“Spousal Refusal” Strategy, Used to Avoid Paying Nursing Home, Held to Create Implied Contract to Repay Medicaid Benefits

A New York trial court entered judgment against a woman who refused to contribute to her spouse's nursing home expenses, finding that because she had adequate resources to do so, an implied contract was created between her and the State of New York entitling the state to repayment of Medicaid benefits it paid on the spouse's behalf. Banks v. Gonzalez (N.Y. Sup. Ct., Pt. 5, No. 452318/15, Aug. 8, 2016).

Evelyn Gonzalez' spouse was admitted to a nursing home and received $28,235.56 in Medicaid benefits from the Department of Social Services of the City of New York.  At the time of her spouse's Medicaid application, Ms. Gonzalez' assets exceeded the resource allowance permitted by Medicaid.  However, she signed a declaration refusing to make her income or resources available to pay for her spouse's care. This strategy is commonly known as “spousal refusal.”

The “spousal refusal” Medicaid strategy a product of federal law. Federal Medicaid law states that the community spouse can keep all of his or her assets by simply refusing to support the institutionalized spouse. If a spouse refuses to contribute his or her income or resources toward the cost of care of a Medicaid applicant, the Medicaid agency is required to determine the eligibility of the nursing home spouse based solely on the applicant's income and resources, as if the community spouse did not exist. After awarding Medicaid benefits to the institutionalized spouse, the Medicaid agency then has the option of beginning a legal proceeding to force the community spouse to support the institutionalized spouse. However, this is not always done. If the Medicaid agency chooses not to sue the community spouse for support, it can file a claim for reimbursement against the community spouse's estate following his or her death.

After a letter to Ms. Gonzalez demanding repayment of the cost of Medicaid benefits paid on behalf of her spouse went unanswered, the agency filed suit.  Ms. Gonzalez neither responded to the summons and complaint nor to the agency's motion for default judgment.

The Supreme Court of New York, New York County, granted the motion and entered default judgment against Ms. Gonzalez for the cost of benefits provided to her spouse.  The court held that, since Ms. Gonzalez had the income and resources but refused to contribute to her spouse's care, state law created an implied contract between her and the State of New York allowing recovery of the Medicaid benefits provided by the state.

(Adapted from an article on the ElderLawAnswers website. Mr. Vanarelli is a founding member of ElderLawAnswers.)

For additional information concerning Medicaid applications and appeals, visit: http://vanarellilaw.com/medicaid-applications-medicaid-appeals/

The post “Spousal Refusal” Strategy, Used to Avoid Paying Nursing Home, Held to Create Implied Contract to Repay Medicaid Benefits appeared first on Elder Law Attorney NJ | The Law Office of Donald D. Vanarelli.

Guardianship Not Warranted Where Less Restrictive Alternatives Available To Address Needs Of Alleged Incapacitated Person

A New York surrogate turned down a guardianship petition filed by the parents of a 34-year-old woman with Down syndrome, holding that courts should always seek to impose the least-restrictive terms of oversight that meet the needs of the person alleged to be incapacitated. Matter of Michelle M., 2016 NY Slip Op 51114(U) (Surrogate's Court, Kings County, July 22, 2016)

Michelle M. suffers from Down's Syndrome and was diagnosed with an intellectual disability. Michelle's parents brought a guardianship petition, alleging that Michelle is unable to make medical and other decisions relating to her welfare. It was undisputed that Michelle's parents are actively involved in Michelle's life, Michelle trusts her parents and often consults with them in her decision-making process, and, if the court were to determine that Michelle was in need of a guardian, the parents would be appropriate.

Michelle's parents acknowledged that Michelle was independent in her activities of daily living. At the guardianship hearing, the evidence showed that Michelle lived in Brooklyn with two roommates in a supported apartment since 2008. Michelle enjoys grocery shopping and cooking for herself and her roommates. For the past six years, Michelle worked part-time at a cellular phone supply store. She travels independently, using public transportation to go to work, run errands, and meet friends. Michelle engages in vocational and recreational activities at a day habilitation program. Michelle sees her doctors on a regular basis, making and keeping her appointments with her physicians.

After the hearing, the New York Surrogate ruled that a guardianship was unnecessary, and dismissed the parents' complaint. The court reasoned that imposing a guardianship “completely removes the individual's legal right to make decisions about her own affairs and gives the guardian virtually complete power over the disabled person.” As a result, a court judgment imposing a guardianship is an “extreme remedy” that “should be the last resort for addressing an individual's needs because it deprives the individual of so much power and control over his or her life.” According to the court, “if there are less restrictive alternatives that are sufficient and reliable to meet the needs of the person, guardianship is not warranted.”

In order to identify less restrictive alternatives to guardianship that meet the legitimate goal of protecting a person with intellectual or developmental disabilities from harm connected to those disabilities, the Surrogate held that “an inquiry into the availability of resources to assist the individual, including a support network of family and supportive services, is required.” The court held that:

[I]t is not … in the best interest of a person with the capacity to make independent decisions to have her decision making wholly removed through [a] guardianship, no matter how well-intentioned the guardian. The appropriate legal standard is not whether the [plaintiffs] can make better decisions than Michelle, it is whether or not Michelle has the capacity to make decisions for herself, albeit with supportive services.

As a result, the Surrogate ruled that, with appropriate supportive services, Michelle had capacity to make decisions affecting the management of her own affairs and, in fact, already made decisions and managed herself and her affairs without a guardian. As a result, the guardianship application was dismissed.

The decision in this case was the latest in a series of recent New York rulings declining to appoint guardians. In Matter of D.D., 2014-2185, the court held that family members' objections to the plans of a 29-year-old man with Down syndrome to get married did not justify appointing a guardian (NYLJ, Nov. 3, 2015). In Matter of Raymond J.R. and Proceeding for Hytham M.G., the court held that guardianship was not warranted for individuals with disabilities who had viable, less-restrictive supervision available to them.

The case is annexed here – Matter of Michelle M., 2016 NY Slip Op 51114(U) (Surrogate's Court, Kings County, July 22, 2016)

For additional information concerning guardianships and fiduciary services, visit: http://vanarellilaw.com/guardianship-fiduciary-services/

The post Guardianship Not Warranted Where Less Restrictive Alternatives Available To Address Needs Of Alleged Incapacitated Person appeared first on Elder Law Attorney NJ | The Law Office of Donald D. Vanarelli.

Trust Instrument Does Not Immunize Trustee From Liability For Breaching Duty Of Undivided Loyalty To Beneficiaries

In 1992, Ann Mark created two irrevocable trusts for the benefit of her three children. In 1997, Jared Scharf became the successor trustee for the trusts, and used some of those assets to form a separate trust for each of Ms. Mark's three children. Each of the trusts stated that they were governed by New York law.

In 2010, the trustee invested funds from those trusts into a hedge fund in which his son was a principal. In 2011, after the hedge fund generated a return, the trustee advised Ms. Mark and her children that he intended to increase the investment in the hedge fund, and advised them in writing that his son was a principal. Thereafter, the hedge fund suffered substantial losses. In 2013, Ms. Mark and her children demanded that the trustee withdraw the investments from the hedge fund. The trustee refused, and Ms. Mark and her children filed a lawsuit seeking his removal as trustee, and seeking reimbursement for the losses that resulted from his investments.

Although the overall value of the trusts increased significantly, the investments in the hedge fund resulted in losses.

Both sides filed cross-motions for summary judgment. The trial court granted the trustee's summary judgment motion, finding that the trust instruments permitted the trustee to make the investment in issue because it authorized him “to hold and retain all property received from any source without regard to … the trustee's personal interest in such property….”

On appeal, the Superior Court, Appellate Division disagreed. Applying New York law, it reversed the order granting summary judgment in favor of the trustee, and granted partial summary judgment to Ms. Mark and her children. The Appellate Division found that the trustee's investment in the hedge fund constituted a conflict of interest. It explained that the motion judge had mistakenly interpreted the trust language: although the trust insulated the trustee from inaction regarding trust property, it did not do so with respect to investments of trust property. Thus, although the trust protected the trustee when he took no action with respect to trust property, it did not protect the trustee from liability for making investments that breached his duty of undivided loyalty to the beneficiaries: “[the trustee] violated his fiduciary duty to the beneficiaries because this investment created a conflict of interest that resulted in a financial loss to the trusts.”

Although the trustee argued that the hedge fund investment represented only a negligible portion of the trust assets, the appellate court noted that this argument related to damages, not to liability. The appellate court reversed the motion judge's decision, and granted partial summary judgment as to liability against the trustee.

A copy of In the Matter of the May 1, 1992 Mark Family Trust  can be found here – In the Matter of the May 1, 1992 Mark Family Trust

For additional information concerning probate litigation and will contests, visit: http://vanarellilaw.com/will-contests-probate-litigation-elder-abuse-actions/#iplwc

The post Trust Instrument Does Not Immunize Trustee From Liability For Breaching Duty Of Undivided Loyalty To Beneficiaries appeared first on Elder Law Attorney NJ | The Law Office of Donald D. Vanarelli.

In Contested Guardianship Action, Counsel Fees Awarded to Plaintiff and Court-Appointed Guardian; Denied to Lawyer Hired by Alleged Incapacitated Person

Plaintiff filed an action seeking to declare his mother, D.W., an incapacitated person, and seeking to be appointed as her guardian. D.W. contested the guardianship action, claiming that she was not incapacitated and did not need a guardian.

The court had appointed Matthew Van Natten, Esq. as D.W.'s counsel. Later, D.W. privately retained Alan John Clark, Esq. as her attorney, and the court appointed Van Natten to be D.W.'s guardian ad litem. Approximately a year later, Clark withdrew as counsel, and a new attorney was substituted as counsel for D.W.

The guardianship action was litigated more than nineteen months, during which discovery was conducted, motions were filed and mediation was attempted. On the day the case was scheduled for trial, the parties settled the case. The consent order appointed a “financial monitor” to oversee D.W.'s finances, but D.W. retained her decision-making authority over her finances. The consent order provided that the trial court would determine all counsel fee applications.

Counsel fee applications were filed by plaintiff, the guardian ad litem, and Clark.  D.W. opposed all of the applications.

The trial court awarded counsel fees to be paid from D.W.'s estate to the plaintiff and to the guardian ad litem, but denied Clark's fee application. The court reasoned that fees to the plaintiff and guardian ad litem were warranted under the court rules, even though there was no determination of incapacity. As to Clark, the court held that the court rules did not provide for a fee award to be made to an attorney who is directly retained by an alleged incapacitated person. Instead, the court reasoned that Clark's recourse was to seek payment of his fees directly from D.W.

On appeal, the Superior Court, Appellate Division affirmed the fee order, finding that the trial court had the authority to make a counsel fee determination, and that the consent order had expressly stated that the trial court would make a determination as to counsel fees.

A copy of In the Matter of D.W. can be found here – In the Matter of D.W., An Alleged Incapacitated Person

For additional information concerning guardianships and fiduciary services, visit: http://vanarellilaw.com/guardianship-fiduciary-services/

The post In Contested Guardianship Action, Counsel Fees Awarded to Plaintiff and Court-Appointed Guardian; Denied to Lawyer Hired by Alleged Incapacitated Person appeared first on Elder Law Attorney NJ | The Law Office of Donald D. Vanarelli.