Elder penalized for wages paid to family caregiver, due to insufficient evidence

When a person applies for Medicaid to pay for home care or nursing home care, a penalty will be imposed if assets were given away during the preceding five year “look-back” period. There are numerous regulations in federal and state law  concerning “uncompensated transfers,” which are gifts.  A “gift” is distinguished by law from a “payment for goods and services at fair market value.” In general, any transfer of money from a Medicaid applicant to their family members during the look-back period will be suspected to be a gift unless there is credible proof that it was payment for something. For example, the child may be employed by the parent, or the child may have sold something to the parent. The applicant must show that the payment was not a gift.

In situations where the elder is paying their family member on an ongoing basis to provide home care services, the proofs become very important, so as to prove that this is wages and not a “gift.”  Greater scrutiny is given to those situations than to the situation where a non-family member is the paid Aide. Extensive evidence is needed to satisfy the agency that the work was actually done, that there was specified terms of employment, and that the wage was consistent with prevailing wages (i.e. not a wage of $70 an hour for work which is normally paid for at $15 an hour). A written contract isn’t explicitly required, but a recent case strongly suggests that it is needed.

Suppose, though, that the child is being paid now for caregiving services that were allegedly provided in the past? A payment made after the fact to a family member for alleged caregiving services is presumed to be a gift, if services were performed for free before the payment was made and there was no pre-existing written contract spelling it all out.  For such situations, the burden of proof is on the applicant to produce “credible documentary evidence preexisting the delivery of the care or services indicating the type and terms of compensation,” as well as proof that the wage was at “prevailing rates for similar care or services in the community.”  N.J.A.C. 10:71-4.10(b)6.ii.

The recent decision in E.B. vs. DMAHS  illustrates the common problem all too well. The decision is not approved for publication, which means it is non-precedential and is limited to its facts and the parties in the case.

E.B. moved into her daughter’s home, and the daughter began providing some  caregiving services when she was not at her job. After two years,  the daughter quit her job and became the full-time aide. The absence of income began to create a hardship for her. She was the Agent under Power of Attorney for her mother. She did some research about prevailing wage for this kind of work, and then using her mother’s funds,  she began to pay herself $10 per hour for 40 hours a week of home care companionship services plus $25 per week for the two-and-a-half hours she claimed she spent each week to shop for petitioner’s food, medication, and toiletries, “for a total of  $425 per week from April 2011 to May 2013, when petitioner entered the nursing home. J.W. did not keep a ledger of the services she provided and the days and hours she performed them. J.W. claimed that, when lucid, her mother understood and agreed to J.W. paying herself from petitioner’s funds to compensate J.W. for her services.”

When E.B.  applied for Medicaid to pay for her care, she was penalized for the $69,211.90 she had paid her daughter. (note that this amount divided by $425 is just over 36 months, so part of the payment must have reflected post-facto payment for work previously done). After a hearing with testimony and other evidence at the Office of Administrative Law, the penalty was upheld by the Division (DMAHS), and this appeal followed. The Appellate Court upheld the penalty.

The Administrative Law Judge found that (1) there was insufficient proof of the actual tasks performed, (2) there was insufficient proof that  rate selected was prevailing wage, and (3) there was no pre-existing written contract. The Judge held it against her that she began receiving wages when it was “foreseeable that [petitioner’s] advanced age and deteriorating condition would require intensive care and the possibility of entering a nursing care facility.”  This is a completely irrelevant consideration, as a person receiving care in the home would otherwise have to BE in the nursing home!!  The Director of Medicaid affirmed those conclusions.

The primary problem for E.B. was that the Medicaid Agency was not satisfied with the proofs provided.  The Appellate Court emphasized that there was no written agreement specifying terms of employment, and there were no records showing exactly what work was done, when and how. However, the Court was harsh, criticizing the daughter for choosing to be the caregiver rather than hiring somebody outside the family. I find this criticism deeply disturbing and unfair. National and state policy encourages people to take care of their family members, and in fact, the Medicaid home care program is only part time because it is presumed that there is someone available to fill in the gaps. Further, the Court did not distinguish between the payments for ongoing work and the payment for work previously done.  The Court found that “Petitioner did not rebut this presumption. She did not provide the requisite “convincing evidence” the asset was transferred exclusively for some purpose other than to establish eligibility. First, J.W. did not show why she could not have paid a competent professional ten dollars per hour to take care of her mother, which would have freed her up to return to work. As a former claims adjuster, presumably J.W. was capable of earning more than ten dollars per hour and, thus, would have been in a better position to address her budget needs. Further, while a third party may not have been a relative, that does not mean a competent professional caretaker could not have been located to meet petitioner’s needs.amount of proof that this was payment of wages for work that was actually done.”

The lesson here is that it is still perfectly legal for children to be employed by their parents to provide senior care in the home. However, the demands of the Medicaid program for elaborate proofs to disprove the notion that a payment was a gift require the applicant to prepare a strong paper trail coupled with  enough corroborating formal evidence to satisfy a state auditor. Informal verbal arrangements will not be sufficient. Assembling proof beyond a reasonable doubt is the safest approach to take.

Call for advice about home care plans, employment contracts, Medicaid applications and appeals …. 732-382-6070

Court reiterates the strict standards for “caregiver child” house transfer exception to Medicaid penalty

When a person applies for Medicaid to pay for nursing home care (or assisted living or in-home care), they have to be mindful of whether transfers of assets will result in a denial of benefits. This denial is called the “transfer penalty,” and the 5-year Look-Back rules  capture most transfers that occurred within the 5 years preceding the application. There are a handful of exceptions to the penalty. One of those exceptions has to do with an applicant who transferred their home to their “caregiver child.” If all the criteria are met, there will be no penalty for that transfer under both federal and state law.

The federal Medicaid law at 42 USC 1396p(c)(2)(A)(iv) says there is no penalty for transfer of the home to ” a son or daughter of such individual …  who was residing in such individual’s home for a period of at least two years immediately before the date the individual becomes an institutionalized individual, and who (as determined by the State) provided care to such individual which permitted such individual to reside at home rather than in such an institution or facility.” The New Jersey regulation at N.J.A.C. 10:71-4.10 (d)4.is the same as the federal that I just quoted, but adds “The care provided by the individual’s son or daughter for the purposes of this subchapter shall have exceeded normal personal support activities (for example, routine transportation and shopping). The individual’s physical and mental condition shall have been such as to require special attention and care. The care provided by the son or daughter shall have been essential to the health and safety of the individual and shall have consisted of activities such as, but not limited to, supervision of medication, monitoring of nutritional status, and insuring the safety of the individual.” A diagnosis such as Alzheimers Disease is an important part of the overall evidence of the arrangement.

So there are several elements to be proven, and the burden of proof is always on the applicant. The care that was provided has to meet the criteria in the New Jersey regulation. This is becoming more and more contentious as the State imposes extra unpublished standards. In addition, the child has to reside  in the applicant’s home for 2 full years immediately preceding the date that the applicant moves out to the nursing home or assisted living. 

In the recent decision in M.K. v. Div. of Med. Assistance and Health Serv., (New Jersey App. Div. 2016) the Appellate Division affirmed a transfer penalty that was imposed on M.K. who had transferred her house to her daughter, J.K. The daughter resided with her mother and provided the required  level of care. However, the caregiving didn’t satisfy the 2-year requirement, because within that 2-year period, M.K. actually was out of the house and residing with her son for 5 months.

Each of these cases is fact sensitive, but before transferring the property, a careful analysis of the impact on Medicaid eligibility is crucial.

Call us for advice and representation on Medicaid asset transfer planning, applications  and appeals … 732-382-6070

Transfers during the look-back merely raise presumption of intent to qualify for Medicaid

When a medicaid application is processed, five years’ of transactions are examined, and among other things, they look to see if there were uncompensated transfers or “gifts.” The agency then must presume that the transfers were made for the purpose of expediting eligibility, and can impose a transfer penalty  for the gifts. You are entitled to a Fair Hearing at the Office of Administrative Law to try to “rebut the presumption” by providing “convincing evidence” that gifts were made exclusively for a purpose unrelated to potential Medicaid eligibility. Sometimes, life takes a terrible turn and an otherwise healthy person makes gifts to their children but then becomes catastrophically ill and requires Medicaid to pay for their bills. That’s what happened to Mr. and Mrs. M in a case I handled  6 years ago.

Mr. and Mrs. M were in their mid-50’s. He retired at about 57 years of age. Coincidentally, the factory where his  wife worked closed down. They had 2 children. They sold their house in NJ, transferred some of the modest proceeds to their children, and took a long-awaited and prolonged vacation out of the country . Upon their return, staying in their daughter’s apartment as they began looking for a new house to buy, Mrs. M. became desperately ill with a rampaging infectious condition and required lengthy hospitalization. She had no insurance and did not survive the crisis. In processing the Medicaid application, the agency  imposed a transfer penalty for the gifts. We appealed.

Estate of M.M. vs Division of Medical Assistance & Health Services & Union County Board of Social Services, OAL docket no. HMA 13911-08 (2009)

DMAHS’ Final Agency Decision May 2009 adopting the ALJ Initial Decision, reverses County Board’s action that penalized pre-eligibility transfers of assets. The Agency confirmed the ALJ findings that  transfers made to her daughters a year before the application were made exclusively for a reason unrelated to medicaid eligibility.

These cases are all fact-sensitive. Particularly in the case of younger applicants, there is opportunity to “rebut the presumption” with the careful development and presentation of the relevant evidence.

Call us for advice about Medicaid eligibility, planning, applications and appeals … 732-382-6070

Get ready for a wild ride when filing a NJ Medicaid application

Growing old doesn’t mean that people stop taking care of their family members and think only about themselves. Families expand. Children may enter second marriages. The grandchildren get married. A child  may run into financial trouble, lose their job  or become medically disabled. Loving families support each other and that often means that people will share their home with the next generation and financially assist them. A retiree may still be supporting a child who never quite made it on their own or can’t quite afford to raise his own children. All of this support may be a “gift,” but people aren’t thinking about eventual Medicaid eligibility.

Children are often supporting their parents who have run out of cash. There might be an unwritten understanding that “when the house sells, I’ll pay you back.” They may or may not keep track of all these expenditures and loans. In some cases, children may be doing all the purchasing for the infirm parent — they may put all the purchases on their own credit card (to get the points) and be periodically repaid by a parent. All of this support may be a loan, but people aren’t thinking about how Medicaid will look at the use of the parent’s money to pay them back.

People spend their money in a way that meets their needs, and normally don’t have to account to anyone about what they do. But when the aged person has to apply for Medicaid to pay for their nursing home care or home care (or assisted living), every single financial transaction of the prior 5 years is put under a microscope. And from the time the application is filed, they may only give the applicant 90 days to produce 5 years of account statements and cancelled checks, and all the scraps of paper necessary to explain every check, deposit or cash withdrawal. It can be an impossible task, and the law puts the burden on the applicant. When the person compiling the documentation is a third party who wasn’t involved — a niece, or a stand-by agent under power of attorney who now has to step in because the applicant can’t function any more — they may have absolutely no idea what the applicant was doing with his money or why he was in the habit of going to his ATM and taking out $750 in cash twice a month.

Take a look at this sample of the kind of questions that were asked on one particular Medicaid application. This is very typical. Oftentimes, the person filing the application (next of kin) has no idea what the answers are.     Sample Verifications Request from caseworker              And if the applicant can no longer remember, what’s to be done?

Sure, it’s important for aging people to retain their documentation for at least five years, keep things organized and have a paper trail, and it’ s important for people to have their lawyers create documents to confirm a financial arrangement. However, it’s equally important that government agencies which are performing the administrative task of evaluating Medicaid eligibility not treat each case like a forensics investigation. Administrative law requires proof by a mere preponderance of the evidence – it’s a standard that should require an evaluator to take a reasonable look at a situation and not require proof “beyond a reasonable doubt” as to every dollar that was spent or received. Presently, Medicaid applicants find that every dollar spent that  they can’t explain is treated as a gift to someone else which was intended to speed up their Medicaid eligibility. The result that a transfer penalty is imposed. The application process is becoming increasingly difficult for individuals to navigate. Forewarned is forearmed!

Call us for legal advice and assistance with Medicaid applications, hearings and appeals, as well as asset protection plans …. 732-382-6070

 

 

 

Was it a Gift or a Loan? What do your Other Kids Think?

Many times over the years, as we work on their estate planning, my senior clients have told me that they gave a substantial sum to one of their children to help them with a specific need. Perhaps it was to pay off debt, or buy a house, or start a business, or pay for college expenses for their own children. Whatever the reason, an important legal question comes up: “Was this a gift or a loan?”

A gift is a unilateral transfer of assets from one person to another made for “no consideration,” meaning, with no expectation of repayment and no obligations placed on the receiving party to return something of equivalent value. (By the way, “selling the house for a dollar” is a gift). A loan on the other hand is a 2-party transaction, in which one party gives money to the other in exchange for a mutually-understood obligation to repay. It’s a contract. There must be a “meeting of the minds” on all of the terms.

Why does it matter? The parent may feel that they want to treat their children individually during lifetime and help them as needed, even if that means giving one child more than the other. That same parent may plan to leave her estate equally to all of the children. I always ask, was this transaction a loan to be repaid during your lifetime? Did your child sign a promissory Note? If so, the child has a debt on their “balance sheet,” and you have an asset (the Note). Do you expect to be repaid during your lifetime? Did the child make some agreement with you to repay, even if it wasn’t put in writing? Is the child in the process of repaying you? If the loan is unpaid at your death, the estate will be the holder of the Note. Do you expect the child to repay the estate? Or do you want to forgive the indebtedness? Do you want to adjust the distributions in the Will to take into account the money you previously lent?

There has been plenty of litigation in estates, where money was advanced by the deceased to one child, but the others believe the money was intended as a loan and not an unconditional gift, and they want the recipient to repay the estate or take less of an inheritance. In the absence of a writing that confirms the loan, these can be real uphill battles. In the Medicaid context, there are different consequences — gifts made during the 5-year look-back may cause disqualification, whereas loans would not, but the Note might be a  “resource” and the loan repayments might be “income.”

These loving family transactions can have serious legal ramifications. Sometimes the simple, unwritten agreement can cause more problems for you later than a written arrangement made with legal advice. In planning for a good old age, be sure to think it all through.

Contact us for elder law and estate planning … 732-382-6070