Unequal Under the Law

Recently, the Supreme Court of the United States rendered a decision through which it struck down key provisions of the Defense of Marriage Act, better known as DOMA.  DOMA is a federal law that prevented same-sex couples from receiving any federal benefits, such as Social Security and Medicaid.  DOMA said that whether or not a State recognized a same-sex couple as being legally married, the federal government must refuse to recognize that marriage for purposes of federal benefits.

By striking down DOMA, the Supreme Court left the door open for the federal government to treat opposite-sex and same-sex couples equally.  For instance, the Court’s decision permits the federal government to give a surviving same-sex spouse Social Security benefits based upon the deceased same-sex spouse’s work history.

In the months since the Supreme Court’s decision, the federal government has begun bestowing equal benefits upon same-sex couples.  For instance, the Social Security Administration changed its policy manual to recognize that same-sex couples who reside in states in which same-sex marriage is permitted are married for purposes of various federal benefits.

The Supreme Court’s recent decision and the federal government’s willingness to treat same-sex couples equally sets up a very interesting scenario in the state of New Jersey.  A few years ago, the Supreme Court of New Jersey ruled that same-sex couples are entitled to the same rights as opposite-sex couples under this state’s constitution. New Jersey’s Supreme Court did not say that the legislature must permit same-sex couples to marry, but it did say that same-sex couples must be provided with a mechanism through which they can receive marriage-like treatment under the law.

In reaction to this decision, New Jersey’s legislature created what are known as domestic partnerships.  Essentially, a domestic partnership is a legal partnership through which same-sex couples are supposedly entitled to all the rights to which a married opposite-sex couple would be entitled.  As long as the legislature has given same-sex couples the same rights as opposite-sex couples, the legislature is complying with the New Jersey Supreme Court’s decision and our constitution.

For the past several years, same-sex couples have sought to challenge the fact that they cannot “marry” under our laws and can only enter domestic partnerships.  The argument against them is, you are given all the same rights, it’s just not called marriage.

Governor Christie is against same-sex marriage.  He believes the right of same-sex couples to marry should be left up to the constituents, and that the issue should be put to a referendum vote.  Essentially, a majority of the people would vote on whether or not same-sex couples should marry.

Personally, I believe same-sex couples should be permitted to marry.  They aren’t asking to be married in a church or a temple.  Such a request would be up to the religious organization, and if the religious organization refused the request, there is nothing the government could do about that, as there is a separation of church and state in this country.

Same-sex couples are asking to be treated equally under the law.  Many of us say we live in a great country, an exceptional country, but it is hard to believe that statement when a percentage of our population is denied fundamental rights.

The arguments against same-sex marriage are weak.  People worry that such marriages will degrade the sanctity of marriage.  Approximately 50% of the marriages end in divorce.  Do all those divorces degrade the sanctity of marriage?  Permitting same-sex couples to marry isn’t going to degrade the sanctity of my marriage.

The recent amendment to the Social Security Administration’s policy manual lists the states that permit same-sex marriage and from which same-sex couples are entitled to shared federal benefits.  New Jersey is not on the list.

This fact, in and of itself, sets up the right of same-sex couples to petition our Supreme Court and request that the Court fulfill its decision holding that they are entitled to equal protection under our constitution.  This issue has reach an inevitable conclusion; some people just haven’t accepted it yet.

A Federal Victory … Yet Again

I hate to sound like a broken record, but another federal court decision was just published that supports the use of annuities as a Medicaid planning technique.  Medicaid is a federal and state health insurance program for needy individuals.  Unlike most health insurance programs, Medicaid will pay for long-term care, such as care in a nursing home or assisted living residence.

Many people who need long-term care seek to qualify for Medicaid benefits.  Nursing homes in New Jersey can cost up to $12,000 a month, so even people who have a decent amount of money can be bankrupted very quickly by long-term care costs.

Annuities have been used as a technique to aid a person in qualifying for Medicaid benefits for several years now.  Typically, the purchase of an annuity is used when there is a couple involved with the planning.

Assume the following:  Mr. Smith enters a nursing home.  Mrs. Smith remains at home and is in reasonably good health.  The Smiths own a home, a car, and about $300,000 in cash.

The Medicaid program pools a couple’s assets, so it is irrelevant whether the $300,000 is in Mr. Smith’s name, Mrs. Smith’s name, or jointly-held between the Smiths.  Whatever assets one member of a couple owns the other member of the couple owns.

The Medicaid program will permit Mrs. Smith to retain the home, the car, and about $115,000 of the cash.  Mr. Smith can retain no more than $2,000 of the cash.  So, in order to qualify for Medicaid, the Smiths will have to “spend down” their cash assets to $117,000 ($115,000 for Mrs. Smith and $2,000 for Mr. Smith).

To “spend down” simply means to spend your money.  Without planning for Medicaid eligibility, most of the spending down that the Smiths will be doing will be in the form of paying Mr. Smith’s $12,000 per month nursing home bill.  Paying that bill, the Smiths will have accomplished their $185,000 spend down ($300,000 – $115,000 = $185,000) in about fifteen months.

Think about that, the Smiths worked their entire lives to accumulate $300,000 in savings.  If they are anything like the current older generation, the Smiths probably went without many of the luxuries in life—vacations, newer clothes, going out to eat.  They wanted to ensure that they had money so they would never be a burden on anyone and so they could pass something to their children when they died.

But the cost of long-term care drives their savings down 66% in fifteen months.  In another ten months, they’d be completely bankrupt.

Unlike assets, which are pooled between the couple, income belongs to the individual whose name is on the check.  So, if Mr. Smith has Social Security income of $1,500 per month and a pension of $500 per month, that is his income.  If Mrs. Smith has Social Security income of $1,000 per month, that is her income.  There is no pooling of income.

The purchase of an annuity, structured properly, can be used to convert excess assets (the $185,000 in the Smiths’ case) into a stream of income.  If that stream of income belongs to Mrs. Smith, not Mr. Smith, it will not count against Mr. Smith for purposes of eligibility for Medicaid.  Needless to say, the various states hate this fact.

In a recent federal appeals court case out of the federal Eight Circuit (the federal circuit serving North Dakota and some other states), the court shot down a multitude of arguments that the state of North Dakota and various other states were making against the use of annuities as a Medicaid planning technique.

In this case, entitled, Geston v. Anderson, the states of Hawaii, Kansas, Maryland, New Mexico, Oklahoma, Rhode Island, Tennessee, and Connecticut joined with the state of North Dakota, hoping to impress the court with their concern over the use of annuities and to support North Dakota’s attempt to prevent annuities to be used as a Medicaid planning technique.

They lost.  And the states didn’t kind of lose, they were shot down in flames on every argument they made.

No Way Out … Really?

Today, I read an interesting article in the Asbury Park Press, No Way Out (Asbury Park Press, Section A1, Sunday, September 1, 2013).  The article was about a gentleman by the name of Ken Schmidt who fell, bumped his head, was rendered incapacitated for several weeks (or months … the article didn’t specify), and had a guardian appointed for him.  His guardian was the Office of the Public Guardian for the Elderly, which is a state agency that sometimes serves as a person’s guardian.

The basic tenor of the article was that Mr. Schmidt’s civil rights were taken away from him and now, after he regained his mental capacity, he couldn’t get those rights back.  According to the article, he was being forced to living in an assisted living residence, as opposed to his home, and couldn’t undo the guardianship that had been foisted upon him.

The author of the article interviewed the surrogate of Ocean County.  The ocean county surrogate indicated that Mr. Schmidt would need affidavits from two licensed physicians attesting to the fact that he had regained his mental capacity before the guardianship could be undone and Mr. Schmidt’s civil rights could be returned to him.  The Surrogate also indicated that his office only handles two or three “return to capacity” actions a year, making such actions rare.

The problem for Mr. Schmidt was, his cash assets had all been spent on the assisted living residence and having been declared incapacitated, he did not have access to an attorney or to physicians who could attest to his regained capacity.

Personally, I have several problems with the tenor of this article.  A guardianship is a court procedure through which one person, the guardian, has another person, the ward, declared incapacitated as the result of physical or mental infirmity.  The idea is that the ward, because of physical or mental incapacity (or a combination of the two) can no longer handle his affairs.

From what I could gather, Mr. Schmidt was a single individual who never executed a financial power of attorney or living will.  In other words, he never appointed another individual to make decisions for him if he were ever unable to make those decisions for himself.  After he bumped his head, for at least several weeks, he was unable to make decisions for himself.

During those weeks (or perhaps months), I am sure that many decisions needed to be made for him—health decisions, residential decisions, financial decisions.  Since Mr. Schmidt was incapacitated by his own admission during this time period, the hospital couldn’t simply make medical decisions for him without his input and consent and the hospital couldn’t discharge him to a facility, such as a nursing home for rehabilitation.  Moreover, he couldn’t simply go home, because people who are incapacitated typically don’t take good care of themselves.  The hospital would be liable if it didn’t provide for Mr. Schmidt’s proper care and discharge.

Now, Mr. Schmidt has regained his capacity.  So, it is fit and proper that his guardianship should be dissolved and his rights should be returned to him.  I disagree with the Ocean County surrogate’s assessment that Mr. Schmidt must now obtain the affidavits of two physicians (whom Mr. Schmidt cannot afford to retain) to attest to his regained capacity.

There is a court rule and a New Jersey statute that addresses the return to capacity of a person who has been adjudicated as being mentally incapacitated.  Neither the court rule nor the statute require the ward to obtain two physician’s affidavits.  The two-physician-affidavit standard is the standard to declare a person incapacitated, not the standard to declare that a person has regained his capacity.

The rule and statute only say that the action to declare that a person has regained capacity must be “supported by affidavit … setting forth facts evidencing that the previously incapacitated person no longer is incapacitated.”  So, Mr. Schmidt could file an action pro se supported by an affidavit that he signs, not a physician, outlining why he believes he has his mental capacity and no longer requires his guardian.  The court would be forced to hear his case, and if Mr. Schmidt could prove his case, his guardianship would be dissolved.

Guardianships are very necessary court actions.  They are not actions designed to strip people of their rights and leave them with “no way out.”  Knowing that a ward has no money, our legislature and Supreme Court established a cost-free way out.