Top 10 Elder Law Decisions of 2009

The most important Elder Law decisions from around the country are summarized here.  Each case is relevant to New Jersey as elder law often involves Medicaid, which is subject to "supposedly uniform" federal regulation as jointly funded and administered by the federal and state governments. As a result, treatment of a question about Medicaid in one state may eventually become the law of the land in all states.  

Elderlawanswers.com has created this top 10 list from the popularity of the cases on its website - I have added topic heading and notes about what impact these cases might have in New Jersey.

 

  1. Estate Recovery - State That Has Not Expanded Definition of Estate May Still Recover Non-Probate Asset

    A Missouri appeals court finds that the state may use an accounting statute to recover Medicaid benefits from a decedent's estate even though the only asset is a non-probate asset and Missouri has not expanded its definition of estate to include non-probate assets. In Re Estate of Jones (Mo. Ct. App., W.D., No. 69310, Jan. 13, 2009).  Note that NJ has an expanded estate recovery statute so that Medicaid can have a lien against assets passing by joint ownership or a beneficiary designation when a person dies.

  2. Medicaid Annuity - Annuity Purchased to Benefit Community Spouse Is Available Resource

    A New Jersey appeals court holds that under the Deficit Reduction Act of 2005 (DRA) a state may consider the value of an annuity purchased for the sole benefit of the community spouse in determining whether the Medicaid applicant is eligible. N.M. v. Div. Medical Assistance and Health Servs. (N.J. Sup. Ct., App. Div., No. A-0828-07T1, Feb. 26, 2009). See prior posting for a full discussion of New Jersey treatment of Medicaid Annuities.

  3. Promissory Note - Non-Saleable Promissory Note Is Improper Transfer

    The Ohio Court of Appeals finds that a non-saleable promissory note is a prohibited asset transfer for Medicaid eligibility purposes because the interest was deferred and it wasn't clear the note barred cancellation upon the loaner's death. Brown v. Ohio Dept. of Job & Family Servs. (Ohio Ct. App., 8th Dist., No. 92008, March 12, 2009). There is a current pending case on the question of the use of promissory notes in New Jersey.

  4. Trusts as Countable Assets for Medicaid - Trust Is an Available Resource Despite Discretionary Language

    The Minnesota Court of Appeals finds that a trust's principal and income are both available resources for Medicaid purposes even though the trust's language requires only payments of income to the beneficiary and gives discretion to the trustee to distribute principal. In The Matter of the Stephanie L. Wilcox Trust (Minn. Ct. App., No. A08-1458, May 19, 2009).  The lesson here?  Trusts must clearly specify if the assets are not available to satisfy long term care needs.

  5. Estate RecoveryProperty Owned in Joint Tenancy Falls Under Estate Recovery Rules

    A Minnesota appeals court rules that the state may assert an estate recovery claim against property that was owned in joint tenancy at the time of a Medicaid recipient's death and that flowed into her surviving spouse's estate. In re the Estate of Grote (Minn. Ct. App., No. A08-1691, June 2, 2009).  Again, New Jersey has an expanded estate recovery statute, so Medicaid can recoup money it expended against joint assets when a person dies.

  6. Trusts as Countable Assets for MedicaidIrrevocable Trust Forbidding Distribution of Corpus Is Still Countable by Medicaid

    The Massachusetts appeals court finds that although an irrevocable, income-only trust expressly prohibits distributions of principal, other provisions in the trust could conceivably permit the trustees to invade trust assets, and thus the trust is countable for Medicaid purposes. Doherty v. Director of the Office of Medicaid (Mass. App. Ct., Essex, No. 08-P-939, June 18, 2009). Again - trusts must clearly specify if the assets are not available to satisfy long term care needs.

  7. Trusts as Countable Assets for MedicaidProperty of Trust That Bars Distributions That Interfere With Medicaid Eligibility Is Available Asset

    An Illinois appeals court finds that a trust that prevented the trustee from making distributions if it would interfere with public assistance is an available asset for Medicaid eligibility purposes. Vincent v. Dept. of Human Services (Ill. Ct. App., 3rd Dist., No. 3-08-0096, June 18, 2009). Seeing a theme here? Trusts must clearly specify if the assets are not available to satisfy long term care needs.

  8. Medicaid Annuity - Community Spouse's Post-DRA Annuity Purchase Is Not an Improper Transfer

    An Ohio appeals court holds that the purchase of a post-DRA annuity by a community spouse is not an improper transfer of assets. Vieth v. Ohio Dept. of Job & Family Services (Ohio Ct. App., 10th Dist., No. 08AP-635, July 30, 2009). I expanded on this case and how it might apply in New Jersey in a prior post.

  9. Trusts as Countable Assets for Medicaid10th Circuit Reiterates: States Need Not Exempt (d)(4) Trusts From Asset Calculations

    Confirming an earlier decision, the 10th Circuit Court of Appeals rules that Congress left states free to count (d)(4)(A) and (d)(4)(C) trusts as available resources for Medicaid purposes. Hobbs v. Zenderman (10th Cir., No. 08-2099, Sept. 1, 2009). New Jersey considers so called (d)(4)(A) trust as non-countable assets so long as the State is the primary beneficiary upon death.

  10. Medicaid Annuity - Annuity Purchase by Community Spouse Upheld in Federal Appeals Court Decision

    In a much-anticipated decision, the Third Circuit Court of Appeals affirms a U.S. district court ruling allowing a community spouse to purchase a DRA-compliant annuity to protect savings from the costs of her husband's nursing home care. Weatherbee v. Richman (3d Cir., No. 09-1399, Nov. 12, 2009). I blogged about this excited development in an earlier post as New Jersey is in the Third Circuit so this case applies to our clients.

      

Image: Salvatore Vuono / FreeDigitalPhotos.net

Medicaid Annuity Upheld by Federal Court

Third Circuit Court of Appeals Elderlawanswers.com reports today that:

In a much-anticipated decision, the Third Circuit Court of Appeals has affirmed a U.S. district court ruling allowing a community spouse to purchase a DRA-compliant annuity to protect savings from the costs of her husband's nursing home care. Weatherbee v. Richman (3d Cir., No. 09-1399, Nov. 12, 2009)."

This is an incredibly important ruling.  New Jersey is in the 3rd Circuit, so this ruling may have application to New Jersey Medicaid cases.

The Deficit Reduction Act or "DRA" states that a purchase of a Medicaid Compliant Annuity is not a transfer of assets that creates a penalty period under Medicaid.  As I discussed at "Annuity Purchased by Spouse Tarnished in NJ - But is There Light from Other State's Analysis" New Jersey has not enforced the federal law. Instead New Jersey, like Pennsylvania (the state at issue in the case) took the position that a purchase of an annuity by a community spouse is a transfer that results in a penalty period - essentially, even though you used $200,000 to purchase an annuity that can only give you $3500 a month, you are still treated as owning the $200,000 and then penalized for not having it liquid to spend on nursing home care.

In the Weatherbee case, Mrs. Weatherbee purchased a Medicaid compliant annuity for $400,000, which paid her $4,423 a month.  Pennsylvania took the position that the $4,423 a month was an "available resource" that she could sell (i.e.: she could sell the income stream, get a lump sum amount, and spend that amount on care). Normally, an annuity payment is deemed income, and not an asset (assets have to be spent down for Medicaid, but income of the spouse not in the nursing home is not considered).

Pennsylvania's approach (which is similar to New Jersey's) was soundly rejected.  The Third Circuit Court of Appeals confirmed that "treating the income from an otherwise compliant annuity as an available resource is inconsistent with the treatment of annuities under the Medicaid Act."

My colleague Don Vanarelli has a lengthy post  at his blog on the Weatherbee case with some great insight into how it might be effective in New Jersey.   The issue is that while NJ is in the Third Circuit, there are issues of deference and authority between state and federal laws and courts. 

DRA Effective Date - February 8, 2006 - Transfer Penalty Calculation Changed

Oftentimes a client asks "I heard that Medicaid law changed recently - when did it change and how does it effect me?"

The change those clients are referring to in the enactment of the Deficit Reduction Act of 2005 or DRA.  The effective date of the DRA is February 8, 2006 (the date President Bush signed the DRA into law).

February 8, 2006 is a line in the sand from a Medicaid Asset Protection perspective.  Transfers or gifts made prior to that date are subject to a 3 year lookback period, and the penalty for transfers reduces each month starting with the month of the gift.  Transfers or gifts made after that date are subject to a 5 year lookback period, and the penalty for transfer doesn't begin to run until after you are already in a nursing home.  For more detailed information, look to my prior post What is the Medicaid Look-Back Period under the DRA?

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Annuity Purchased by Spouse Tarnished in NJ - But is There Light from Other State's Analysis

My colleague Donald D. Vanarelli has a great post at The Law Offices of Donald D. Vanarelli Blog about how Ohio and Massachusetts have taken a different approach to whether or not an Medicaid Qualifying Annuity purchased by a Community Spouse is considered an Available Asset of a Community Spouse.

The Deficit Reduction Act of 2005 (DRA) addresses situations where the purchase of an annuity can be Medicaid Compliant and the value of the annuity not deemed to be an available asset to the Community Spouse.  Regardless, as Don points out:

As I blogged here, the New Jersey appellate court, in N.M. v. Division of Medical Assistance and Health Services, 405 N.J. Super. 353  (App. Div. 2009), certifden., 199 N.J. 517 (2009), held that an annuity purchased for the sole benefit of the community spouse after the effective date of the Deficit Reduction Act of 2005 (DRA) may be considered in determining whether the resources of the institutionalized spouse exceed the resource limit for Medicaid eligibility. This case is one of major importance in the Medicaid estate planning area, and it is a major setback for those trying to help couples protect sufficient assets for the community spouse to live on when the ill spouse is institutionalized. However, based upon recent case law developments in other states, it appears that the New Jersey court’s analysis in the N.M. case may be less persuasive than anticipated. In that regard, courts in Ohio and Massachusetts have recently ruled, contrary to the court in New Jersey, that a community spouse’s annuity purchase is not an improper transfer.

But an Ohio and Massachusetts Court have looked at similar facts and reached different conclusions.  Notably the Ohio appeals court considered and rejected New Jersey's analysis in N.M.:

 

Significantly, the Ohio appellate court in the Vieth case considered, but refused to follow New Jersey’s N.M. case, instead finding “more reasonable the interpretation and analysis” of the applicable federal statute set forth in the federal district court case entitled Weatherbee v. Richman, 595 F. Supp. 2d 607 (W.D. PA 2009), which held that a post-DRA annuity purchased for the community spouse is exempt for Medicaid eligibility purposes. I blogged about the Weatherbee v. Richmancase here.

 

Given that the treatment of annuities is set forth in federal law, perhaps these cases will lend weight to a revised interpretation in annuities in New Jersey that is in fact consistent with the law.