2009 was an exciting year of litigation in the elder and disability law arena, producing a bumper crop of significant decisions from the administrative forum, as well as state and federal courts. In stark contrast with years past, New Jersey lawyers are now in the forefront of the effort to expand legal protections to greater numbers of the elderly and disabled in New Jersey through litigation. Here is a review of the top 10 15 New Jersey elder and disability law cases in 2009.

Community Spouse Annuities.

• The most important cases in 2009 involved annuities. In James v. Richman, 465 F.Supp. 2d 395 (M.D. Pa. 2006), aff’d., 547 F.3d 214 (3d Cir. 2008) , the Third Circuit Court of Appeals held that the income from an irrevocable, non-transferable, non-assignable, single premium, immediate annuity purchased before the passage of the Deficit Reduction Act of 2005 (DRA) and payable to the community spouse of a nursing home resident is not countable in determining the institutionalized spouse’s Medicaid eligibility. Blog post(s): here.
• Similarly, in Weatherbee v. Richman, 595 F. Supp. 2d 607 (W.D. Pa. 2009), aff’d., 2009 WL 3792406 (3d Cir. 2009), which involved a community spouse annuity purchased after the DRA was enacted, the Third Circuit again decided that the annuity was not countable in determining the institutionalized spouse’s eligibility for Medicaid benefits. Blog post(s): here and here.
• In Prall vs. Valez, Civil Action No. 09-04205, plaintiff, who was denied nursing home Medicaid benefits because her spouse purchased a single premium immediate annuity, filed a lawsuit asking the federal judge to enjoin defendants from denying Medicaid benefits. The court entered an Order which recognized the likelihood of plaintiff’s success on the merits of the case, but reserved decision for other reasons. Blog post(s): here.
• In contrast, in N.M. v. Division of Medical Assistance and Health Services (DMAHS), 405 N.J. Super. 353  (App. Div. 2009), certif. denied, 199 N.J. 517 (2009), the Appellate Division of the New Jersey Superior Court held that an annuity purchased for the sole benefit of the community spouse is countable in determining whether the resources of the institutionalized spouse exceed the resource limit for Medicaid eligibility. Blog post(s): here.

Retirement Annuities.

• E.F. v. DMAHS, held that an annuity purchased by a community spouse with retirement assets from the community spouse’s IRA was exempt in determining the institutional spouse’s nursing home Medicaid eligibility. On appeal, the Director of the State Medicaid agency reversed and remanded the decision “for further findings regarding the availability and value of the annuity.” On remand, NJ admitted that the community spouse’s retirement annuity could not be liquidated or sold. Blog post(s): Initial decision by the Administrative Law Judge (ALJ); Director’s remand; ALJ’s decision on remand.
• The petitioners in Estate of F.L. v. DMAHS were married to spouses who purchased annuities with retirement assets.  Respondents directed the petitioners to contact the issuing insurance companies and request changes so that the annuities could be sold.  The petitioners refused. On summary judgment motion, the  ALJ held that petitioners did not have an obligation to request that the insurance companies change the terms of their annuity contracts. Blog post(s): here.

Caregiver Agreements.

• In A.G. v. DMAHS, the ALJ ruled that payments made for care services provided to A.G., a nursing home resident and Medicaid applicant, by E.G., her adult son, pursuant to a Caregiver Agreement were, in fact, uncompensated transfers for less than fair value, subject to a penalty period under the Medicaid program. ALJ Delanoy also found that that a loan made by 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. Blog post(s): here.
• In C.S. v. DMAHS, Medicaid applicants who prepaid for personal care services to be provided in the future by family members under Life Care Contracts were ineligible for Medicaid because the prepayments constituted transfers of assets for less than fair market value, subjecting the applicants to the imposition of penalty periods under the Medicaid program. The parties filed exceptions, and the case was affirmed by the Director of the Medicaid agency. Blog post(s): Initial decision by the ALJ; Director’s decision.

Court Reformation of A Testamentary Trust Into A Special Needs Trust.

• In E.C. vs. DMAHS, the ALJ awarded Medicaid benefits to a developmentally-disabled woman in a nursing home whose parents had established testamentary trusts in their wills for the Medicaid applicant and her two brothers. After the trusts had been reformed by the court to make them consistent with the testators’ probable intent, three subtrusts were created, one for each of the beneficiaries, and the trustee of E.C.’s subtrust was permitted to take E.C.’s eligibility for Medicaid into consideration in making distributions to E.C. The Director of Medicaid affirmed. Blog post(s): ALJ’s Initial decision; Director’s decision.

Special Needs Trusts Established By The Court In An Intestate Estate.

• In the Matter of the Trusts to be Established in the Matter of the Estate of Margaret A. Flood, Deceased, Superior Court of New Jersey, Chancery Division, Monmouth County, the court authorized the administrator of his deceased mother’s intestate estate to establish two supplemental benefits trusts within her intestate estate to protect the shares of the estate which passed to the decedent’s two disabled adult daughters, and to fund the trusts with the beneficiaries’ intestate shares. Although the State of New Jersey’s motion for reconsideration was denied, the State recently filed an appeal. Blog post(s): Superior Court Order; Reconsideration Order.

Gifts To Disabled And Blind Children.

• In Sorber v. Velez, Civ. No. 09-cv-3799, plaintiffs, aged parents of blind or disabled children, applied for nursing home Medicaid benefits after transferring substantial assets outright to their blind or disabled children. New Jersey denied the applications because, according to the State, the “disabled child” exemption applied only to those transfers made to a trust for the sole benefit of the applicant’s blind or disabled child which contained a “payback” provision. The federal district court enjoined NJ from denying Medicaid, holding that the Medicaid statute “clearly exempts outright transfers of resources to blind or disabled children.” Blog post(s): Order and Opinion.

Gifts Made During The Look-Back Period; Loans And Promissory Notes.

• In the Estate of M.M. v. DMAHS case, M.M. (a now-deceased Medicaid applicant) and her community spouse had gifted $50,000 to their daughters during the Medicaid “look-back period”. Later, M.M. unexpectedly became ill and eventually died. M.M’s Medicaid application was denied based on the transfer of resources, among other reasons. On appeal, the ALJ concluded that, due to the traumatic onset of disability, the assets were transferred exclusively for some purpose other than to establish Medicaid eligibility. Blog post(s): ALJ’s Initial decision; M.M. v. Division of Medical Assistance and Health Services (Final Agency Decision).

Loans And Promissory Notes.

• Sable v. Velez, Civil Action No. 09-2813, involved five applicants for nursing home Medicaid benefits who were denied eligibility based upon excess resources. The State included promissory notes owned by each applicant as part of that applicant’s available resources in calculating financial eligibility, holding that each promissory note qualified as a “legal instrument or devise that is similar to a trust.” The applicants filed a lawsuit in federal court, asking the court to enjoin the State from denying their Medicaid applications. The court denied the applicants’ motion for a preliminary injunction, ruling that he promissory notes may have been created with an understanding that the children would hold the money for the benefit of their parents, making them “trust-like” instruments, as alleged by the State. A motion for reconsideration was also denied. Blog post(s): here.

Guardians And Life-Support Decisions.

• In Betancourt v. Trinitas Regional Medical Hospial, Hon. John Malone, P.J. Ch., ruled that life-support decisions should be made not by caregivers or courts but in accordance with a patient’s rights as expressed by a guardian, ordered life support resumed for a patient who was in a vegetative state, and restrained a hospital from discontinuing treatment over the patient’s family’s wishes. Blog post(s): here.

Grounds For The Removal Of A Fiduciary.

• In In the Matter of the Estate of John H. Hnat, Deceased, the NJ appellate court ruled that mere friction between the executrix and a beneficiary is insufficient cause for removal without a showing that the relationship is likely to materially interfere with the administration of the estate or that the friction arose out of the trustee’s behavior. The court held that courts should not remove a fiduciary unless there is “clear and definite proof of fraud, gross carelessness or indifference.” Blog post(s): here.