The Caregiver Child

A recent decision of the Superior Court of New Jersey, Appellate Division, highlights an interesting issue affecting New Jersey’s Medicaid program.  This new decision and the fact that several of my colleagues are suing the state of New Jersey over this issue makes it something worth bringing to the public’s attention.

Medicaid is a health payment plan for needy individuals. In order to qualify for Medicaid, an individual must have a very limited amount of assets, typically less than $2,000 in countable assets.

Because a Medicaid applicant must have very limited assets in order to qualify for benefits, many applicants think they can simply give their assets away and qualify for benefits.  For this reason, Medicaid has rules concerning the transfer of assets.

If an applicant gave away any asset within five years of applying for Medicaid benefits, Medicaid punishes the applicant.  This five-year period of time is commonly known as the lookback period.

The manner in which Medicaid punishes the applicant is by making him ineligible for Medicaid benefits for a period of time. This period of time is known as a penalty period; a penalty period is a period of ineligibility for Medicaid benefits.

The more valuable the asset that was given away, the longer the period of ineligibility for Medicaid. Medicaid will aggregate the value of all assets that an applicant gave away during the lookback period to calculate the penalty period.

After Medicaid has a total value of assets given away during the lookback period, Medicaid divides that total figure by a divisor number in order to calculate the penalty period. The divisor number that Medicaid uses is based upon the statewide average cost of a nursing home room.  The current divisor figure that Medicaid uses is approximately $10,000.

For every $10,000 that an applicant gives away during the lookback period, he will be ineligible for Medicaid benefits for one month. This is the penalty period.  If Mr. Smith gave away $60,000 during the five-year period prior to applying for Medicaid benefits, he will be ineligible for Medicaid benefits for six months.

There are certain exceptions to the transfer of asset rules. One exception has to do with a transfer of the house of the applicant.

If an applicant transfers his house to his child who lived with him for a period of two years prior to the applicant entering a nursing home and if the child provided a level of care to the parent that enabled the parent to live at home instead of in a nursing home during that two-year period of time, then Medicaid cannot impose a penalty period against the applicant for his giving his home to his child. This is called the caregiver child exception.

Recently, New Jersey has imposed an arbitrary and unwritten rule prohibiting a caregiver child from working during the two-year period. If the child worked during the two-year period of time, then Medicaid will claim that the child is not a caregiver child.

In the recent appellate division case, the court held that the applicant had failed to prove by sufficient evidence that his child had provided the requisite level of care during the entire two-year period of time. Interestingly, the child worked and the court did not find this fact to be a per se bar to the child’s caregiver status.

While I believe that work can be a factor in whether or not a child is a caregiver child, it cannot be a per se bar to caregiver child status. Oftentimes, disabled elderly people need a lot of care at night.  They need help getting to the bathroom at night.  The might wander at night.  They might need medications at night.  Providing care is a 24/7 job and no one person can be expected to provide all of that care.

Is Medicaid Planning Illegal?

Is it illegal to give advice to a person about how best to qualify for Medicaid benefits? It depends.  If the person giving the advice is not a lawyer, the answer is, yes, it is illegal.  The Supreme Court of New Jersey’s Committee on the Unauthorized Practice of Law issued Opinion 53 on May 16, 2016 (Opinion 53).  In Opinion 53, the Committee held that providing advice on strategies to become eligible for Medicaid benefits is the practice of law.  When an individual who is not an attorney renders such advice, it is the unauthorized practice of law, which is a crime.

Medicaid is a health payment plan for needy individuals.  If a person qualifies for Medicaid benefits, Medicaid will pay for many of the costs associated with long-term care, such as a nursing home or assisted living residence.

Medicaid planning is a process through which attorneys advise individuals how best to preserve some or all of their assets and qualify for Medicaid benefits.  There are a great number of strategies that can be employed to assist an individual who would not otherwise qualify for Medicaid benefits to qualify for Medicaid benefits.  These strategies inevitably involve applying a complex law, the Medicaid Act, to the person’s individual situation.

Such an application of the law to an individual’s facts is the practice of law. For those of you who have read my column in the past, you know that I have made this argument in many previous columns.  On May 16, 2016, the Supreme Court of New Jersey concurred with my prior pronouncements on this issue.

In fact, I had a part in the issuance of Opinion 53, having co-authored the New Jersey Bar Association’s submission to the Committee.  The State Bar’s submission was the impetus behind the issuance of Opinion 53.

What spurred my fellow elder law attorneys and I to obtain this opinion from the Committee is the great influx of non-attorney “Medicaid advisors” in recent years.  The federal regulations governing the Medicaid program permit an applicant for Medicaid benefits to obtain help from any person with regard to the filing of his Medicaid application.  An applicant for Medicaid benefits can also enlist the services of any person to represent him before the Medicaid Office in an appeal of a denial of Medicaid benefits.

The person the applicant hires to assist him with these tasks does not have to be an attorney. And nothing in Opinion 53 changes the fact that a Medicaid applicant can hire a non-attorney to assist him with filing his application for Medicaid benefits or in representing him in an appeal of a denial of Medicaid benefits.

What is illegal is for the non-attorney Medicaid advisor to provide any advice to a Medicaid applicant as to how best to qualify for Medicaid benefits. It is also illegal for a non-attorney Medicaid advisor to draft any of the documents commonly used in planning for Medicaid eligibility, such as trusts and wills.

I have always said to my clients and to my staff that even the “simple” Medicaid case isn’t as simple as the case initially appeared and that all cases require some legal advice. In some form or another, every one of my clients has always required that I apply the Medicaid law to their facts in order to qualify the client for Medicaid.  So, I don’t know how any non-attorney Medicaid advisor could effectively represent a customer in qualifying for Medicaid benefits without retaining an attorney to assist them.  In fact, I don’t see how any such advisor could “represent” his customer at all without hiring an attorney, as well, since qualifying for Medicaid almost always involves some form of legal analysis.

Because Medicaid is such a complex law, I feel safe in saying that in all but the most simplest of cases (a case I have never seen in the thousands of cases in which I have been involved), if you are seeking to qualify for Medicaid with the assistance of a non-attorney Medicaid advisor and an attorney isn’t assisting you in some manner, as well, then your non-attorney Medicaid advisor is committing a crime.

Do I Recommend Long-Term Care Insurance?

Do I recommend that my clients purchase long-term care insurance?  It’s a question that I am often asked.

My answer is always the same:  I recommend that you look into it.  If you feel you can afford it, then you should.  But be warned:  The premium on the insurance will go up over time in most cases, so you have to be committed to the product.  Don’t buy it when you are 65, for instance, costing you $800 a year in premiums, then drop the coverage when you are 80 because it’s costing you $3,000 a year in premiums.

Long-term care insurance is a type of private insurance that will pay for the costs associated with long-term care.  Long-term care is care in a nursing home, an assisted living residence, or at home, such as home health aide services.

A need for long-term care exists when a person cannot perform one or more of the basic activities of daily living.  The basic activities of daily living are clothing, bathing, toileting, transfers from a bed to a chair or to a chair from a standing position, eating, and ambulating (walking).  Commonly, a long-term care insurance policy will define a need for long-term care as existing when the insured cannot perform two or more of the basic activities of daily living.

Most people who need long-term care need that type of care when they are in their 80’s.  For this reason, it is often difficult to purchase long-term care insurance by the time you are 80 or older.  A good time to look into the insurance, in my opinion, is when you are around 60 years of age.

Long-term care insurance has never really taken off.  Most people believe the premiums are too high and don’t want to pay for the insurance.  I also believe that most people are overly optimistic about their future need (or lack of need) for long-term care services.

It’s nice to think that someday, we’ll just die peacefully in our sleep at the age of 100 after we have told our family that we love them and realized that we had a wonderful life.  Reality is sometimes different.

I have served as guardian for over 100 people.  I have served as special medical guardian for over 50 people.  I have made end-of-life decisions for about 20 people.  I have helped over 2,000 people qualify for Medicaid benefits.  My mother is 91 and has resided in a nursing home for 3 years (despite the fact that when competent she would tell us to “just shoot me” if she ever needed to be placed in a nursing home; ironically, she’s quite happy) and my father is 88 and has required the assistance of a home health aide for the past 4 years.

I have a vast experience with long-term care needs and issues associated with aging.  I have seen firsthand—many, many times—the needs people have for long-term care services.  I have made long-term care decisions and end-of-life decisions for far more people than the average person will ever have to make.

I can say unequivocally that if you are lucky enough to attain the age of 80, there is a strong probability that you will require some long-term care services.  For that reason, I recommend that my client’s look into long-term care insurance.

Nowadays, insurance companies offer greater options to insureds.  Instead of paying a premium for insurance that is lost if the insured never requires long-term care, companies are offering riders to life insurance policies and annuities whereby the owner of the life insurance policy/annuity can receive long-term care insurance benefits in addition to the benefits of owning a life insurance policy or of owning an annuity.  In this way, even if the insured never needs long-term care, his family will receive the benefits of the life insurance policy or the death benefit of the annuity.

Executor’s Duty To Account

When an individual dies, someone has to be appointed to handle the affairs of his estate.  If a person dies with a last will and testament, then the decedent typically nominated someone to handle the affairs of his estate.  The person nominated to handle the estate is called the executor.  If a person dies without a last will and testament, then the person appointed to handle the affairs of the decedent’s estate is called the administrator.

For all intents and purposes, the role of executor and administrator are identical and for purposes of this discussion will be called an executor. An executor is a fiduciary, meaning that an executor is held to a very high standard of care when dealing with the affairs of the estate.

The executor must ensure that all the assets of the estate are gathered together. He must ensure that all of the debts of the estate are paid.  After all the assets of the estate are collected and all the debts of the estate are paid, the executor must account to the beneficiaries of the estate, if the beneficiaries want an accounting.  After the accounting is approved, the executor must distribute the assets of the estate to the beneficiaries.

The executor has the right to hire an attorney and other professionals to assist him with his duties. The executor can pay the fees these professionals charge from the assets of the estate.

Before an executor distributes the assets of the estate to the beneficiaries, he should always obtain a release from the beneficiaries. The release is an acknowledgement from the beneficiary that the executor faithfully performed his obligations as executor and an agreement to refrain from taking any action against the executor for an alleged breach of the executor’s duties.

If an executor fails to obtain a release from the beneficiaries, then the beneficiary could sue the executor for an alleged breach of the executor’s duty to the beneficiary. If the executor releases the assets of the estate to the beneficiaries before obtaining a release, then the executor has little leverage over the beneficiaries with which to obtain releases.

Many times, an executor will circulate an accounting to the beneficiaries and ask them to sign a release. Once releases are obtained from each of the beneficiaries, the executor will distribute the assets of the estate to the beneficiaries.

If a beneficiary refuses to sign the release, then the executor has the right to file his accounting with the court and obtain court approval of his accounting. Obtaining court approval of an accounting could cost an estate many thousands of dollars in fees.

With most estates, the beneficiaries are the spouse of the decedent and the children of the decedent. In most instances, these individuals get along and trust one another. The beneficiaries also frequently know what assets the decedent owned and know, approximately, what debts the decedent owed.

Given this trust and knowledge, most beneficiaries do not want the executor to account for his actions with the assets of the estate. They have a fair knowledge of what an accounting will tell them, so there is no reason for the executor to account to them.

Sometimes, this is not the case. Sometimes, the beneficiaries do not have a good relationship with the executor.  The beneficiaries might not trust the executor and might believe that the executor is hiding assets from them.

There is no doubt that the beneficiaries have a right to an accounting. There are statutes and court rules concerning an executor’s obligation to account to the beneficiaries of the estate.  A well-drafted accounting can tell the beneficiaries a lot about the financial affairs of the estate—the assets the decedent held, the changes that have occurred in those assets since the decedent’s death, and the liabilities that the executor paid with the assets of the estate.

On the other hand, beneficiaries should bear in mind that accountings cost money to compile. An executor will probably retain the services of an attorney to draft the accounting.  The time the lawyer spends on the accounting will be billed to the estate, which, for all intents and purposes, means that the beneficiaries are paying for the accounting.

One of the first questions I ask a client who is the executor of an estate is, “Do you get along with the beneficiaries?” As with many things in the law, the working relationship of the parties often determines the amount of legal fees that will be expended.