The Appellate Division’s Pre- Keri View of Medicaid Planning :

IN RE KERI: GUARDIANSHIP PROCESS & PLANNING IMPACTPresented by Donald D. Vanarelli, Esq. Certified Elder Law AttorneyRegistered GuardianR. 1:40 Approved Mediator

The Appellate Division’s Pre-Keri View of Medicaid Planning: “We can safely assume by his will that if [the incapacitated person] were competent, he would take every lawful and reasonable action to minimize obligations to the State or a nursing home in order to secure the maximum amount available to [benefit his loved ones].” In re Labis, 314 N.J.Super. 140, 148 (App. Div. 1998)

The Appellate Division’s New View of Medicaid Planning: “[M]any people might well be reluctant to become wards of the state by unnecessary self-impoverishment, even if that course would benefit their children. In short, Medicaid planning … poses a moral and personal dilemma ….” In re Keri, 356 N.J. Super. 170, 177 (App. Div. 2002)

In re Keri “Putting euphemisms to one side, [Medicaid planning], if followed by a competent person, is nothing other than self-imposed impoverishment to obtain, at taxpayers’ expense, benefits intended for the truly needy.” 356 N.J.Super. 170, 174 (App. Div. 2002)

Keri: The Proposed Medicaid Plan: Nursing care: $6,500/month Income: $1,575.45 Home sale proceeds: $170,000 $92,000 gift 16-month penalty period $78,000 retained sufficient to pay privately for nursing care (with all income) during entire penalty period resulting from gift

Safeguards Protecting Medicaid Applicant’s Right to Nursing Care: A Medicaid-certified nursing facility cannot transfer or otherwise discriminate against a patient based upon his/her pay status as a Medicaid recipient. See 42 U.S.C. §§1395l(c)(4); 1396r(c)(4)(a); 42 C.F.R. §483.12(c)(1); N.J.S.A. 26:2H-12.8.

“Key Money” The proposed Medicaid plan reserved “key money” to ensure Mrs. Keri would be admitted to the nursing home of her choice and she could pay privately for her care during the period of ineligibility for Medicaid resulting from the transfer of assets for less than FMV.

Self-Determination The proposed Medicaid plan accomplished the goals Mrs. Keri undoubtedly would have sought to achieve had she faced nursing home admission during her competency: maximizing the amount of her estate preserved for her heirs and minimizing the amount spent on nursing home costs while insuring that she received all necessary care.

In re Keri -- Chancery Division: Judge Rockoff: “I don’t know when probate judges got in to this business of doing estate planning post-incompetency, but I don’t do it.”

In re Keri - Chancery Division: Judge Rockoff: “I do not [pauperize] human beings and citizens in the U.S. solely to make them [wards] of the taxpayers.”

The Conroy Evidentiary Continuum: A Decision-Making Model for Guardians IP’s wishes have been clearly “purely subjective” test expressed Some evidence of IP’s“limited objective”wishes is available test No evidence of IP’s wishes best interests/“purely is available objective” test

The Keri “Purely Subjective” Standard: Guardian/child is barred from conducting Medicaid planning unless the IP, while competent, expressly indicated a preference to engage in Medicaid planning.

The Keri “Purely Subjective” Standard (cont’d.): “A purely subjective standard is called for … to protect the incompetent’s right to self-determination.”

The Keri court: the following evidence is insufficient to meet the “purely subjective” standard: * Will left estate to donees of the proposed gifting strategy * Power of attorney named guardian/son as agent * Power of attorney authorized agent “to deal on my behalf with respect to … Medicaid….”

Trott factors: (1) The mental and physical condition of the incompetent are such that the possibility of her restoration to competency is virtually nonexistent; (2) The assets of the estate … are more than adequate to meet all of her needs…; (3) The donees constitute the natural objects of the bounty of the incompetent…; (4) The transfer will benefit and advantage the estate of the incompetent…; (5) There is no substantial evidence that the incompetent, as a reasonably prudent person, would, if competent, not make the gifts proposed… .

Trott Factors Applied to Keri Case: (1) Virtually no possibility that Mildred Keri will return to competency. (2) Assets remaining in Mrs. Keri’s name after the transfer will be adequate to meet her needs until Medicaid eligibility was established. (3) Mrs. Keri’s 2 sons are the natural objects of her bounty.

Trott Factors Applied to Keri Case (cont’d.): (4) The proposed transfer will benefit Mrs. Keri by accelerating her eligibility for Medicaid without compromising her care and ensuring that her sons have an inheritance in accordance with her will. (5) There is no evidence that Mrs. Keri, while not under a disability, would not have made the proposed transfers.

In re Trott: “The guardian should be authorized to act as a reasonable and prudent man would act (in the management of his own estate)…, unless there is evidence of any settled intention, formed while sane, to the contrary.”

In re Keri: “When the incompetent has not indicated a preference for Medicaid planning while competent, we will not prematurely force enrollment on the public dole at the guardian’s request for the benefit of the incompetent’s self-sufficient children.”

In re Keri: • “Trott makes sense when the goal is saving on estate taxes. Moreover, that goal is not inconsistent with one’s obligations as a citizen…. But application of [Trott] to Medicaid planning is troublesome … [because] a competent and reasonable adult might or might not engage in this type of ... planning….”

In re Labis: “[A] guardian may effectuate a [Medicaid] transfer provided that it complies with the best interest of the ward inclusive of his desire to benefit the natural objects of his bounty.” 314 N.J. Super. 140, 147 (App.Div. 1998)

In re Labis: “Concepts of equal protection and inherent fairness dictate that an incompetent should be given the same opportunity to use techniques of Medicaid planning and estate planning as others more fortunate.”

Labis: The lower court denied the guardian’s Medicaid planning application “on an erroneous view that [it was] contrary to public policy, and thereby failed to consider that the … transfer would benefit [the ward] in carrying forth his probable actions if he were competent to address the situation.”

Labis: We can safely assume … that if [the IP] were competent, he would take every … action to minimize obligations to the State [and] secure the maximum amount available [to benefit his love ones].” In re Labis, 314 N.J.Super. 140, 148 (App. Div. 1998)

In re Kashmira Shah, 694 N.Y.S.2d 82 (Sup.Ct. 1999), aff’d, 95 N.Y.2d 148 (App.Div. 2000): “There can be no quarreling with the … determination that any person in the [ward’s] condition would prefer that the costs of his care be paid by the State, as opposed to his family.”

How Keri distinguishesConroy, Trott and Labis: 1. Conroy: guardians limited to “purely subjective” standard in Medicaid planning. 2. Trott: gifting in Trott evaluated under the “limited objective” standard. 3. Labis: proposed beneficiary was the IP’s spouse rather than the children.

Post - Keri: Possiblesources of evidence to satisfy the “purely subjective” standard: * Language from powers of attorney or wills * Testimony of loved ones * Stand-alone document stating the incapacitated person’s wishes

From Durable Power of Attorney: To make gifts … to facilitate my qualifying for the receipt of government benefits for my long-term healthcare and nursing-home needs. Such gifts shall be irrevocable, and my Agent is authorized to make such gifts as long as my long-term care is reasonably provided for by my Agent from the assets subject to this Power or otherwise, during the time period I would be disqualified from receiving long-term care and/or medical assistance under the State of New Jersey “Medicaid” program, ….

From Durable Power of Attorney (cont’d.): Any gifts made … may also include a gift to my Agent as long as the gift is made in the same manner as my established estate plan … or pursuant to the Intestate Laws of the State of New Jersey.

From Estate & Medicaid Planning Questionnaire: If your future medical condition made it necessary to place you in a nursing home, would you authorize your designated agent to conduct “Medicaid planning”, by gifting your assets to loved ones, so that you could qualify for Medicaid? Yes No Please explain: ____________

Stand-Alone Document: Affidavit (separate from a POA) in which the affiant certifies that he/she understands the significance of Medicaid planning and wishes to engage in such planning so that the State, rather than loved ones, will pay for care.

Proposed revision to guardianship statute (3B:12-24): A determination of incapacity shall not deprive an incapacitated person of the free and unrestricted exercise of any rights powers and privileges under law, unless otherwise provided in an order appointing a guardian. These rights powers and privileges shall include, but shall not be limited to, determinations concerning the following considerations…: managing finances; executing a will; establishing a trust or engaging in asset or tax planning… .

Post-Keri Practice of Elder Law/Estate Planning: * Educate clients about Medicaid planning * Include Medicaid planning as a standard subject of your estate-planning questionnaire * Encourage clients to consider/discuss Medicaid and nursing home issues earlier * Encourage clients to document their thoughts regarding Medicaid planning

Post-Keri Practice of Elder Law/Estate Planning: * Consider interviewing the IP even after incapacity, if there is a possibility that the IP may still be capable of expressing an opinion regarding Medicaid planning

The Appellate Division’s Pre- Keri View of Medicaid Planning :