Spousal Refusal in Medicaid Planning

Do you need Medicaid and can’t wait for a 5-year lookback to qualify?

Then, consider Spousal Refusal, which with the Reverse Rule of Halves, represent 2 options to avoid the 5-year lookback requirements.

Spousal Refusal means that assets are transferred from the Medicaid applicant to such applicant’s spouse (the community spouse or the spouse not receiving Medicaid). Luckily, these transfers of assets to a spouse are exempt from the five-year look back period and thus, don’t trigger a penalty period.

Under Medicaid law, the community spouse can sign a Spousal Refusal which states that the community spouse refuses to make their income and resources available to the Medicaid applicant. This can be done especially when the community spouse may have assets over Medicaid’s allowable recourse limit or in excess of the income allowance.

In New York, Social Services Law §366(3)(a) provides that if the community spouse refuses or fails to provide the applicant with the necessary care and assistance, the medical assistance furnished to the applicant creates an implied contract with the community spouse. The cost of the medical assistance then may be recovered from the community spouse. However, this takes a lawsuit, which is often settled for far less than what was transferred, if the lawsuit is pursued in the first instance. Also, if repayment is pursued, the repayment rate is only based on the Medicaid reimbursement rate, which is significantly less than the private pay rate so there is very little to lose for a spouse to claim Spousal Refusal when they cannot plan in advance of the 5-year lookback.

Regardless, those needing Medicaid often have unique circumstances and everyone should get tailored legal advice on any strategy they seek to pursue before effectuating such strategy.

The Reverse Rule of Halves in Medicaid Planning

Medicaid provides a penalty period for the transfer of assets for less than its fair market value within 5-years of an individual’s application for Medicaid. The penalty is calculated by taking the amount of the transfer and dividing it by the average cost of one month of nursing home care in the region where the applicant resides.

A strategy used to maximize an applicant’s excess assets is the Reverse Rule of Halves. Essentially, this strategy allows the applicant to retain at least half of his excess assets and to become eligible for Medicaid sooner. When using this strategy, the Medicaid applicant gives 100% of their excess assets to a family member or multiple members. As this transfer may be a violation of Medicaid’s look back rule, a penalty period of Medicaid ineligibility will result. The family member, however, can return half of the gifted assets in installments back to the Medicaid applicant through a promissory note, so that the penalty period is also cut in half. The applicant, then, can use the returned assets to pay for care during the penalty period.

To utilize this strategy, the assets must be accessible either through a competent individual’s signature, joint ownership, or a Durable Power of Attorney. The return of assets will need to be done through a Deficit Reduction Act (DRA) compliant promissory note. To determine the value of assets that can be preserved with this strategy, the following factors are considered: 

1. Total value of the applicant’s assets that constitutes excess resources for Medicaid purposes;
2. Total monthly fixed income of the applicant;
3. Actual private monthly cost of the nursing home that the applicant will be entering or is in; and
4. Average monthly nursing home cost figure used by the Medicaid district in which the applicant resides to calculate transfer penalty periods.

While there is a specific procedure calculating the maximum amount, the amount gifted is usually approximately equal to the maximum value of assets that can be protected. To determine whether this applies to a specific applicant’s circumstances and to determine whether using the Reverse Rule of Halves is the best strategy for their specific needs, applicants are encouraged to retain counsel as early as possible.

New York State Courts Release Reopening Details

As expected, Chief Administrative Judge Lawrence K. Marks has issued a new administrative order detailing the first stage of court operations for nonessential matters. A full copy of the order can be read HERE.

1. Judges will commit themselves to deciding fully submitted motions in pending cases. 
2. Judges will examine their dockets to find matters through which video conferencing can be helpful in resolving the matter. Parties may request a similar conference, where appropriate.
3. Judges may conduct discovery and other ad hoc conferences to resolve disputes which should not require the filing of motion papers.

The Order also contains an important clarification and limitation: litigants may NOT file any new nonessential matters, and parties may NOT file any additional (new) papers in any pending nonessential matters.

This means no new motions, no new answers, no motion opposition papers, etc. Previous orders tolling deadlines in those matters still control. Currently deadlines are tolled by executive order of Governor Cuomo through May 7, 2020. 

Expect expansion of the courts' capabilities and filings in the near future after successful implementation of this phase.

Reminder that federal courts are still open and capable for accepting new matters and Lieb at Law attorneys are still litigating where court intervention is not needed. 

Empire State Development Issues Guidance on Real Estate Services

On March 9, 2020, Executive Order 202.6 mandated non-essential businesses to reduce their in-person workforce by 50% and later, by 100%. Today, the Empire State Development (ESD) issued guidance on Executive Order 202.6 to further determine which businesses are considered essential.

What does the ESD Guidance mean for real estate professionals?

Lawyers are permitted to continue to perform all work necessary, as long as it is performed remotely. Any in-person work must be only for supporting essential businesses or services, with the caveat that such work should still be conducted as remotely as possible.

Real estate services, including but not limited to, title searches, appraisals, permitting, inspections, recording, legal, financial and other services necessary to complete the transfer of real property shall be conducted remotely for ALL transactions.

• In-person services may be conducted only to the extent legally necessary and in accordance with appropriate social distancing and cleaning/disinfecting protocols.
• Brokerage and branch offices may be opened only to clients.

With ESD’s Guidance, along with Executive Order 202.10 and 202.14 which authorized remote notarization and electronic witnessing for deeds (which we blogged about HERE and HERE), real estate professionals can get back to work and close some deals.

Deeds & Estate Documents - Electronic Witnessing Now Permitted

Through Executive Order 202.14 and effective from April 7, 2020 to May 7, 2020, the act of witnessing as required in signing a will, healthcare proxy, disposition of remains, recording of instruments regarding real property, power of attorney and living trusts may now be done through audio-video technology.

To do so, the following requirements must be satisfied:

• The person requesting that their signature be witnessed, if not personally known to the witness(es), must present valid photo ID to the witness(es) during the video conference, not merely transmit it prior to or after;
• The video conference must allow for direct interaction between the person and the witness(es), and the supervising attorney, if applicable (e.g. no pre-recorded videos of the person signing);
• The witnesses must receive a legible copy of the signature page(s), which may be transmitted via fax or electronic means, on the same date that the pages are signed by the person;
• The witness(es) may sign the transmitted copy of the signature page(s) and transmit the same back to the person; and
• The witness(es) may repeat the witnessing of the original signature page(s) as of the date of execution provided the witness(es) receive such original signature pages together with the electronically witnessed copies within thirty days after the date of execution.

Similarly, video notarization has been permitted since March 19, 2020 through Executive Order 202.7, which we blogged about HERE.

This is one major step closer to remote real estate closings and estate planning.

Now, the NYS legislature needs to make this permanent and not let Coronavirus innovation be a wasted opportunity.

Are You at Risk to Exposure to COVID-19? Designate a Guardian with this Form

By Executive Order 202.14, Governor Cuomo has permitted the use of this form for "any parent, a legal guardian, a legal custodian, or primary caretaker who works or volunteers in a health care facility or who reasonably believes that they may otherwise be exposed to COVID-19... [to] designate a standby guardian" for their children:

Designation of Standby Guardian

(NOTE: As used in this form, the term “parent” shall include a parent, a court-appointed guardian of an infant's person or property, a legal custodian, or a primary caretaker, and the term “child(ren)” shall include the dependant infant of a parent, court-appointed guardian, legal custodian or primary caretaker

I _________________________ hereby designate 

________________________________________________________________________________________________________________________________________________________________(name, home address and telephone number of standby guardian) as standby guardian of the person and property of my child(ren) (You may, if you wish, provide that the standby guardian's authority shall extend only to the person, or only to the property, of your child, by crossing out “person” or “property”, whichever is inapplicable, above.)

______________________________________________________________________________________________________________________________________________________________

(name of child(ren)).

This appointment as the standby guardian of my child(ren) would be in the best interests of my child(ren) because:

________________________________________________________________________________________________________________________________________________________________

(insert justification for appointment of this person as the standby guardian)

The standby guardian's authority shall take effect: (1) if my doctor concludes in writing that I am mentally incapacitated, and thus unable to care for my child(ren); (2) if my doctor concludes in writing that I am physically debilitated, and thus unable to care for my child(ren) and I consent in writing, before two witnesses, to the standby guardian's authority taking effect; (3) If I become subject to an administrative separation such that care and supervision of the child will be interrupted or cannot be provided; or (4) upon my death.

In the event the person I designate above is unable or unwilling to act as guardian for my child(ren), I hereby designate 

________________________________________________________________________________________________________________________________________________________________

(name, home address and telephone number of alternate standby guardian), as standby guardian of my child(ren).

I also understand that my standby guardian's authority will cease sixty days after commencing unless by such date he or she petitions the court for appointment as guardian.

I understand that I retain full parental, guardianship, custodial or caretaker rights even after the commencement of the standby guardian's authority, and may revoke the standby guardianship at any time.

Signature: 

 

Address: 

 

Date: 

 

I declare that the person whose name appears above signed this document in my presence, or was physically unable to sign and asked another to sign this document, who did so in my presence. I further declare that I am at least eighteen years old and am not the person designated as standby guardian.

Witness' Signature: 

 

Address: 

 

Date: 

 

Witness' Signature: 

 

Address: 

 

Date: