Doctrine of Laches means you are "Out of Time"

In a continuation of our "rosetta stone" of "legalese" to English, Stacey C. Maiden, Esq. of our Estate Planning and Elder Law Department, talks about a recent case that gives life to the dusty doctrine of "laches".  Aren't latches what you use to close a door ?  Not if you are a lawyer - to us "laches" means "too bad, you are out of time", as in, "that door is now locked".

Defendants often raise the “doctrine of laches” as an affirmative defense in answers, but it is seldom applied by the Court. What exactly is laches? The doctrine of laches is based on the maxim that “equity aids the vigilant and not those who slumber on their rights.” (Black’s Law Dictionary). The outcome is that a legal right or claim will not be enforced or allowed if a long delay in asserting the right or claim has prejudiced the adverse party. Elements of laches include knowledge of a claim, unreasonable delay, neglect, which taken together hurt the opponent.

A New Jersey Court recently put the doctrine of laches to use in dismissing claims made by a surviving spouse in an estate matter. In the unpublished case Buie v. Estate of Buie, Chancery Div., Probate Part (Essex Cty.) (Koprowski, J.S.C.), the decedent died testate, leaving his property in Newark to be divided among his six children equally. One week after his death, the plaintiff, his wife, who received non-probate assets of $95,000, left the house in question and returned to South Carolina with co-plaintiff, her son with the decedent.

14 years later [and yes, that is a long time later], the plaintiff/surviving spouse filed an action demanding her intestate share under N.J.S.A. 3B:5-3 as an omitted spouse under 3B:5-15 or an elective share of her husband's estate under 3B:8-1. The court held that the omitted spouse claim was barred by the doctrine of laches since there has been a substantial delay in bringing the action, the plaintiff was the cause of the delay, and defendants have been prejudiced as a result of the delay.

 The court also held that plaintiff’s claim under the Elective Share statute was time-barred and that no good cause existed to extend the time to file. Under New Jersey statute, plaintiffs must file claims for elective share within 6 months of the appointment of a personal representative. (N.J.S.A. §3B:8-12):

What is the take-away from this?  If you have a legal claim, you have to act on it in a timely manner.  While some claims may have to be brought in a specific period because of a statue-of-limitations (like the Elective Share in the example above), all claims must be made in a reasonable time frame from when you knew about the claim.  It is very difficult to have to tell a client while they may have the best case in the world, they aren't able to get relief because they didn't act quickly enough.  Luckily, the Doctrine of Laches is entirely avoidable if you get legal advise from an attorney at the time that you have a legal question.

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Top 10 Elder Law Cases of 2011

New Jersey accounted for 30% of the most important court rulings on elder law issues in 2011. The crib notes version?  Stay within the line and intent of the law to get the results that you want. The courts are supporting Medicaid's ability to create a period of denial because of a transfer of assets to family members.  This is in line with one of the core principals of Medicaid eligibility - the state will pay for your long term care if you have a dire financial need, but not if you manufactured that need in the past 5 years by transferring assets to your family. 

The key takeaway - effective plans are put into place well before they are needed and fully conform to the law.

This "Top 10" list comes courtesy of elderlawanswers.com:

1. Medicaid Applicant's Penalty Period Does Not Begin Until Returned Assets Are Spent Down
The U.S. Court of Appeals, Third Circuit, rules that a New Jersey Medicaid applicant who transferred assets and then had some of the transfers returned cannot get credit toward her penalty period for the time before the transfers were returned that she was resource-eligible. Marino v. Velez (U.S. Ct. App., 3rd Cir., No. 10-2324, Jan. 10, 2011).  

What do you need to take away?  If you made a gift in the 5 years before you applied for Medicaid, and you lost the "bet" that you wouldn't need Medicaid for 5 years, the ENTIRE gift needs to be returned, and spent down, before you will qualify for Medicaid.  To be successful, you need to plan early so that you have a greater likelihood of not needing care for 5 years.

2. State Cannot Recover Assets That Were Transferred Before Medicaid Recipient Died
In a case pursued by ElderLawAnswers member attorney Peter C. Sisson, an Idaho district court rules that the state cannot recover assets from the estate of a Medicaid recipient's spouse that were transferred to the spouse before the Medicaid recipient died. In Re: Estate of Perry (Idaho Dist. Ct., 4th Dist., No. CV-IE-2009-05214, March 16, 2011).  

3. Federal Court Rules Ahlborn Does Not Bar Medicaid Recovery From Future Medical Expenses
A federal district court rules that a state Medicaid agency may recover the cost of a beneficiary's medical care from the portion of her personal injury settlement that was allocated to medical expenses, regardless of whether the funds were allocated to past or future medical care. Perez v. Henneberry (D. Colo., No. 09-cv-01681-WJM-MEH, April 26, 2011).  

4. Court Upholds Nursing Home Resident's Eviction Prior to Resolution of Medicaid Appeal
A Kentucky appeals court holds that a nursing home may evict a resident for nonpayment despite a pending Medicaid appeal. King v. Butler Rest Home, Inc. (Ky. Ct. App., No. 2010-CA-001467-MR, June 17, 2011).  

5. Payments to Caregivers of Dementia Patient Are Deductible Medical Expenses
The U.S. Tax Court rules that payments to caregivers of a dementia patient are deductible medical expenses, even though the caregivers were not licensed health care providers. Estate of Lillian Baral (U.S. Tax Ct., No. 3618-10, July 5, 2011).  

What do you need to take away?  This is a win for caregivers.  Catastrophic medical expenses in excess of 7.5% of your adjusted gross income are deductible. This may offset some of the costs of care.

6. Third Circuit Affirms That N.J. May Count Promissory Notes As Available Resources
In a long-running case that has bounced back and forth between two federal courts, the Third Circuit Court of Appeals rules that New Jersey's Medicaid agency may analyze promissory notes as trust-like devices and count the notes as available resources. Sable v. Velez (U.S. Ct. App., 3rd Cir., No. 10-4647, July 12, 2011). 

What do you need to take away?  While the court specifically advised that this case was not precedential, if you are making loans, they need to be real and fit within the requirements of the law.  They need to be in writing, actually repaid, and consistent with the law.

7. Transfer of Medicaid Applicant's House to Son Falls Within Caregiver Child Exception
A New Jersey appeals court rules that the transfer of a Medicaid applicant's house to her caregiver son is not subject to a Medicaid penalty period because it falls within the caregiver child exception. V.P. v. Dept. of Human Services (N.J. Sup. Ct., App. Div., No. A-2362-09T1, Sept. 2, 2011). To read the full summary, click here.

What do you need to take away?  The Medicaid applicant was successful because the caregiver child was able to prove that he actually provided a high level of care including walking, bathing, and cooking.  In short, he had good facts.  If you are a caregiver child looking to someday keep your home by taking advantage of this exemption, you will also need good facts. Start keeping a log of what you do now.

8. U.S. Court Rules Connecticut Likely Cannot Refuse Spousal Refusal Doctrine
Ruling that a state statute violates federal Medicaid law, a federal district court grants a preliminary injunction preventing Connecticut from denying Medicaid benefits to an applicant seeking to disregard his spouse's assets using the doctrine of spousal refusal. Fortmann v. Starkowski (D. Ct., No 3:10cv1562 (JBA), Sept. 28, 2011).  

9. Medicaid Applicant's Transfer to Daughter Created Trust-Like Device
A federal district court rules that when a Medicaid applicant transferred money to her daughter with the intention that the daughter pay for her care during the resulting penalty period, she created a trust-like device, so the money is still an available resource. Pfeffer v. AHCCCS (U.S. Dist. Ct., D. Ariz., No. CV-11-0891-PHX-GMS, Sept. 29, 2011). 

10. Irrevocable Trust Set Up by Medicaid Applicant's Children Is Available Asset
A Wisconsin appeals court rules that a Medicaid applicant who transferred funds to her children, who then put them in an irrevocable trust for her benefit, is ineligible for Medicaid because the trust is an available asset under state law, even though the transfer occurred 17 years before she applied for Medicaid. Hedlund v. Wisconsin Dept. of Health Services (Wis. Ct. App., No. 2010AP3070, Oct. 13, 2011).  

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Deconstructing a Trust - A Rosetta Stone for Trust Terms

It is a fact of life (or a result of law school) that attorneys tend to speak "legalese".  This means that we can take a perfectly well known English word - like "income" - ascribe a very specific meaning to it, and then bandy the word about without you having the benefit of  knowing the specific definition we are referring to. So what is "income", or "principal" for that matter, from a trust or estate planning perspective?  And what makes up a trust anyway?

Trusts are a legal construct (see - more legalese).  This means that a trust doesn't exist in a tangible sense.  Instead, it is "formed" on paper (the "Trust Agreement") and given life by the people who carry out the terms of the trust.  Who are those people?

"Grantor" or "Settlor" - The person who creates the trust. 

"Beneficiary" - The people the trust is made for, or intended to benefit.

"Trustee" - The person who operates the trust for the benefit of the Beneficiaries.  

If you think of a trust like a small business, the Trustee is akin to the President, and the Beneficiaries are like the Shareholders.  Everything that the Trustee/President does is for the benefit of the Beneficiaries/Shareholders.

A Beneficiary can be further described as having rights to "income" and/or "principal".

Income - For trust purposes income is defined as interest and dividends. Capital gains are generally not part of the trust definition of income.  So a person entitled to income would be entitled to any interest on bond payments, or any dividends on stock, but not the proceeds from the sale of an asset that resulting in a capital gain.

Principal - Principal is the bulk of the trust.  This is what the Trustee invests and distributes to the beneficiaries.  Any capital gain would be added back to income to be reinvested.

There are myriad ways how income and principal can be designed to be allocated to the beneficiaries, and the level of discretion the Trustee has regarding those distributions.  However, that is a subject for another post.

Don't Be that Person - Craziest Lawsuits of 2011

You have all heard the lawyer jokes ("Why didn't the shark eat the lawyer?"  ... "Professional courtesy").  Unfortunately, some of that tarnished reputation comes from our own brethren who assist clients in making the most ridiculous claims.  As a humorous, or ironic, look at last year, Findlaw.com has published The 5 Most Outrageous Lawsuits of 2011.  To share some:

Kidnapper Sues Hostages for Breaching 'Contract' to Hide Him

The most outrageous and strangest lawsuit to come out of 2011 might be this one. A convicted kidnapper in Colorado sued his former hostages for breaching an oral contract to hide him when he was a fugitive. He sought damages to compensate him for injuries incurred during his arrest.

'Bad Mothering' Lawsuit: Kids Sued Mom over Empty B-Day Card

Attorney Steven A. Miner helped his kids file a lawsuit against his ex-wife for being a "bad mother." The kids said that they were subjected to empty birthday cards, clothing budgets, seat belts, and their mother's "forgetfulness."

Most lawyers don't get involved in such cases that have no real substance - just like most attorney's practices aren't what you see on TV.  Your attorney's role should be as a trusted advisor to you - someone who educates you about the law, learns what your goals are, are helps you create and take a path through the law towards your goals.  Oh, and your attorney should be able to laugh at any good lawyer jokes.

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New Year's Resolution - Look at that Will or Estate Plan

Early January is a great time of year.  Everyone is full of enthusiasm for all we are going to accomplish this year.  Maybe you even sat down over the weekend and made a list of goals for 2012. One of your 2012 goals may very well be "Get a Will", "Review my Will", of "Find out if I need a Will."  Luckily, unlike some other New Year's Resolutions, meeting these goals is easy.

First, why do you need a Will?  We have answered this an some other estate plan "overview" questions with "Why do I need a Will?  And other frequently asked questions about Estate Planning". You can use this short article as a starting point about:

  • Why do I need a Will?
  • What happens if I die without a Will?
  • What is a "Living Will"?
  • Do I need a Power of Attorney?
  • What is a Trust?
  • What is a Living Trust or Revocable Trust?
  • Will a Will or a Revocable Trust help me save taxes?

Next, if you have an estate plan or Will already, is it still working for you?  Have you planned for today's tax laws, as opposed to the ones in place when you originally  put the plan together?  Are your named fiduciaries (Executor, Trustee, Guardian) still appropriate?  Has there been a material change in your circumstances so your current Will or estate plan just doesn't fit you anymore?  To address these questions and many others we have created a detailed "Estate Plan Review Checklist" to help you determine the suitability of your current estate planning documents.  The Checklist includes both questions to ask about your estate plan, and explanation of why to ask them. Questions asked on the Checklist, and the reasons for them, include:

  • Do you have the 3 documents every estate plan must contain? (Will, Living Will/Health Care Proxy, Power of Attorney)
  • Have you moved since you last updated your estate planning documents?
  • Do you have a separate personal property designation?
  • Is any person receiving your personal property a minor (under 18)?
  • Do you have any specific gifts or bequests you want to make?
  • Are your total combined assets, including life insurance death benefits, greater than $675,000?
  • Do you own assets held in joint accounts, or where you have a named beneficiary?
  • Are your residuary beneficiaries correct?
  • Are assets being distributed to your beneficiaries outright or in trust?
  • If you currently have a trust established, are the terms still appropriate?
  • Do any of your beneficiaries have special needs?
  • *Does your estate plan contain provisions to allow you and your family to be as flexible as possible in meeting your goals?
  • *What authority does the Trustee have to distribute the assets in the trust?
  • Are your alternate beneficiary designations appropriate?
  • Are your Executors, Trustees, and Guardians still the appropriate people, in the appropriate order?
  • If you have a taxable estate (assets exceeding $675,000), have you and your spouse reallocated ownership of and title to your assets to minimize estate taxes?
  • Is your General Durable Power of Attorney more than 10 years old?
  • Does your General Durable Power of Attorney continue to name appropriate attorneys-in-fact?
  • Does your General Durable Power of Attorney allow for Medicaid planning?
  • Does your Health Care Power of Attorney continue to name appropriate Health Care Representatives?
  • Does your Health Care Power of Attorney reference the Health Insurance Portability and Accountability Act (“HIPAA”)?
  • Does your Living Will clearly state your desire about what medical treatment you want to receive or refuse in a terminal situation?
  • Does somebody know where all of your estate planning documents are?
     

Considering that 88% of New Years Resolutions fail, why not look at your estate plan to find out how to keep at least one of those resolutions this year?

Happy 2012!

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