In the Matter of Mildred Keri: N.J. Supreme Court Rules, for the first time, that Son / Guardian May Engage in Medicaid Planning for Mother / Ward

Reversing the state’s appellate court, the New Jersey Supreme Court unanimously ruled that guardians may engage in Medicaid planning on behalf of their incapacitated wards. In the Matter of Mildred Keri, 181 N.J. 50 (2004).

Richard Keri sought appointment as guardian of his mother, Mildred, and permission to engage in Medicaid planning on her behalf. Mrs. Keri’s major asset was her home. In 1996, Mrs. Keri executed a general power of attorney naming Richard as her agent and authorizing him to apply for Medicaid on her behalf, although the instrument did not provide for him to make gifts. Richard wished to sell his mother’s home, valued at about $170,000, and gift $92,000 of the proceeds to himself and his brother (who are the beneficiaries of Mrs. Keri’s will). He would then place Mrs. Keri in a nursing home that accepts Medicaid patients and use the remaining $78,000 from the sale to pay for her nursing home care during the resulting period of Medicaid ineligibility. Richard maintained that, if not so ill, his mother would have approved of and undertaken this strategy to preserve a portion of her assets for her sons.

The Medicaid plan proposal by Richard Keri was unopposed; in fact, it was recommended by the court-appointed counsel for Mrs. Keri. Nevertheless, although granting the guardianship application, ordering the sale of Mrs. Keri’s home and her placement in a nursing home, the trial court refused to authorize the Medicaid plan, announcing that,

I do not [pauperize] human beings and citizens of the United States solely to make them [wards] of the taxpayers. I don’t know when probate judges got in to this business of doing estate planning post-incompetency, but I don’t do it.

The Appellate Division affirmed the denial of Medicaid planning. The court held that courts should approve a Medicaid spend-down plan proposed by an incompetent’s self-sufficient adult children only when the incompetent person indicated a preference for Medicaid planning before losing competency. The court also reversed the order requiring sale of the home and nursing home placement and directed the trial court to seek intervention of the Public Guardian to determine Mrs. Keri’s best interests. In re Keri, 356 N.J. Super. 170, 172 (2002).

The Supreme Court of New Jersey reversed in a unanimous decision. The court found that Richard’s proposed Medicaid spend-down plan met the criteria set forth in In re Trott, 118 N.J. Super. 436, 440 (Ch. Div. 1972) and should be approved. Under the Trott criteria, which the court adopted, guardians seeking to make gifts to reduce estate taxes must establish that: (1) the chance of restoration of the ward’s competency is virtually nonexistent; (2) the assets of the incompetent’s estate after the proposed gifts are more than adequate to meet her needs; (3) the donees constitute the natural objects of her bounty; (4) the gifts will benefit her estate; and (5) there is no substantial evidence that the incompetent would, if competent, not make the gifts proposed in order to reduce her estate taxes.

“Few would suggest that it is improper for taxpayers to maximize their deductions under our tax laws to preserve income for themselves and their families even though they are, by their actions, reducing the amount of money available to government for its public purposes,” the court wrote. “So long as the law allows competent persons to engage in Medicaid planning, incompetent persons, through their guardians, should have the same right, subject to the legal constraints laid out herein.”

The court also does not “find it necessary for the Public Guardian to be involved in this or any other like matter.”

For the full text of the Keri decision, go to: In the Matter of Mildred Keri

(Donald D. Vanarelli represented plaintiff Richard Keri. Various disability rights organizations and attorney groups participated in the case as amici curiae, or friends of the court. In that regard, Linda S. Ershow-Levenberg argued the cause for amicus curiae New Jersey Chapter of National Academy of Elder Law Attorneys (Fink, Rosner, Ershow-Levenberg, attorneys); Gwen E. Orlowski argued the cause for amicus curiae Legal Services of New Jersey; Peggy Sheahan Knee argued the cause for amicus curiae New Jersey State Bar Association; and, Daniel J. Jurkovic, submitted a brief on behalf of amici curiae National Academy of Elder Law Attorneys and Guardianship Association of New Jersey, Inc.)