Opening Remarks – Case Law Update At The 13th Annual Elder and Disability Law Symposium

(The 13th Annual Elder and Disability Law Symposium was held on September 29, 2010 at the New Jersey Law Center, in New Brunswick, NJ. This year I was asked to give the case law update at the opening session, summarizing the most significant legal developments over the past year in the areas of elder and disability law. I’ve reproduced the presentation below for readers of this blog. Where available, I linked the cases and laws mentioned in the presentation to the articles I posted about those items on this blog.)


It’s been an active year for elder and disability law, in terms of New Jersey and federal case law and legislation.

We’ve gotten a number of written decisions in the areas of probate and nursing home litigation, as well as guardianship practice, which are traditionally areas in which practitioners often wish for a more comprehensive body of case law to guide them.

In terms of federal legislation, this year witnessed the repeal of the federal estate tax, to the surprise (should I say horror?) of many practitioners.

The Social Security Administration has issued new initiatives and guidance relevant to the area of special needs and disability planning.

And of course, our traditional “elder law” practice area, Medicaid planning, has seen plenty of action, with many administrative law judges increasingly resistant to rule in favor of Medicaid applicants, and practitioners exploring litigation of Medicaid cases in federal courts.

Some of these developments are positive, in terms of the practice; others are not. But all of these developments will serve to guide us as we continue the practice.


Matter of the Estate of Jewell B. Sykes, N.J. App. Div. No. A-1109-09T2 (Aug. 19, 2010): Family Ties Do Not Create A “Confidential Relationship” Sufficient To Invalidate A Will Based On Undue Influence

In Sykes, the decedent’s daughter/co-executor (“Evelyn”) challenged the validity of two leases her mother had entered into in 1981 and 1986, with a company that was owned by the decedent’s son/co-executor (“Gerald”). Notably, Gerald lived with the mother from 1976 until she entered a nursing home in 1992; he later qualified as a “caregiver child” for at least two years prior to her institutionalization. After losing at the trial level, Evelyn argued on appeal that there was adequate proof of a “confidential relationship” between the decedent and Gerald “by virtue of the ‘natural relationship between mother and son living together, with [the] son caring for [the] mother and managing her financial affairs.’” The appellate court affirmed the trial court, and refused to accept Evelyn’s expansive view of a “confidential relationship”:

Although parent-child relationships are “among the most natural of confidential relationships … the mere existence of family ties does not create … a confidential relationship… The record is devoid of evidence that Gerald occupied a position of dominance over [the mother] and, indeed, Evelyn relies upon the familial relationship rather than citing any evidence on appeal to support that conclusion.

In re Macool, 2010 WL 3608686 (App. Div. 9/16/10) (Approved for Publication): A Draft Will That Was Not Reviewed By The Client Before Death Cannot Be Admitted To Probate

Pursuant to N.J.S.A. 3B:3-3, for a writing to be admitted as a will, the proponent must establish by clear and convincing evidence that (1) the decedent actually reviewed the document in question and (2) thereafter gave his or her final assent to it. However, the writing need not be signed by the testator.

In Re Buscavage, App. Div. No. A-6041-08AT3 (Aug. 25, 2010): The “Mere Possibility” Of An Attorney Conflict Of Interest May Be Sufficient To Establish An Ethical Breach

New Jersey estate planning attorneys were again reminded of the conflict of interest minefield they face in Buscavage.

In this challenge to trust amendments made by the decedent favoring defendant, the decedent’s attorney had previously represented the defendant in her capacity as co-executor in the sale of a home, and represented her daughter in the purchase and sale of her home. The plaintiffs alleged that this prior relationship was a conflict of interest and impaired attorney Martin Gleason’s ability to independently represent the decedent. The lower court found in favor of the defendant. On appeal, the Appellate Division considered, among other things, the role of the attorney in an undue influence case. It held that “a conflict on the part of an attorney in a testimonial situation is fraught with a high potential for undue influence, generating a strong presumption that there was such improper influence and warranting a greater quantum of proof to dispel the presumption.”

Attorneys engaged to perform this highly personal and sensitive task for a client are held to an extremely high standard of professional conduct. In this context, “a conflict of interest … need not be obvious or actual to create an ethical impropriety. The mere possibility of such a conflict at the outset of the relationship is sufficient to establish an ethical breach on the part of the attorney” … We are unable to ascertain whether the court determined if Gleason’s conduct presented the possibility of a conflict. We are thus compelled to remand this case for further analysis.

Estate of Ruszala v. Brookdale Living Communities, No. A-4403-08T1 (App. Div. Aug. 10, 2010): Arbitration Agreements In Nursing Home Contracts Are Enforceable, But Some Provisions Are Voidable For “Substantive Unconscionability.”

The Appellate Division addressed the Federal Arbitration Act (“FAA”) and its impact on New Jersey’s Nursing Home Responsibilities and Rights of Residents Act (“Residents’ Rights Act”). The court first held that the FAA preempts New Jersey’s Residents’ Rights Act’s ban on  “[a]ny provision or clause waiving or limiting the right to sue … between a patient and a nursing home.”

However, the Ruszala court affirmed the lower court’s finding that some of the arbitration agreement provisions were unenforceable, based on the doctrine of substantive unconscionability. In particular, the provisions limiting discovery, limiting compensation for non-economic damages, and precluding punitive damages, were found to be substantively unconscionable, and were stricken from the arbitration agreement.

Rossius v. Krasheninnikov, No. A-4220-08T3 (Jan. 27, 2010): Awarding Attorneys Fees To The Wrongdoer In An Undue Influence Case Is “Abuse Of Discretion”

In Rossius v. Krasheninnikoff, after a trial, the court found that the defendant had unduly influenced the decedent to make him the sole beneficiary named in the decedent’s will. The court awarded the entire estate to plaintiff. However, the trial court also granted defendant’s counsel application for fees.

The appellate court reversed, holding that it was an abuse of discretion for the trial court to award attorneys fees to defendant: “where the wrongful conduct of one party triggers otherwise unnecessary litigation, no allowance of counsel fees will be made to the wrongdoer.  In fact, in some circumstances, counsel fees for the innocent prevailing party may be charged against that individual.”


Sable v. Abo, No. A-1820-08T2 (Jan. 20, 2010): Guardian / Expert Appointed By The Court Is Entitled To Absolute Immunity From Liability In Litigation

The court appointed CPA Martin Abo as temporary guardian for an incapacitated father. Based on the temporary guardian’s report and testimony, the court found that the son had unduly influenced the father and violated fiduciary duties, and entered judgment against the son. The son then filed a separate lawsuit against the temporary guardian, alleging accounting malpractice and negligent misrepresentation. The court found that temporary guardian was entitled to absolute immunity from liability in the matter. On appeal, the appellate court affirmed.

Estate of McNieney, BER-P-89-10, Ch. Div. Bergen Cty. (Doyne): Plenary Guardians Can Control The Visitation Rights Of Their Ward

Two of Ann McNierney’s children were appointed as her co-guardians. After assisted living facility visits by one brother, Patrick, were making Mrs. McNierney agitated, the co-guardians prohibited Patrick from visiting the mother. The trial court ruled that, under the guardianship statutes, a plenary guardian has “all the powers conferred upon the guardian by the law and the provisions of this chapter except as limited by judgment.” The Court held that anyone, such as Patrick, who disagreed with a plenary guardian’s decisions had to seek the intervention of the court to remove the guardian.

In re J.M., Bergen County, Docket No. P-036-10 (Koblitz, July 2, 2010): Court-Appointed Counsel vs. GAL–Special Medical Guardianship

In J.M., Valley Hospital sought the appointment of a special medical guardian to consent to life-saving dialysis treatment for J.M. Her treating physicians indicated that dialysis was immediately necessary to save her life, but she refused treatment. After conducting an investigation, J.M.’s court-appointed attorney recommended, against J.M.’s wishes, a special medical guardian be appointed so that dialysis treatments could begin. The court then discharged that attorney and appointed a new attorney to represent J.M., directing the second attorney to advocate for J.M.’s expressed wishes. The court found that, in making recommendations contrary to J.M.’s wishes, the first attorney had acted as a guardian ad litem rather than legal counsel for J.M.

The court ultimately found that J.M. was, in fact, incapacitated. A special medical guardian was appointed, and dialysis was provided which saved J.M.’s life.


January 2010: Federal Estate Tax Repealed, “Carryover Basis” Rules Instituted

This is the subject of one of today’s presentations by our estate tax gurus. Suffice it to say that it was a big year for estate planning and taxation.


February 2010: Social Security Adds 38 New Compassionate Allowances Conditions, Including Early-Onset Alzheimer’s Disease

SSA is adding 38 more conditions to its list of Compassionate Allowances conditions, for a total of 88 conditions that are part of the Compassionate Allowances Initiative, a way of allowing SSA to quickly target the most obviously disabled individuals for immediate approval. The new conditions include early-onset Alzheimer’s disease and 4 “related dementias.”

June 2010: New POMS On Early Termination Of Special Needs Trusts

All Special Needs Trusts (SNTs) established after January 1, 2000 containing early termination provisions will now be rendered ineffective, resulting in the assets in the trust becoming countable as a resource under SSI, unless the SNTs provides as follows:

(1) Upon early termination, the State(s), as primary assignee, must receive all amounts remaining in the trust at the time of termination up to an amount equal to the total amount of medical assistance paid on behalf of the individual under the State Medicaid plan(s);
(2) No person or entity other than the trust beneficiary may benefit from the early termination (i.e., after reimbursement to the State(s), all remaining funds must be disbursed to the trust beneficiary); and,
(3) The early termination provision must give the power to terminate the trust to someone other than the trust beneficiary.

Many, if not most, early termination provisions in existing SNTs will not meet the requirements set forth in the new POMS section. The new POMS section becomes effective on October 1, 2010, but applies retroactively to all trusts created on or after January 1, 2000.

June 2010: Changes To Medigap Insurance

Beginning June 1, 2010, the plans and coverages of Medigap policies are changing, as a result of the July 2008 Medicare Improvements for Patients and Providers Act (“Medicare Supplement Modernization”). Two new plans (Plan M and Plan N) are being offered, and Plans E, H, I and J will be discontinued. The June 2010 Medigap changes are seen as representing a movement toward policies that are less expensive, but which require increased cost sharing from policyholders.


A.G. v. Division of Medical Assistance and Health Services (DMAHS) and the Ocean Co. Bd. of Social Services, Docket No. HMA-2405-09: Caregiver Agreement Invalid; Promissory Note – Loan Medicaid Plan Is An Invalid “Trust-Like Device”

At the hearing level, ALJ Delanoy ruled that payments made for care services provided to A.G., a nursing home resident, by her son, pursuant to a Caregiver Agreement were uncompensated transfers for less than fair value. The reasons were: (1) the services to be provided under the Agreement were duplicative of services rendered by the nursing facility (2) the son did not prove that any services were actually delivered  (3) no basis for the hourly rate was set forth in the Agreement or established at the hearing, (4) the Agreement gave A.G. no recourse against the son for failure to provide services as promised, and (5) the Agreement failed to provide for any refund if either party died prematurely.

ALJ Delanoy also found that that a loan from A.G. to her son and evidenced by a promissory note was a valid, bona fide loan which was not subject to a Medicaid penalty period. Judge Delanoy found that the loan was not a “trust-like device” because (1) the son/obligor did not owe a fiduciary obligations to A.G. and (2) the loan was not made with the intention that it be held for the benefit of A.G.

Later, the Director issued a Final Agency Decision which (1) affirmed the ALJ’s ruling that payments made under the Caregiver Agreement were uncompensated transfers but (2) reversed Judge Delanoy’s decision that the loan was valid, instead holding that the loan was a “trust-like device” and an available resource.

E.S. v. DMAHS,  (App. Div., No. A-2564-08T2, March 26, 2010): More bad news regarding Personal Services Contracts: Payment For Care Under A Contract Is Not Transfer For Fair Market Value

The Appellate Division held that a life care contract between a nursing home resident and her daughter is not a transfer for fair market value, for the purposes of Medicaid eligibility. The daughter, as agent under a power of attorney, entered into a life care contract on her behalf in which E.S. would pay the lump sum of $56,550 for caregiving services to be rendered on an as-needed basis over E.S.’s lifetime. The administrative law judge affirmed Medicaid’s decision that the transfer was not for fair market value, and E.S. appealed.

The Appellate Division affirmed. It found that because the contract was not assignable, it has no market value, and because contract terms benefited only the caregiver, the contract exposed E.S. to unwarranted risks and was worthless on the open market.

W.B. v. DMAHS, No. A-5658-07T1 (N.J. App. Div. Feb. 24, 2010): “Ignorance Isn’t Bliss When You Apply For Medicaid”

The Appellate Division affirmed Medicaid’s denial of eligibility to an incapacitated applicant, based on the applicant’s ownership of assets that she was not aware she owned.

In April 2007, while W.B.’s Medicaid application was pending, W.B.’s son discovered that W.B. owned stock worth $6,289.25 (above the $2,000 Medicaid resource limit). The son promptly sold the stock and, by the end of April 2007, used the funds to pay W.B.’s outstanding nursing home costs. Medicaid determined that W.B. was eligible for Medicaid benefits as of May 1, 2007. The son appealed, contending that the original eligibility date should apply. After the matter was appealed to an ALJ, the ALJ’s decision was reversed by the DMAHS Director, who found that, despite W.B.’s family’s ignorance of the existence of the stock, W.B. had the “right, authority, or power” to liquidate the asset, and that it was therefore a countable resource pursuant to N.J.A.C. 10:71-4.1(c)(1) and 20 C.F.R. §416.1201(a)(1). The son appealed to the Appellate Division.

The Appellate Division found that it “must accord the Division substantial deference in its areas of expertise,” and concluded that W.B.’s stock ownership through April 2007 provided a “reasoned basis” for the Director’s May 1, 2007 eligibility determination. It found that the aforecited regulations “contain no exception for situations in which the applicant, or his or her guardians, profess ignorance of the asset.”

Arnold Walter Nursing Home v. Pumarejo, No. A-4313-08T3 (Mar. 23, 2010): Son Not Liable For Unpaid Nursing Home Bill, Even Though Transfer Of Father’s Home To Son Caused Father’s Medicaid Ineligibility

A father transferred his home to his son for $1. About 2 years later, the father became a nursing home resident. The son’s wife (and resident’s representative) signed an agreement to pay all nursing home bills that were not paid by Medicaid from the resident’s personal assets. The nursing home was informed at the time of admission that the father had transferred his house to his son.

After the father’s Medicaid application was denied because of the transfer, the nursing home attempted to collect from the son and his wife. The motion judge granted the son’s summary judgment motion and the nursing home appealed.

The appellate court affirmed the motion judge’s judgment, on two bases: (1) the admission agreement contained no requirement that assets other than the father’s be used to satisfy his financial obligations; and (2) there was nothing wrongful in the transfer of the home. The court held that, although the transfer may have been made as part of a Medicaid plan, Medicaid planning is legally permissible, citing In re Keri, 181 N.J. 50, 69 (2004).

Estate of F.L. v. DMAHS and the Union County Board of Social Services, OAL Docket No. HMA 13756-08 (Jan. 19, 2010): Retirement Annuity Owned By Medicaid Applicant’s Spouse Is Countable

The Director of DMAHS reversed ALJ Paone’s Order that a retirement annuity owned by a Medicaid applicant’s spouse was not a countable resource. The petitioners were married to spouses who purchased annuities with retirement assets.  The annuities were irrevocable, non-assignable and non-transferable, rendering them non-saleable.  Medicaid directed the petitioners to contact the annuity companies and request that changes be made to the endorsements so that the annuities could be sold.  The petitioners refused.  Respondents contended that the petitioners’ refusal rendered them ineligible for Medicaid. Judge Paone had concluded that petitioners did owe a duty to request that the insurance companies change the terms of their annuity contract endorsements, or take any other action to allow for the liquidation of the annuity.

The Director reversed, finding that “[c]ase law supports the proposition that an applicant must take steps to obtain resources.”  As a result, the Director remanded the case for further proceedings on whether the petitioners – regardless of whether they were willing to do so – could change the payee or otherwise make the annuities accessible. (I understand that, before another administrative hearing was held, the Medicaid agency granted eligibility after petitioners showed that the issuing insurance companies would not consent to making any changes to the endorsements so that the annuities could be sold).

V.M. v. DMAHS, Union County B.S.S. (HMA No. 5769-09): Despite Court Order, Payment To Adult Children For Services Provided Under Power Of Attorney Was A Gift

A June 21, 2010 final agency decision adopted an ALJ decision that, despite a court order awarding wages for services rendered under a power of attorney (POA), the resulting payment to the adult children of a Medicaid applicant for services rendered under a power of attorney was a gift subject to a Medicaid penalty.

Petitioner, V.M., is a 93 year-old widower with four adult children. In 2002, he appointed his daughter and his son as co-agents under his POA. In 2007, he was admitted to a nursing home. In August 2007, he applied and was approved for nursing home Medicaid.

In January 2008, petitioner sold his home and received approximately $202,747.63 in net proceeds. The co-agents/adult children under petitioner’s POA reported the sale to Medicaid, and his benefits were terminated due to excess resources.

Petitioner’s co-agents filed an Order to Show Cause in the Chancery Division, Union County, seeking permission to make monetary reimbursement to themselves from petitioner’s estate for services rendered as his co-agents under the POA, pursuant to N.J.S.A. 46:2B-8.12, and for expenses they incurred on petitioner’s behalf. The co-agents provided a detailed list of the specific services performed and expenses paid.  Judge Malone ordered that that the co-agents be compensated in the amount $102,555.55 for services rendered under the POA and reimbursed for expenses incurred on petitioner’s behalf in the amount of $24,400. After making those payments, the remainder of the proceeds of sale of petitioner’s home (approx. $75,000), was used to pay petitioner’s care costs.

Once he spent down all of his remaining assets and reapplied for Medicaid, Medicaid held that the payment for POA services (and the reimbursement for expenses) was actually a transfer for less than fair market value. ALJ Rigo agreed with Medicaid, and Judge Rigo’s decision was adopted by the Director. The case is now on appeal.

Med. Comm. 10-02 (May 26, 2010): New Jersey Rewrites The Rules Concerning Gifts Made By Medicaid Applicants Which Are Later Returned

When all gifts made during the look-back period are returned to the Medicaid applicant, Medicaid regulations require that a retroactive adjustment be made; when only a part of the gifted asset is returned, the penalty period is modified on a pro rata basis

However, New Jersey’s Medicaid Communication No. 10-02 provides that no adjustments to the penalty period resulting from a gift made within the look-back period can be made unless all assets gifted during the look-back period are returned to the Medicaid applicant.

Sable v. Velez, 2010 WL 2929918 (3d Cir. July 28, 2010): In Federal Court, Legal Error to Use “Trust-Like Device” Analysis For Promissory Notes Without First Applying Regular SSI Rules

In Sable v. Velez, applicants were denied Medicaid because of promissory notes owned by the applicants. Each note was properly signed, and contained a specified interest rate and repayment schedule.  Medicaid found the promissory notes to be countable after determining that the notes qualified as a “trust-like device.”

In their suit in federal court under 42 U.S.C. §1983, the applicants alleged that the notes had no value because they could not be sold, and that the State violated federal law by counting the notes as trust-like devices. They asked the court to enjoin the State from denying their Medicaid applications.

U.S. District Judge Thompson held that the federal Medicaid law created enforceable rights under 42 U.S.C. §1983, but denied the preliminary injunction, ruling that the notes may have been created with an understanding that the relatives would hold the money for the benefit of their parents and, if so, the State would have correctly found them to be countable.

On further appeal, the Third Circuit vacated the district court’s order, finding that it improperly analyzed the notes as trust-like devices, without first undertaking the proper “regular SSI” analysis of the promissory notes.  As a result, the appellate court remanded the case to the lower court for further proceedings.