Bar News - August 23, 2013
NEW LAWS: what you need to know: Senate Bill 138 Creates Liabilities for Fiduciaries
By: Tina Annis and Jeffrey Zellers
Intended to help nursing homes collect, this controversial law opens tranferees and fiduciaries to three new causes of action
A new law that went into effect July 2 without the governor’s signature creates liability for fiduciaries and transferees and gives assisted living and nursing home facilities new ways to collect fees from residents.
Senate Bill 138 amends RSA 151-E to provide nursing homes and other residential care facilities with three new private causes of action.
Attorneys should study the law carefully, as it may impact advice to clients who make (or receive) gifts, or who serve as fiduciaries. The term “fiduciary” is defined to include an agent under a power of attorney, legal guardian, trustee, or representative payee (manager of another’s social security benefits).
The issues arise when an individual requires long-term medical care, the cost of which is significant (individuals might pay $5,000-$10,000 per month in New Hampshire). A nursing home resident can quickly deplete his or her personal funds, and the only governmental program that pays for long-term care expenses is Medicaid.
Medicaid carries with it strict eligibility rules and a complex application process administered by the NH Department of Health and Human Services (DHHS). To be eligible for Medicaid benefits, an applicant must demonstrate that his or her total assets do not exceed $2,500. Once deemed eligible, all of the applicant’s income (excepting a $65 monthly allowance) must be paid to the nursing home.
As part of the application process, the nursing home resident must provide five years worth of financial information. If DHHS determines that the applicant made any gifts (transfers for less than fair market value) during this five-year “look-back,” then a penalty period is imposed. During the penalty period, the resident will be ineligible for Medicaid benefits.
Nursing homes face difficulty in getting paid for their services while a Medicaid application is pending, because it can take many months to complete. If an applicant made a prior gift, the nursing home may not get paid during the applicable penalty period, because the resident will have already spent down his or her assets to the $2,500 limit.
Nursing home residents are typically elderly and frail, and rely on others (usually family members) to assist them with their finances and the Medicaid application.
Family members (as fiduciaries or gift recipients) must now be concerned about personal liability in three situations:
1. Where a gift by an applicant results in a “penalty period” during which the applicant is ineligible for Medicaid benefits, the recipient of that gift will be liable to the nursing home to pay any costs of care, up to the amount of the gift.
2. A fiduciary who has the “authority and duty” to file a Medicaid application on behalf of a resident will be liable to the nursing home if the fiduciary is negligent in “failing to promptly and fully complete and pursue” the Medicaid application.
3. A fiduciary or other person with authority over the income of a resident (which may include a joint owner of a bank account), will be liable to the nursing home for refusing to pay the resident’s income to the nursing home.
The New Hampshire chapter of the National Academy of Elder Law Attorneys (NAELA) testified against this legislation, expressing concern that the law may deprive individuals of procedural due process.
Current Medicaid rules presume that gifts made during the five-year look-back period were made for the purpose of improperly qualifying the resident for Medicaid benefits. That presumption is difficult and costly to rebut through an appeal process. Recipients of gifts (who would face personal liability under this new statute) might include “innocent” individuals who had no inkling that their benefactor would need nursing home care in the future.
There is also concern that fewer family members will be willing to serve as fiduciaries for elderly relatives, because of potential personal liability. If family members become unwilling to serve in these roles, there will be increased stress for the frail and elderly, and a heavier burden on governmental agencies to provide assistance.
Despite the potential benefit of being able to collect fees in according with this law, long-term care facilities may find themselves plagued with new issues, if family members decline to assist their elderly relatives.
Attorneys drafting powers of attorney and trust documents should consider including language to address these issues. A statement that the fiduciary has the authority, but not the duty, to file a Medicaid application might offer some protection.
Gov. Maggie Hassan issued a statement indicating that this law should be amended to “include clearer definitions, clarify what happens if the state or another payer source has covered costs of care, and explain precisely the period of time and method of calculating the potential liability.”
Changes to the law may be forthcoming, but until then, families of Medicaid applicants (and their counsel), should be aware of the potential liability created by this statute.
Tina L. Annis is an owner at Annis & Zellers PLLC in Concord. Her practice includes elder law, estate planning, and tax. She can be reached at email@example.com.
Jeffrey J. Zellers is an owner at Annis & Zellers PLLC in Concord. He practices estate planning, tax, and business law. He can be reached at firstname.lastname@example.org.