Recently, Meghan Davey, the Director of the New Jersey Division of Medical Assistance and Health Services, issued a final agency decision that correctly states the correct law governing irrevocable trusts. Ms. Davey’s decision is important, because the counties are beginning to interpret the law governing trusts in an incorrect manner. County workers need proper guidance as to how to analyze trusts, so they don’t improperly deny applicants Medicaid benefits to which they are entitled.
Medicaid is a federal and state 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 care in a nursing homes or assisted living residences.
The cost of long-term care can be exceedingly high. While some might debate the morality of planning to qualify for a government “welfare” program, the fact of the matter is Medicaid planning is perfectly legal and permissible. Numerous courts have stated that Medicaid planning is something in which most competent people can and do engage.
Over the years, I have assisted many people in qualifying for Medicaid. I know for a fact that some of my clients were individuals who staunchly align themselves with conservative political thinking; the type of thinking that abhors big-government with its government welfare programs. Yet, when it came time for a family member to benefit from Medicaid and Medicaid planning, these otherwise fiscally conservative thinkers were lining up to qualify for Medicaid.
And there is nothing wrong with that. It is a shame that our country treats health care in such a cavalier manner, almost blaming people for needing care. People age and with age, we diminish in our capabilities and require the assistance of others. If you are fortunate to live into your 80’s and 90’s, you will find yourself in need of the assistance more than you needed the assistance of others when you were in your 20’s and 30’s.
Putting aside the morality of Medicaid planning and the politics of the Medicaid program, the fact of the matter is, Medicaid is a law, a very complex law. A great many statutes make up the Medicaid Act.
If you enter a nursing home and seek to qualify for Medicaid benefits, you will file your application for benefits with the county board of social services for the county in which you reside. The county will process your application and can either approve or deny the application.
If the county denies your application, you have the right to take a fair hearing of the denial. A fair hearing is an administrative appeal of the denial of your Medicaid benefits. The first step in a fair hearing is a hearing before an administrative law judge.
Whether the judge rules in your favor or against you, the judge’s decision is reviewed and passed upon by the Director of the New Jersey Division of Medical Assistance and Health Services. The Director, Ms. Davey, makes a final agency decision. Her decision is the final administrative decision in your case. If you disagree with her decision, then you have to appeal to the Superior Court of New Jersey, Appellate Division.
In a recent case, Director Davey correctly analyzed an irrevocable trust that is commonly known as an “income-only trust.” The trust is established with the funds of the applicant, typically more than five years before the date any application for Medicaid benefits if filed.
The trust entitles the applicant to payment from the income the trust generates (interest and dividends), but no right to payments from the principal of the trust. For this reason, the trust is called an income-only trust.
In the recent case, the county denied the applicant benefits. The county took the position that any trust an applicant establishes with his own money is prohibited no matter how many years have passed since the trust was funded, but Director Davey correctly analyzed the trust as an irrevocable income-only trust, which only entitled the applicant to the income.