Protecting Assets from Long Term Care Costs With "Creative" Transfer Techniques Is Not for Everyone
The recent Massachusetts Appeals Court decision in Gauthier v. Director of the Office of Medicaid puts in clear perspective the pitfalls involved in resorting to "creative" schemes to try to protect assets by transfers before a nursing home admission and medicaid application. In this case a $182,000 lump sum transfer was made for "future services" pursuant to a services agreement and refitting of a son's home to accomodate the failing parent some 2 years before the Medicaid application was filed. At a fair hearing it was determined that this was a transfer without fair consideration in return; that the recipients did not sustain the burden of proof to establish that the purpose was exclusively for a purpose other than to qualify for Medicaid; and, that the whole $182,000 was a disqualifying transfer rendering an ineligibility period of over 600 days. The Appeals Court ordered a remand for the purpose of establishing what value the transferring parent actually did receive so that the ineligibility period might be reduced, and to have the hearing officer address the issue of whether the transferor (who did suffer from Alzheimers) actually may have intended to receive full value under the regulations. If that sounds encouraging, consider that the appeal of the hearing officer's decision to Superior Court was filed in March of 2009 and the Appeals Court ruling was handed down in November of 2011. That is a long time to be in limbo and the case still is not finalized. At least the disqualification period has now expired. The message in all this is that these "push the envelope" strategies to protect assets are not for the faint of heart or those without resources to fight.
New Alimony Reform Law for Massachusetts
The Massachusetts legislature has passed the long awaited alimony reform bill and Governor Patrick signed it into law on September 26, 2011. By its own terms the law does not go into effect until March 1, 2012. Some of the new provisions under this new law include:
(1) Creating new, separate alimony categories with specific definitions and durational time limits, such as General Term Alimony, Rehabilitative Alimony, Reimbursement Alimony, and Transitional Alimony;
(2) Termination of alimony payments upon retirement;
(3) Changing alimony terms in the event of an ex-spouse’s co-habitation;
(4) Guidelines capping alimony as determined by need at 30-35% of the difference between the spouses’ incomes determined in a fashion similar to that used for the child support guidelines.
If you are subject to an alimony order, you may cite the new law as a “change in circumstances” entitling you to a modification, but only as to the duration of the alimony payments (if the duration is in excess of that which would result from the new law), and not on the issue of the amount of the alimony being paid. In addition, although the new law is effective for divorces on and after March 1, 2012, there is a phase in provision for the filing of modification petitions based upon the length of the marriage ranging from one to three years, except that in cases where the payor has retired, there is a one year wait. This new law is Chapter 124 of the Acts of 2011 which should be available for viewing on the state website shortly or can be seen at http://www.massbar.org/media/1060979/alimonybill.pdf
Prenuptial Agreements and Long Term Care Medicaid Issues for the Elderly
We often get inquiries along the lines of the following:
Question: Our father is in his early 70’s and is planning to marry for the second time. She is also in her 70’s and is a great companion and comfort to him. On the other hand she appears to have health issues that aren’t serious now but could worsen in a few years. Will a prenuptial agreement protect our father from all liability for the cost of her nursing home care if that becomes necessary?
Answer: From the standpoint of being concerned about the nursing home being one of her creditors, the answer is yes provided that the agreement is recorded as provided in section Chapter 209 section 26 of Massachusetts General Laws. This would avert the result reached in the Wilson case reported earlier on this page (the nursing home successfully sued the non patient spouse after death of the patient). BUT that is not the end of it. For purposes of determining eligibility for Mass Health (Medicaid) long term care benefits, the assets of both spouses are COMBINED. The spouse remaining at home under current rules can only keep the marital home and approximately $110,000 of these assets before the other spouse can qualify for Medicaid. Thus your father possibly could be forced to spend down his own assets in excess of $110,000 or divorce so that the long term care benefits can be obtained DESPITE what the prenuptial agreement says. The Mass Health regulations have nothing to do with the debtor/creditor relationship but everything to do with government requirements for receiving benefits. One could argue that because of the agreement, your father’s assets are “unavailable” to his new wife under the regulations, but the state could force them to obtain a court ruling to that effect while at the same time navigating the Medicaid appeal waters, and that could put the wife’s care in jeopardy for months, if not years while the case is decided. Having the agreement will be helpful, but until there are some recorded decisions on the issue, there can be no guarantees as far as the elegibility for long term care benefits aspect is concerned. Of course, if the wife to be has significant assets of her own, the effect of the agreement could be that her assets be exhausted first. In this situation the prenuptial agreement is only one of the options available to protect assets.
The removal of children from Massachusetts and relocation by a parent is one of the most frequently contested issues coming out of the Probate and Family Court now. In the case of Woodside v. Woodside decided on June 24, 2011 the Appeals Court handed down yet another removal case ruling. In this case the final agreement of the parties provided for joint legal custody but was carefully worded as to the issue of physical custody. It did not provide for “joint custody” or “sole physical custody” totally avoiding that terminology. It provided instead that the children would “reside primarily with the wife” and contained a parenting schedule with the times for the children to be with each parent. The father argued that the real advantage to the moving parent analysis did not apply because the mother did not have “sole physical custody” by the terms of the agreement. Therefore, he argued, the rights of both parents were equal and the Court should have looked solely to the best interests of the children. The Appeals Court ruled that although the labels “sole custody” and “joint custody” are often controlling, the absence of such labels will allow the judge to make an analysis of the actual functional role of the parents in the case and then use the appropriate removal analysis. In this case the judge had found that the mother had the functional equivalent of sole custody with visitation to the father.
Beginning January 1, 2012 [extended by the Legislature from July , 2011] the intestate shares of descendants will be calculated differently where there has been a death in the nearest generation of survivors. Under current law, if a person dies unmarried but with children surviving, the estate will be split equally between the children. If a child has predeceased leaving children surviving, those children would take in equal shares the share their parent would have inherited had he or she survived. This is called a per stirpes distribution scheme. Under the new law, the share of the deceased child would be divided among and distributed to all of the grandchildren, including children of living parents who are inheriting a share in their own right. This is referred to as distribution per capita at each generation. Supposedly this new default distribution scheme for intestate estates was put into the law because the individuals who worked on the law felt that this is what most people prefer, although no scientific poll or survey was conducted to arrive at this conclusion. In comments written in some of the literature generated to support this bill, estate planning lawyers were criticized for never discussing the matter in detail with their clients and using the old per stirpes scheme in most of their wills and trusts. We have always explained and discussed with clients the intestate distribution scheme and other alternatives including the new default as well as class gifts and other more sophisticated plans. Our experience over many years has been that well over 90% of clients preferred the per stirpes scheme contained in the law which will expire on July 1, 2011. If you are unhappy with this new scheme under the new law, the solution is to have a will (or a trust) in place that leaves your estate the way you want it and not the way a few well intentioned lawyers and politicians felt they knew you most likely would prefer it. If you have a will, perhaps it is time to take it out and review it to reassure yourself that it makes the provision you desire. If it does not, or if you do not have a will and do not like the default scheme of distribution provided by this new law, you need to have a will (or trust) done that carries out your wishes.