(The 14th Annual Elder and Disability Law Symposium was held on September 21, 2011 at the New Jersey Law Center, in New Brunswick, NJ. This year, along with a formal presentation on assigning income to special needs trusts, I gave the case law update at the opening plenary session by summarizing the top ten (10) elder and disability law cases decided in 2011. I’ve reproduced the presentation below for readers of this blog. Each hyperlinked title takes the reader to the article posted on this blog about the case.)

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

We’ve gotten a number of written decisions in the areas of probate litigation, guardianship practice, and Medicaid. Many of these are unpublished decisions, but they provide welcome guidance in these areas, where practitioners often wish for a more comprehensive body of case law to guide them.

The following are my “Top Ten” (or so) cases of the year, in chronological order.

In the Matter of the Trusts to be Established in the Matter of the Estate of Margaret A. Flood, Deceased, 417 N.J. Super. 378 (App. Div. 2010)

Doctrine of Probable Intent Cannot Be Used to Create Special Needs Trusts for Intestate Decedent

The Superior Court of New Jersey, Appellate Division, ruled that a trial court erred when it applied the doctrine of probable intent to create testamentary special needs trusts for two disabled children of a woman who died prior to finalizing her estate planning documents.

The chancery court had granted the request filed by the administrator of Ms. Flood’s estate filed to create and fund special needs trusts to hold the inheritances for her daughters with disabilities, because it was Ms. Flood’s undisputed intent to create them prior to her death. The state, which was a party to the action because one of Ms. Flood’s daughters had accrued a million-dollar Medicaid lien, appealed.

The appeals court reversed, finding that the trial court had no authority to establish and fund the trusts under the doctrine of probable intent. The court reasoned that “the doctrine of probable intent is a rule of construction or interpretation and, therefore, presupposes an existing testamentary disposition… [w]here there is no will there can be no will construction.”

The New Jersey Supreme Court denied the Petition for Certification.

Estate of Randall (Unpublished), 2011 N.J. Super. Unpub. LEXIS 808, Docket No. ESX-CP-0199-10 (Feb. 1, 2011)

Clear Evidence Of Testamentary Intent Prevails Over Formalities Governing Will Formation: Handwritten Notations On A Letter Constitute A Valid Will

Superior Court Judge Koprowski ruled that handwritten notations on a hand-written letter constituted a valid will, although the letter itself did not.

The decedent’s cousin Charles offered for probate two pages of a portion of a photocopied letter from 1998, with original marginal notations. The photocopied portion of the letter, in the decedent’s handwriting, was unsigned. The marginal notes stated, “Note: Sept. 8, 2004—Everything but Trust, which will be divided between Charles and Janet is to go to Charles, in appreciation for all his help through the years.” The text of the letter, which had been written to Charles, had stated, “Everything that remains would be divided between you and Janet.” Those words were later crossed out, and in the margin next to the strikeout, the decedent had written, “VOID–*note see Sept. 4, 2008 correction.”

The Court found that, with respect to the initial letter, the plaintiff failed to establish the decedent’s testamentary intent by clear and convincing evidence. However, with respect to the marginal notations on the letter, the Court found that those notes should be given testamentary effect, in accordance with N.J.S.A. 3B:3-3:

In adopting N.J.S.A. 3B:3-3, … the Legislature clearly intends to loosen the rigid formalities which had previously governed will formation, and to move away from situations in which failure of those rigid formalities would defeat the testator’s clear intent.

The Court found that, because the decedent had made a photocopy of the pages from the letter and retained them in her bureau for years, she had recognized them as an important document capable of disposing of her estate on her death. Judge Koprowski concluded,  “I find the language of the notation, as brief as it is, expresses sufficient testamentary intent when viewed in the context of the body of the letter, and its maintenance in a safe place for so many years.”

Estate of William Walb (Unpublished), 2011 N.J. Super. Unpub. LEXIS 515, Docket No. A-1368-09T2 (App. Div. Mar. 3, 2011)

Once An Objection Is Filed To The Probate Of An Unwitnessed Will Revision, A Trial Must Be Conducted To Determine The Decedent’s Intent

The decedent executed a will in January 2003, in compliance with the statutory requirements regarding execution set forth in N.J.S.A. 3B:3-2a. At the time, he was a widower with no children. In his will, the decedent left approximately 81% of his substantial estate assets to Albright College, and stated that he would later issue instructions for disposing of his personal property among friends and relatives by preparing an informal list.

In 2007, he made two substantial gifts to Albright College and in February 2008, he signed a document entitled “Addendum” to his will. When the Addendum was signed, the decedent was ill and blind, so he dictated the contents to his long-time friend and attorney-in-fact, Shirley Waters. Though he signed the document, it was not witnessed as required by N.J.S.A. 3B:3-2a. The Addendum bequeathed certain property to friends, including Shirley Waters, and revised the residuary clause so that Albright College would receive only 60% of the net estate. After Mr. Walb’s death, his executor, on discovering the Addendum, filed an order to show cause to decide whether it should be admitted to probate, and included certifications from beneficiaries arguing for the admission of the Addendum to probate. The trial judge ruled on the papers that the Addendum didn’t meet the will execution requirements of N.J.S.A. 3B:3-16. The Appellate Division reversed, finding that the trial judge should have conducted a trial to determine whether Walb, in dictating and signing the Addendum, intended to alter his will.

In re Nova, an Alleged Incapacitated Person (Unpublished), 2011 N.J. Super. Unpub. LEXIS 946, Docket No. ESX-CP-0196-10 (Ch. Div. Apr. 12, 2011)

Power Of Attorney, Who Is Neither The Principal’s Spouse Nor Next Of Kin, Lacks Standing To Bring A Guardianship Action

A Superior Court judge ruled that an agent appointed under a power of attorney who is unrelated to the principal by marriage or blood lacks standing to file a lawsuit seeking guardianship of the principal in New Jersey.

In 2008 and 2009, Mr. Nova appointed two of his friends as his agents under a general power of attorney and healthcare power of attorney. In June 2010, he revoked the prior estate documents and appointed his long-time attorney and his caregiver as his agents, and named his caregiver as the primary beneficiary under his will.

In July 2010, the two friends/former agents brought a guardianship action The medical evidence submitted to the Court was conflicting. Mr. Nova’s neurologist and psychiatrist found him competent and the court-appointed guardian ad litem delivered a report concluding that Mr. Nova was not an incapacitated person. However, the psychiatrist retained by the petitioners found that he was incapacitated. Mr. Nova then filed a motion to dismiss the guardianship action. On the hearing date, Judge Koprowski dismissed the action, ruling that a complainant in a guardianship action was required by statute to be either a relative or a person with a legal or equitable interest in the subject of the action, and that a power of attorney does not give one a “legal or equitable interest” in either the assets or person of the principal.

S.S. v. Division of Medical Assistance and Health Services (Unpublished), 2011 N.J. Super. Unpub. LEXIS 1036, Docket No. A611809T1, (App. Div. April 28, 2011)

Transfer Penalty Does Not Begin Until Medicaid Applicant’s Assets Transferred To Her Son Were Used To Pay For Applicant’s Care

The Appellate Division ruled that the penalty period for a Medicaid applicant who transferred funds to her son could not begin until she became financially eligible for Medicaid, which occurred only after the son used all the transferred assets to pay the cost of the applicant’s care. S.S. met the medical requirements for Medicaid eligibility on January 28, 2008. Some time before September 2008, S.S. gifted $76,570.40 (all of her assets) to her son, who used $42,909.75 of the money to pay for her care through February 2009. Medicaid imposed a transfer penalty beginning March 1, 2009. S.S. argued that the penalty period should begin when she became financially eligible as a result of the gift. The hearing officer found that the gift had created a “false financial eligibility,” and that the penalty period should begin on March 1, 2009, and should be calculated based upon the value of the assets retained by the son. The Director affirmed. The Appellate Division also affirmed.

Veterans for Common Sense v. Shinseki, 644 F.3d 845 (9^th Cir. May 10, 2011)

Federal Appeals Court Finds VA Failed To Provide Timely Care And Benefits To Veterans

In a scathing 104-page opinion, the U.S. Court of Appeals for the Ninth Circuit ruled that “the VA’s failure to provide adequate procedures for veterans facing … delays in the delivery of mental health care violates the Due Process Clause of the Fifth Amendment.”

Plaintiffs, Veterans for Common Sense and Veterans United for Truth  (“Veterans”), filed a complaint in the federal district court seeking declaratory and injunctive relief on behalf of all veterans with severe depression or post-traumatic stress disorder (“PTSD”) to remedy the lengthy delays in (1) the provision of mental health care and (2) the adjudication of service-connected death and disability compensation claims by the Department of Veterans Affairs (“VA”). Plaintiffs asked the Court to decide whether the delays and the VA’s lack of procedures to remedy the delays violated the veterans’ due process rights to receive the care and benefits they are guaranteed by statute.

Reversing the district court concerning the delays in the VA’s provision of mental health care, the Ninth Circuit held that the Veterans’ constitutional right to due process was violated, and remanded the case for further proceedings. (The court found that as of April 2008 at least 85,450 veterans were languishing on waiting lists for mental health care from the VA, and that on an average day, 18 veterans take their own lives). With regard to the delays in the VA’s claims adjudication system, the court stated that the due process rights of veterans were violated by the absence of procedures designed to reduce delays in claim appeals. The appeals court remanded the case to the district court with the instruction that, unless the parties resolved this dispute, an order be entered by the court consistent with the opinion.

In re Keeter (Unpublished), 2011 N.J. Super. Unpub. LEXIS 1200, Docket No. A-0553-10T4 (May 11, 2011)

Contested Guardianship Action Dismissed Without A Hearing

Mrs. Keeter’s daughter sought guardianship of her 89-year old mother and provided a certification of the mother’s treating physician, stating that she was incapable of managing her care or finances, and from a second doctor, who stated that she was “not completely incapacitated” but that “it would probably be in her best interest” to have a guardian or conservator appointed. The court-appointed attorney for the mother found her to be “coherent and pleasant,” and “adamant” that she did not need a guardian. Mrs. Keeter’s son opined that his mother was competent. The court-appointed attorney arranged for an exam by a third doctor, who found that Mrs. Keeter exhibited “mild signs of cognitive impairment” but that she was not incapacitated. The court-appointed counsel issued her report, which stated that it was in her “best interests to, at the very least, have a conservator appointed. Mrs. Keeter then hired private counsel to represent her in the guardianship action. On the return date of the Order to Show Cause, Mrs. Keeter’s new private attorney waived testimony, and the Chancery Court allowed the matter to proceed in a summary manner, following which the court dismissed the guardianship complaint, finding that plaintiff had failed to meet her burden of proving the need for guardianship by clear and convincing evidence. On appeal, the daughter claimed that the lower court erred in dismissing the complaint without a hearing. The Appellate Division disagreed. It found that, pursuant to R. 4:86-6(a) and N.J.S.A. 3B:12-24, unless the alleged incapacitated person demands a jury, the court may rely upon the affidavits submitted. The court below had found that the report of Mrs. Keeter’s treating physician (who was the only doctor concluding that Mrs. Keeter was incapacitated) was a “fill in the blanks” report without narrative, and that the doctor stated Mrs. Keeter was not capable of attending the hearing while, in fact, she did attend court on the return date. The court found that the report of the second doctor submitted by the plaintiff was inconclusive, and that the third physician found Mrs. Keeter to be competent.  Accordingly, the Appellate Division found that there was sufficient credible evidence to support the chancery court’s decision.

In re Estate of Sauer (Unpublished), 2011 N.J. Super. Unpub. LEXIS 1431, Docket No. BER-P-088-11 (Ch. Div. May 19, 2011)

Co-Executors Of New Jersey Estate Must Act In Concert; Unilateral Action By Co-Executor May Constitute Grounds For Removal

The Chancery Division held that a co-executor’s “unbridled belief she could act unilaterally in administering the decedent’s estate without the need for consent from the co-executrix … [may] amount[] to a breach of the [co-executor’s] … fiduciary duty [and] … [constitute] cause for her removal.” Decedent named two of his daughters as co-executors. One daughter, who had been the decedent’s agent under a durable power of attorney during his life, began to administer the estate even before the will was probated and continued thereafter without notification to or approval from the co-executor/sister. She refused to provide information about the decedent’s finances to the co-executor and failed to provide an accounting she had been ordered to provide by the court. After a hearing, the trial court ruled that removal of an executor, while an extraordinary remedy to be exercised sparingly and cautiously, is one that falls within the court’s discretion. Although the court did not ultimately remove the co-executor, it held that, even though it did not appear that the co-executor misappropriated estate assets, her actions conflicted with state law which generally requires mutuality of action between the co-fiduciaries: ”Absent circumstances requiring an executor to bring an action against the other executor, the executors are required to act in concert.”

J.J. v. New Jersey Division of Developmental Disabilities (Unpublished), 2011 N.J. Super. Unpub. LEXIS 1315, Docket No. A-4307-09T3 (App. Div. May 23, 2011)

New Jersey’s Budget Constraints Trump Disabled Adult’s Right To Payment Of Transport Costs

The Appellate Division found that the state has no obligation to pay for transportation that would allow a 25-year-old man with autism to attend an adult day program because he is on the waiting list for a Medicaid waiver and a comparable program is available closer to his home. For almost 20 years, C.J. participated in a special education program at the Eden Institute that was paid for by his school district. When he aged out of the education program, the Division of Developmental Disabilities offered to enroll him in an adult day program closer to home, but C.J.’s parents insisted that he remain at Eden. The Division agreed to pay the vocational program at Eden, but refused to pay for transportation to and from the program. The Division argued that it was not obligated to pay for C.J.’s transportation because C.J. was only on the waiting list for a Medicaid waiver program that could provide the necessary funding (the waiting list stretches back to 1998). The Division also refused to categorize the case as “contested” and denied C.J. an administrative hearing. The Appellate Division affirmed, finding that the case was not “contested” because “C.J. is presently on the waiting list for the [waiver], and he is not entitled to receive [waiver] services until he is reached chronologically on the waiting list.” In balancing C.J.’s rights with the state’s budgetary constraints, the Court ruled that the Division is only required to provide services “to the extent available.” …If an appropriate service is not available, the Division must provide “alternate service[.]” … The statutes governing the provision of services by the Division evince a recognition that “fiscal constraints may delay the provision of services.”

In re Trocolor (Unpublished), 2011 N.J. Super. Unpub. LEXIS 1350, Docket No. A-5005-09T3 (App. Div. May 26, 2011)

Credibility Determinations By A Trial Court In Cases Involving Claims of Abuse Of A Power Of Attorney Are Binding On Appeal

Matter of Mildred B. Trocolor involved a dispute between two of the decedent’s adult children who were co-executors of the decedent’s estate. After a three-day, non-jury trial, the trial judge found the plaintiff/sister to be a credible witness and that the defendant/brother was not. The court ordered the defendant to pay compensatory and punitive damages, and attorney fees, imposed a constructive trust on the defendant’s home, and barred him from inheriting from the estate. On appeal, the defendant claimed that “the remedies the judge imposed were ‘an abuse of discretion’ because his factual findings were incorrect.”

The appeals court affirmed, finding that the “trial judge had the opportunity, which we did not, to hear and see the witnesses testify and to determine their credibility.” The appeals court held that it was bound and owed particular deference to credibility determinations made by the trial judge.

In re Trust of McLellan (Unpublished), 2011 N.J. Super. Unpub. LEXIS 1915, Docket No. ESX-CP-0107-2011 (Ch. Div.  June 17, 2011)

Failure To Provide “Clear And Convincing Proof” of Decedent’s Intent Mandates Denial Of Action To Reform Trust

In this case, the decedent, William McLellan, created an irrevocable life insurance trust for the primary benefit of his wife and children in 2006. The life insurance trust was established as a generation skipping trust in 2006, but it no longer serves a useful tax purpose. As a result, plaintiff asked the Court to reform the life insurance trust in order to delete the generation skipping tax language and permit final distributions from the trust to be made directly to decedent’s four children. After a hearing, the Court denied the parties’ request for modification of the life insurance trust. The Court found that the trust was unambiguous on its face, and that the suggested changes “substantially modify the trust’s structure, distribution scheme, and beneficiaries.” Further, the Court held that reformation requires clear and convincing proof of the testator’s intent and cannot be based upon “sheer speculation as to what the parties would mutually have intended had the matter been brought to their attention prior to their death.”

Sable v. Velez (Non-Precedential), 2011 U.S. App. LEXIS 14414, Docket No. 10-4647 (3d Cir. July 12, 2011)

In Federal Court, District Court Properly Used “Trust-Like Device” Analysis After 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.

After the District Court denied the preliminary injunction in 2009, the Third Circuit vacated that 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.

However, in December 2010, the District Court found that, under the regular SSI resource-counting rules, the notes did not qualify as cash loans or promissory notes because the plaintiffs failed to meet their burden of showing that the notes were not the product of a “bad-faith arrangement,” and reaffirmed its earlier denial of the injunction based on the “trust-like device” analysis. This time, the Third Circuit affirmed, finding that the lower court had properly concluded that the instrument did not qualify as a cash loan or promissory note, and that the agency did not err in considering the notes to be trust-like devices.

V.P. v. Department of Human Services (Unpublished), 2011 N.J. Super. Unpub. LEXIS 2359, Docket No. A-2362-09T1 (Sept. 2, 2011)

In A Medicaid Case, An ALJ’s Findings Of Fact Based Upon The Credibility Of Witnesses Cannot Be Rejected Without Proper Cause

For most of her life, V.P. lived in her home with her adult son. She  suffered from many significant impairments, and her son assisted her with most activities of daily living at home. At age 88, she was admitted to a nursing home after suffering a stroke and heart attack. She transferred her home to her son and applied for Medicaid benefits. After being denied, an ALJ found that the transfer met the “child caregiver exception” and recommended Medicaid eligibility. The Director rejected the recommendation of the ALJ. On appeal, the Appellate Division reversed, holding that the Director improperly reversed the ALJ’s findings of fact based upon the credibility of lay witnesses without cause, contrary to the statutory requirements set forth in N.J.S.A. 52:14B-10(c).