Personal Injury Damages and Medicaid Liens - SCOTUS Decides

You have a horrific accident and are looking at a life of extreme medical care.  The accident was caused by another person (drunk truck driver). You get a multi-million dollar award.  Does the state that you live in get a share?

First, personal injury awards are generally free from income tax.  Section 104 of the tax code excludes a personal injury award from income tax, so long it is for physical injury, physical sickness, emotional distress arising from these or for medical expenses.

So, it if's tax free, how does the state get involved?  Because sometimes people who are injured don' t have money to pay for their medical care during the lawsuit.  If so, Medicaid in that state may be forwarding funds for the person's care.  The state then files a Medicaid Lien against the award to recover its assets.

The United States Supreme Court just handed down a new ruling about what Medicaid can lien against a settlement.   Wos v. E.M.A. (U.S., No. 12-98, March 20, 2013).  The issue in this case was that when the parties settled the case, they did not allocate any part of the award to medical expenses.  Per

Under North Carolina law, the state is entitled to a lien on a Medicaid recipient's tort recovery for the lesser of the total cost of medical services provided or one-third of the recovery. Emily Armstrong settled a medical malpractice suit for $2.8 million against the doctor who delivered her -- far less than the cost of her future care. The parties did not stipulate what portion of the settlement represented payment for past or future medical expenses. The state, having already spent close to $2 million for Emily's care, asserted its lien for one-third of the settlement.

Emily objected, claiming that the mandatory lien on one-third of the settlement violated the Supreme Court's decision in Arkansas Department of Health and Human Services, et al. v. Ahlborn that limited the state's recovery from a Medicaid recipient to the funds she received as compensation for medical expenses.

The US Supreme Court agreed with Emily.  The Court found that "[a]n irrebuttable, one-size-fits-all statutory presumption is incompatible with the Medicaid Act's clear mandate that a State may not demand any portion of a beneficiary's tort recovery except the share that is attributable to medical expenses."

What does this all mean in the scope of personal injury settlements?  First, the state can only assert a lien against the portion of the award designated towards medical expenses.  Before you get too happy and think "OK- we just won't allocate any of the award to medical expenses", remember that that the state is there to protect the taxpayers' dollars.  If there is no allocation of medical expenses in the settlement, or by a judge or jury, the Court noted that the State and award beneficiary could submit the matter to a court for decision.

Smarter move?  Allocate appropriate medical expenses to satisfy the lien so that special needs planning can be done with the balance of the award. 

Four Good (?) Reasons to Contest a Will

Maybe it's the season, but I have gotten a lot of calls recently about will contests.  A will contest usually happens when your heirs are surprised by what your will says, or by what you have left when you go to the great beyond.  I have represented both heirs and estates, and in all cases there are some big misunderstandings about the reasons you can challenge a will.  And no, being disappointed is not a legal cause of action.

First, this post is an except from my new book Plan Your Own Estate:  Passing on Your Assets and Your Values Legally and Efficiently (Apress 2013).  Want to know more?  Click the link and 350+ pages of fun (I swear) estate planning knowledge is yours!

Sometimes, the heirs are surprised because something hinky is going on. Mom said all her life she was leaving her assets equally to her kids, yet daughter Donna took Mom to her lawyer and Mom suddenly (6 months before she died) named Donna sole beneficiary.

More ofter, when your heirs are surprised by what your will says, it could be they thought they were getting something, and you intended for them to get nothing.  If that's the case, make sure you are super clear about your intentions.  When you aren't, quite a good deal of money could go to defending your will.

From Plan Your Own Estate:  Passing on Your Assets and Your Values Legally and Efficiently (Apress 2013).


Four Reasons to Contest a Will

The good news is that, despite what you see on TV, there are only four limited grounds on which to contest a will:

·         The will wasn’t signed in accordance with state law. All the way back at the beginning of this book, I harped on how important it is to have a will properly executed under state law. If a will fails to meet the very stringent execution standards, then it won’t be deemed to be a will. If it’s not a will, it can’t transfer your property at death. This is one of the biggest areas of concern I have with using an online service or do-it-yourself estate planning—if you don’t get the signature section right, you don’t have a valid estate plan. This has led to many a person believing that they have a perfectly valid estate plan—but instead leaving their heirs in for a very nasty surprise because the will wasn’t executed properly.

·         Lack of testamentary capacity. This invalidates a will on the grounds that the person executing the will was incompetent to do so at the time they did it. You most often see this issue raised regarding an older person who modifies their will and removes some people who were beneficiaries under a prior will. The fact of the matter is that the level of capacity required to execute a will isn’t very high; it’s actually lower than the level of capacity needed to execute a contract. In essence, in order to be competent to execute a will, a person needs to know (1) the nature and value of their assets, (2) who would receive their assets if they didn’t have a will, and (3) the legal effect of signing the will. Someone would have a long road ahead of them to prove you didn’t have the capacity to execute your will. It’s hard to come by historic evidence of lack of capacity.

·         Undue influence. This is the biggie when it comes to will contests. The issue is that if a person is in a confidential relationship with you, then the person might be able to cause you such duress about your will that you lose your independence of thought process. What if you rely on one of your daughters to cook and clean for you, and she hints that unless she gets the house, she won’t be able to continue helping you? Or, what if a hired caregiver threatens to withhold your medication unless you change your will to benefit them? Or, perhaps your nephew helpfully drives you to his attorney to create a new will, which just happens to leave everything to him. When a will has unequal distributions, or distributions to non-family members, a court is reasonably concerned that the will was created out of fear that the favored beneficiary would cease caring for or even harm the person making out the will. Nine months before you died, were you threatened into changing your will to name your caregiver as the primary beneficiary? Or has your caregiver helped you for eight years, you don’t see your relatives, and you just got around to making out your will nine months before you died? This is such a fact-based inquiry that, again, undue influence is very hard to prove.

·         Fraud. You give a person a contract to sign, and it turns out someone slipped a will into the document and the person didn’t know they were signing a will. The will is invalid because it clearly isn’t an expression of the person’s intent. Another fraudulent situation is where somebody slips pages into the middle of the will. This is why I have the person making out a will or revocable trust initial each and every page.



Are You Part of the Billion Dollar IRS Jackpot? Act by April 15.

Guess what?  You might be one of the 1 million or so taxpayers that are due $917 million from the IRS.  Sad thing is, it's your money that they are trying to get back to you.

This pool comes from tax refunds owed to taxpayers from back in 2009.  Problem is, if you don't file a return, you can't claim your refund.  About 1 million taxpayers didn't file a return, so the money has been sitting there.

You must act now.  There is a 3 year statute of limitations on filing back income tax returns.  This is a true case of you snooze, you lose. If you don't file a return by April 15, 2013,all that money goes to the US government.  

Why didn't people file returns to get these refunds already?  Most likely because they were under the threshold for needing to file, and stopped the inquiry at that point, not going to the next step to see if there was any benefit to filing even though no taxes were due.

There is no penalty for filing a late income tax return if you didn't owe any money.  And likely the money due back to you is yours - from withholding in your paycheck.

Yahoo news reports: "People in every state and the District of Columbia are owed refunds, including 100,700 people in California and 86,000 people in Texas, the IRS said. Most of the refunds exceed $500."


Image courtesy of jannoon28 /

Sequester Cuts Hurting Seniors

Will the ridiculous gridlock in Washington that has a sledgehammer instead of scalpel being used to address the cancer of  a bloated budget affect your world immediately?  As a working adult or family, likely not,  For seniors, the cuts could have a more immediate and devastating effect.  Most seniors are living on fixed income - their resources don't change just because their expenses for necessities goes up. recently talked about what the sequester cuts could mean to seniors.  Is there a family member in  your life who might suddenly be struggling just to speak to a person to get care they need or are entitled to?

As a consequence of congressional gridlock, $85 billion in automatic, across-the-board spending cuts are starting to take effect. We’ve heard the dire warnings about the impact: air travel delays, 70,000 children forced out of Head Start, cutbacks in food inspections, understaffed fire departments, 700,000 fewer jobs created . . . the list goes on.

How will programs that seniors rely on be affected? The good news is that big chunks of the budget are exempt from the sequester’s cuts, including Social Security, Medicaid, and veterans’ programs. But while there will be no change in benefits for these programs, the federal workforce that administers them will be slashed, leading to delays and frustration.

In the case of Social Security, for example, visitors to field offices or callers to the program’s 800-number will have longer waits, and some offices may close altogether. Checks for first-time Social Security beneficiaries will take longer to arrive and the backlog of Social Security disability claims will start ballooning again.

Medicare benefits will not change either, but there could be more crowded waiting rooms and fewer practitioners participating in the program because payments to Medicare providers will be cut by 2 percent across-the-board. Doctors and hospitals say the Medicare reductions will cost their industries more than 200,000 jobs this year alone. The 2 percent cut for doctors follows a series of previous reductions, which may translate into more doctors refusing to take Medicare patients.

Where the Real Pain Would Be

The harshest impact will be on seniors who rely on federal programs to keep fed, stay warm (or cool), perform basic tasks like dressing and bathing, and keep in contact with the outside world.

Senior nutrition programs like Meals on Wheels face cuts resulting in 18.6 million fewer congregate and home-delivered meals, according to Amy Gotwals, senior director of public policy and advocacy at the National Association of Area Agencies on Aging. Meanwhile, an estimated 400,000 households will be severed from the Low Income Home Energy Assistance Program, which assists low-income seniors and other households with their heating and cooling bills.

Other vital services administered by Area Agencies on Aging will be cut, including rides to medical appointments or shopping trips, and in-home support for daily chores like dressing, cleaning, or cooking. 

More questions?  Look at AARP’s “What the 'Sequester' Could Mean for You,”  or The New York Times “Questions and Answers About the Sequester”

Image courtesy of Natara /