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 The decision is not approved for publication, which means it is non-precedential and is limited to its facts and the parties in the case.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

Residence in Nursing Home not sufficient to defeat claim for Elective Share

The Medicaid program determines eligibility for a married applicant based on the amount of resources owned by the applicant and his spouse. If the community spouse dies first, the program will count as a resource the amount of assets that the surviving spouse is entitled to receive from the Estate to satisfy his claim for the “elective share.” If the individual fails to pursue his claim for the “elective share,” he may receive a transfer penalty for “giving away” the assets he should have received from the Estate. Alternatively, he may be deemed to have owned the amount of resources that he failed to seek. Also, the State imposes a lien against the estate of a deceased Medicaid beneficiary, and the lien attaches to all resources in which the individual had an interest at the time of death. One of the exceptions to having the right to claim an elective share is if the couple were living separate and apart at the time of the death under circumstances giving the deceased grounds for divorce.

The New Jersey Appellate Division has issued an opinion that examines many aspects of the claim for an elective share. Here is a pdf: Estate of Brown elective share case 2017.  Arthur Brown was married to Mary Brown. Arthur developed Alzheimers Disease and moved into Assisted Living. later he needed to move into a nursing home. He transferred his interest in the marital residence and other assets to his wife Mary and successfully applied for Medicaid benefits, which began in 2008. In 2010, Mary died, but Arthur did not claim the elective share and received no distribution from his wife’s Estate. The County Board of Social Services notified Arthur that it would impose a “transfer of assets penalty” on him and would discontinue benefits. One of Arthur’s positions was that at the time Mary died, they were living separate and apart and she would have had grounds for divorce due to his Alzheimers Disease. He pursued his appeals, and elected to have his Medicaid benefits continue during the appeal process. Arthur died in 2013 before the appeals were concluded. The State then imposed its lien, asserting that the amount of resources which would have comprised the elective share was subject to lien. That led to this case decision.

The case provides a detailed review of both the Medicaid lien statute as well as the issues involved with determining when the elective share applies. In particular, the Court held that there was no evidence that the marital relationship was disrupted or that either party had intended to seek divorce or initiated a complaint for divorce. Although the two of them had different residences, the presence of advanced Alzheimers Disease was not seen by the Court as proof in and of itself that grounds for divorce existed, so the Court agreed with the trial court Judge that allowing the exception to apply would create a broad risk that certain surviving spouses would be left with no support.

Every case is specific to its facts. Call us for advice on elective share claims and other Medicaid eligibility issues …….. 732-382-6070

Medicaid penalty imposed when life tenant received no proceeds of the home sale

A “life estate” in property is an interest that has a quantifiable value. If ownership of property can be thought of as giving the owner a “bundle of rights,” the life estate is a partial ownership of that bundle. For instance, the owner of property has the right to sell it, improve it, demolish it, rent it, give away a partial interest, and reside in it.  The life tenant has the right to reside in the property and exclude other residents, and the right to receive the rent if s/he moves out. At sale, the owner of the life estate is entitled to a percentage of the proceeds based on their age at date of sale.

A new non-precedential appellate division case  called E.S. vs. DMAHS has confirmed this legal principle. E.S. transferred her property to her daughter in 2006 and reserved a life estate. Eventually, she moved into a nursing home. In 2013, Elaine and her daughter sold the property, but 100% of the proceeds were given to the daughter. When Elaine applied for Medicaid in 2014, this transfer of assets was captured by the 5-year look-back which is done at the time a Medicaid application is filed. As a result, a transfer penalty was imposed on Elaine, because $144,720 was the value of the life estate which was given away to the daughter. As a result, Medicaid would not pay the nursing home for approximately 14 months, creating obvious problems for Elaine. Elaine did try to provide evidence to rebut the presumption that the gift wasn’t exclusively for the purposes of hastening Medicaid eligibility, but that’s a different topic for another day.

The Medicaid transfer penalty rules are a minefield. When managing the assets for aging individuals and doing asset protection planning, you need to keep in mind the potential impact on Medicaid eligibility of any financial transaction you are thinking about, because the denial of Medicaid benefits could be catastrophic.

Call us for advice on Medicaid eligibility planning, trusts for family members, Medicaid applications and appeals … 732-382-6070

A disinherited spouse could have a medicaid problem

When a person applies for Medicaid benefits, a five-year look back is done by the county board of social services  to see if the applicant had given away any assets that they owned or to which they were entitled. If that occurred, it’s referred to as a “transfer of assets” or “uncompensated transfer of assets,” and the result will be a penalty period in which the person cannot receive Medicaid payments. This causes substantial problems for people in nursing homes or assisted living facilities, because the application isn’t filed until they are out of assets.

What happens if the Medicaid recipient is married and their community spouse dies? Or the applicant was widowed within the past five years? The question will still be whether the person had given away any assets that they owned or to which they were entitled. What happens if the community spouse signed a Will that left nothing for the Medicaid recipient, or put all their assets in joint names so that the Medicaid recipient inherits nothing from them?

In the Medicaid transfer of assets regulations at N.J.A.C. 10:71-4.10.b.3, a “transfer” is defined as including “failure to take action” to obtain assets, such as ” waiving the right to receive an inheritance, including spousal elective shares pursuant to N.J.S.A. 3B:8-10.” The Appellate Division decision in the case of I.G. v. Dep’t of Human Services (2006),  held that the widower’s failure to make a claim for the elective share was an uncompensated transfer of assets that caused a transfer penalty.

So if the deceased leaves nothing to the spouse who’s on Medicaid, the Medicaid recipient will be expected to assert a  “claim” for the elective share or risk losing benefits for a period of time. Under the law, the claim is asserted by filing a court action in the Chancery Division, Probate Part. The applicant would need an attorney. Assuming the surviving spouse is actually legally entitled to a share, the method to calculate the elective share and the  formula to calculate the amount due to the individual to satisfy the share is complicated. See N.J.S.A. 3B:8-1 to 8-19. For example, the calculations take into account assets that the survivor receives as a result of the death (such as a pension) and assets that are passing to someone else by way of joint ownership. The elective share starts with one-third of the augmented estate, but the calculation doesn’t stop there.

In some situations, our clients were told by Medicaid agencies that there would be a transfer penalty because the applicant/recipient didn’t receive “one third of the estate.” In other situations, the executor of the estate came to us, trying to figure out whether the estate was obligated to even pay an elective share. The issues aren’t simple, but you need to consider them. Many community spouses have “heard” that they should make a new Will disinheriting the spouse who has to move to the nursing home. The reality is, though, that disinheriting the spouse will likely cause legal problems for the person who is applying for or receiving Medicaid.

Call us about any aspect of Medicaid eligibility planning, applications and appeals… 732-382-6070

 

Changing a Trust to reduce your access to funds can cause a Medicaid transfer penalty

In Maurice Needham vs. Director of the Office of Medicaid, the Massachusetts Court of Appeals upheld a transfer penalty imposed by the State Medicaid program after the Medicaid applicant obtained a court order amending his trust. There was a revocable Trust containing Needham’s house, and an irrevocable Trust for Needham’s benefit which was the sole beneficiary of the revocable Trust. Needham had created both Trusts (he was the “settlor.”) In the Irrevocable Trust, the trustee was directed to accumulate the principal and to use it for Needham’s future needs without regard to the interest of the remaindermen (his children). When Needham applied for Medicaid benefits, the Agency concluded that the assets in the Trusts were countable, available assets, and denied his application due to excess resources because under federal law, the Medicaid applicant is only allowed to have $2,000 in countable available resources.

After requesting an administrative hearing/appeal, Needham went to Court and sought a court order reforming the irrevocable Trust, to remove him as the beneficiary. This “reformation” was ordered by the Court based on a Stipulation signed by Needham and the co-Trustees, and the order said it was effective “ab initio,” meaning, back to the beginning of the Trust. Next, in the administrative tribunal, the Administrative Law Judge decided that the action to reform the Trust was an uncompensated  transfer of assets, and that a transfer penalty would be imposed which would delay the receipt of benefits. The next appeal was to the Courts. The trial court reversed the administrative ruling, and decided that it was bound by the Court order and that “ab initio,” the Trust only existed in a form which would not be a countable resource. On appeal by the State, the Massachusetts Appeals Court reversed.

The Court explained its rationale as follows: “The issue before us is not whether the trust was reformed as a matter of State law. The issue is whether MassHealth is required to recognize a reformation as a matter of Federal law when determining whether there has been a disqualifying transfer. The answer to that question in this case is no. Were the answer different, persons of means would be permitted to enjoy otherwise countable assets held in trust throughout their lives, transfer those assets for less than fair market value by reforming the trust ab initio when their health declines, and thereby obtain Medicaid payment for long-term nursing home care without complying with the waiting period imposed by Federal law.”

There is a limit on the resources a Medicaid applicant can have.  When it comes to a Trust that is created with the assets of the applicant or their spouse which is not a bona fide Special Needs Trust , federal law at 42 USC 1396p(d)(3)(B) says that “(i) if there are any circumstances under which payment from the trust could be made to or for the benefit of the individual, the portion of the corpus from which, or the income on the corpus from which, payment to the individual could be made shall be considered resources available to the individual.” New Jersey’s counterpart regulation is at NJAC 10:71-4.11.

 The related legal issue is that when an individual takes action to reduce his access or ownership of an asset, there is generally the risk that a transfer penalty will be imposed if he applies for benefits within 5 years of doing that. 42 USC 1396p(c) [federal law] and NJAC 10:71-4.10.

 There are times that a Trust has to be reformed because the way it is written is a mistake on the part of the scrivener (the person who wrote the trust) or the way it is written doesn’t match up with the intention of the settlor. Court proceedings for trust reformation are not uncommon. However, what looks like an ordinary state court proceeding can have an unexpected impact on Medicaid eligibility — that’s the “law of unintended consequences.” Now, the judges in New Jersey make a point of telling such parties that while the Court has jurisdiction to enter the relief the party is looking for, the court cannot make a determination about the impact the action may have with regard to Medicaid eligibility. That is an issue between the applicant, the agency, and federal law. Matter of A.N.

As I like to say, careful planning can prevent a crisis. The best time to avoid potential Medicaid eligibility problems is before the cows are out of the barn, and well before they kick the lantern over and set the  on shed on fire (I’m giving a nod to Miss O’Leary of folk song fame).

Call for advice on Medicaid eligibility, trust reformation, and preparation of Medicaid applications … 732-382-6070