did not really purchase anything of value, reasoned the Medicaid agency, and she never actually resided in the home.
After Medicaid eligibility was denied Ms. Monroe appealed on her mother’s behalf. The Arkansas Court of Appeals agreed with the Medicaid agency and the trial court, and denied Ms. Groce’s Medicaid eligibility until the expiration of the disqualification period imposed by the $43,953.13 gift. Groce v. Director, Arkansas Dept. of Human Services, June 11, 2003.
Arizona Medicaid regulations require that the Medicaid applicant either actually resides in the home or “has resided” there. The result would probably be the same in Arizona.
