Law Office of Donald D. Vanarelli Blog

The following list contains some of the most frequently encountered issues faced by parents of a child with special needs who wish to arrange a secure future for their disabled child through estate planning.

1. Don’t disinherit the child with special needs.
2. Carefully consider the division of assets among all of the children.
3. Understand the differences between public benefits such as Medicare, Medicaid, Social Security Disability benefits and Supplemental Security Income (SSI).
4. Establish a third-party special needs trust funded with assets belonging to the parents to maintain the child’s eligibility for needs-based public benefits.
5. Carefully choose the trustee of a special needs trust.
6. Prepare a letter of intent to assist the trustee of a special needs trust.
7. Include contingent special needs provisions in estate planning documents.
8. The parents’ general durable powers of attorney should permit the agent to make discretionary, nonsupport distributions to or for the benefit of their special needs child.
9. Parents should review all beneficiary designations to insure that no resources pass directly to the child with disabilities.
10. Consider second-to-die life insurance as a lower cost source of funding for the special needs trust.
11. If IRAs, 401(k)s and 403(b)s must be used to fund the special needs trust, the retirement assets should be accumulated inside a special needs trust to avoid negatively affecting the child’s needs-based public benefits.
12. Coordinate other relatives’ estate planning documents with the parents’ special needs trust.
13. If the child with disabilities has accumulated his or her own assets, consider helping the child establish a first-party, self-settled special needs trust funded with the child’s assets to preserve eligibility for public benefits.
14. If the parents may themselves soon need nursing home Medicaid benefits, consider establishing a “sole benefit” special needs trust for the disabled child and funding the trust with all of the parents’ assets.
15. Divorcing parents of a child with special needs should insure the disabled child maintains eligibility for public benefits by arranging for child support to be paid to a first-party, self-settled special needs trust.

Source: March/April 2010 edition of Probate & Property magazine, a publication of the American Bar Association

These guidelines are intended to establish a framework for collaborative family law negotiations undertaken by members of the New Jersey Collaborative Law Group. In order to provide some predictability to the collaborative negotiations, it is anticipated that these guidelines will be followed in most cases. These guidelines are not intended to be exhaustive.

Before the First Meeting of the Divorcing Couple and their Lawyers

1.    Each lawyer will discuss with their client:

• the collaborative process;
• their goals and interests and that generally comprehensive settlement proposals will be developed through the process;
• the participation agreement;
• general rules of behaviour during the collaborative process including during meetings.

2.    The lawyers will discuss:

• the form of the participation agreement to be presented to the clients;
• the time, place and planning for the first meeting;
• important and urgent issues as presented by their clients.

3.    Preliminary efforts to gather financial information may begin.
4.    There shall be active positive communication between parties throughout the process. The lawyers shall demonstrate and model respectful constructive behaviour throughout the process.

At the First Meeting of the Divorcing Couple and their Lawyers

1.    The participation agreement will be reviewed, finalized and signed by both clients and lawyers.
2.    The group will determine how to document meetings and follow-up tasks.
3.    Clients will share information as to their respective goals, priorities and expectations.
4.    All parties shall endeavour to communicate with each other constructively and respectfully. The lawyers shall demonstrate effective communication skills with both clients and each other.
5.    Any urgent or immediate issues will be identified and options for resolution canvassed; if possible, solutions to these immediate issues will be negotiated.
6.    Requirements for financial disclosure will be established together with a timetable.
7.    If appropriate, the need for jointly retaining outside experts will be addressed.
8.    The agenda and date of the next meeting(s) will be arranged.

After each Meeting of the Divorcing Couple and their Lawyers

The lawyers will communicate with one another as necessary to discuss the dynamics of the meeting and provide constructive feed-back to each other. This may constitute training for the lawyers and not be billable time to the clients.

The Second and Subsequent Meetings of the Divorcing Couple and their Lawyers

1.    When it is appropriate to do so, options for resolution of the various issues will be generated and the merits of the options will be considered in light of the goals and priorities of each of the parties.
2.    Schedules for the children and summaries of property, income and reasonable expenses may be prepared jointly at meetings in an effort to narrow areas of disagreement and generate options for their resolution.
3.    The lawyers will continue to be advisors to their clients while the clients take on the responsibility for negotiations.
4.    Generally, any negotiations regarding both procedural and substantive issues between the lawyers in the absence of the clients will be governed by agreement between the parties.

The Agreement

The final agreement may be drafted by the parties and the lawyers working together; ideally at a meeting scheduled for this purpose.

At the End of the Case

The lawyers will discuss the case with one another to highlight what each learned through the collaborative process.

Source: New Jersey Collaborative Law Group

In case you missed them, here are last week’s most popular articles posted to the Vanarelli Law Office Blog:

200,000 Veterans Expected to File Agent Orange Claims Over Next Two Years – Veterans who served in Vietnam during the war and who have one of the illnesses covered by the “presumption of service connection” don’t have to prove an association between their medical problems and military service.

What Does A Court Mean When Litigants Are Ordered To “Mediate In Good Faith?” – This post discusses two recent non-NJ courts who have taken a look at what constitutes “good faith” by a party ordered into mediation.

New Jersey State Bar Association’s 2010 Elder Law Retreat – In this post, I provided the agenda for the Elder and Disability Law Retreat scheduled for April 22-23, 2010 in Cape May, NJ.

Following is a news release about the Department of Veterans Affairs new initiative to fast track Agent Orange claims:

WASHINGTON (March 9, 2010) – The Department of Veterans Affairs (VA) announced today an aggressive new initiative to solicit private-sector input on a proposed “fast track” Veterans’ claims process for service-connected presumptive illnesses due to Agent Orange exposure during the Vietnam War.

“This will be a new way of doing business and a major step forward in how we process the presumptive claims we expect to receive over the next two years,” Secretary of Veterans Affairs Eric K. Shinseki said. “With the latest, fastest, and most reliable technology, VA hopes to migrate the manual processing of these claims to an automated process that meets the needs of today’s Veterans in a more timely manner.”

Over the next two years, about 200,000 Veterans are expected to file disability compensation claims under an historic expansion of three new presumptive illnesses announced last year by Secretary Shinseki.  They affect Veterans who have Parkinson’s disease, ischemic heart disease and B-cell leukemias.

In practical terms, Veterans who served in Vietnam during the war and who have one of the illnesses covered by the “presumption of service connection” don’t have to prove an association between their medical problems and military service.  This “presumption” makes it easier for Vietnam Veterans to access disability compensation benefits. Vietnam Veterans are encouraged to submit their claims as soon as possible to begin the important process of compensation. (I previously blogged about the VA’s decision to establish presumptive service-connection for these illnesses here.)

Along with the publication of proposed regulations for the three new presumptives this spring, VA intends to publish a formal request in Federal Business Opportunities for private-sector corporations to propose automated solutions for the parts of the claims process that take the longest amount of time.  VA believes these can be collected in a more streamlined and accurate way.

Development involves determining what additional information is needed to adjudicate the claim, such as military and private medical records and the scheduling of medical examinations.

With this new approach, VA expects to shorten the time it takes to gather evidence, which now takes on average over 90 days.  Once the claim is fully developed and all pertinent information is gathered, VA will be able to more quickly decide the claim and process the award, if granted.

The contract is expected to be awarded in April with proposed solutions offered to VA within 90 days.  Implementation of the solution is expected within 150 days.

“Veterans whose health was harmed during their military service are entitled to the best this nation has to offer,” added Secretary Shinseki. “We are undertaking an unprecedented modernization of our claims process to ensure timely and accurate delivery of that commitment.”

Last year, VA received more than one million claims for disability compensation and pension.  VA provides compensation and pension benefits to over 3.8 million Veterans and beneficiaries.  Presently, the basic monthly rate of compensation ranges from $123 to $2,673 to Veterans without any dependents.

Disability compensation is a non-taxable, monthly monetary benefit paid to Veterans who are disabled as a result of an injury or illness that was incurred or aggravated during active military service.

For more information about disability compensation, go to www.va.gov., or see prior posts on this blog here.

Conceding defeat in the courts, the National Association of State Medicaid Directors (NASMD) has sent a letter to the Center for Medicare and Medicaid Services (CMS) requesting that the agency revisit its treatment of community spouse annuities.

In the Omnibus Budget Reconciliation Act of 1993, Congress delegated the treatment of annuities in the Medicaid program to the Secretary of Health and Human Services. CMS then exercised that authority in Transmittal 64 to the State Medicaid Manual which contained the Secretary’s determination that annuities were non-countable resources under Medicaid. The treatment was modified somewhat by the Deficit Reduction Act of 2005 (DRA), but recent federal and state court cases have upheld the Secretary’s decision that the purchase of DRA compliant annuities by community spouses are non-countable, and can protect resources in excess of the Community Spouse Resource Allowance. NASMD now wants CMS to change its rules so that annuities will be treated like trusts which would make them countable resources under the Medicaid rules.

A copy of the NASMD letter is available at: http://www.nasmd.org/home/doc/NASMDlettertoCMSannuityconcerns.pdf

Updated on March 14, 2010 – The New Jersey State Bar Association Elder and Disability Law Section, on behalf of the National Academy of Elder Law Attorneys (NAELA),  drafted a response to the  NASMD’s letter to CMS as follows – NAELA Response.

Source: Elder Law Listserv

State v. Kennedy, 61 N.J. 509 (1972) explored the issue of “legally authorized” transfers made by an agent under a power of attorney. Kennedy obtained a power of attorney that was assumed to have been executed by the elderly victim, authorizing Kennedy to draw upon the victim’s bank accounts. Kennedy misappropriated most of the money in those accounts. The New Jersey Supreme Court affirmed a conviction of embezzlement. In so doing, it made the following comments regarding the abuse of a power of attorney:

A power of attorney of course is not an instrument of gift. In itself, it is no more than the term, power of attorney, imports—an authorization to the attorney to act for the principal. Although as between the bank and the principal, the bank was relieved [by the terms of the power of attorney] to inquire as to whether any withdrawal was in the agent’s interest rather than the principal’s, the instrument did not authorize the agent to make off with the principal’s money. In short, the instrument was the means whereby the agent was able to get his hands on the moneys, but when the moneys were thus obtained, the agent received them as agent for the principal, and the fraudulent appropriation of the moneys thus obtained to his own use constituted embezzlement. In other words, it is no defense to embezzlement that the moneys reached the agent with the consent of the principal. On the contrary, such entrusting is the necessary setting for the crime…. [I]t is no defense to embezzlement that the victim trusted the culprit. 61 N.J. at 512-513 (emphasis added).

Two recent non-NJ courts have taken a look at what constitutes “good faith” by a party ordered into mediation, with different outcomes hinging on weather the court viewed the actions of the mediator in reporting a party’s conduct in mediation as a breach of confidentiality.

Anthony vs. Andrews, 2009-Ohio-6378 – In this Ohio medical malpractice case, defense counsel told the mediator that her client would not give her consent to settle the matter and had never done so. The mediator, in his report back to the court, told the court the case did not settle and what defense counsel had stated. The court — sua sponte — issued an Order to Show Cause to determine if the defendant was in contempt of court for violating the order to mediate in good faith. The trial court found the defendant in contempt and ordered defendant to pay plaintiff’s attorney fees, lost wages and costs of attending the mediation session. On appeal, the trial court was reversed. The appellate court found that the mediator’s report to the court violated the confidentiality of the mediation. Costs of the appeal were taxed to the plaintiff.

In re A.T. Reynolds and Sons Inc., Case No. 08-37739 – In this case, the bankruptcy court in the Southern District of New York also looked at good faith participation by a party ordered to mediation. In a detailed opinion, the court wrote:

The issue is whether mere attendance at court-ordered mediation, without active participation in the mediation process, satisfies the requirement to participate in good faith. The Court holds that attendance without active participation is insufficient to constitute good-faith participation in mediation.

The court also looked at what mediation is:

Mediation entails a process, and requires parties to hear each other’s points of view and proposed resolutions to the issue underlying the mediation. Passive attendance at mediation cannot be found to satisfy the meaning of participation in mediation, because mediation requires listening, discussion and analysis among the parties and their counsel. Adherence to a predetermined resolution, without further discussion or other participation, is irreconcilable with risk analysis, a fundamental practice in mediation. While it goes without saying that a court may not order parties to settle, this Court has authority to order the parties to participate in the process of mediation, which entails discussion and risk analysis.

Addressing confidentiality, the court held as follows:

To ensure good faith participation, the mediators are required to report failures to participate in good faith, and they are relieved from rules of confidentiality to the extent necessary to do so.

The court ultimately issued sanctions against Wells Fargo and their counsel for civil contempt and ordered them to pay for all of the costs of the mediation, including the mediator and costs for the other parties to attend.

Social Security’s annual surplus nearly evaporated in 2009 for the first time in 25 years as the recession led hundreds of thousands of workers to retire or claim disability.  Social Security took in only $3 billion more in taxes last year than it paid out in benefits — a $60 billion decline from 2008, according to federal data. The impact of the recession is likely to hit the giant retirement system even harder this year and next. The Congressional Budget Office previously projected that Social Security would operate in the red in 2010 and 2011, but a deeper economic slump could make those losses larger than anticipated. “Things are a little bit worse than had been expected,” says Stephen Goss, chief actuary for the Social Security Administration. “Clearly, we’re going to be negative for a year or two.”  Since 1984, Social Security has raked in more in payroll taxes than it has paid in benefits, accumulating a $2.5 trillion trust fund. But because the government uses the trust fund to pay for other programs, tax increases, spending cuts or new borrowing will be required to make up the difference between taxes collected and benefits owed.  Experts say the trend points to a more basic problem for Social Security: looming retirements by Baby Boomers will create annual losses beginning in 2016 or 2017.

Source:  USA Today (February 8, 2010)

Time for a review of February’s most popular articles posted to the Vanarelli Law Office Blog. The original post date, along with a short summary of the content of each post, are included after each hyperlinked title.

New Tax Basis Rules In Estate And Elder Law Planning – January 14, 2010. This post briefly summarizes the tax law changes that became effective on January 1, 2010, including the elimination of the stepped-up tax basis for assets and the repeal of the federal estate tax.

New Jersey State Bar Association’s 2010 Elder Law Retreat – February 12, 2010. In this post, I provided the agenda for the Elder and Disability Law Retreat scheduled for April 22-23, 2010 in Cape May, NJ. This year, for the first time the Retreat is open to everyone; in prior years attendance was restricted to members of the NJ State Bar Elder and Disability Law Section.

NJ Appellate Court Rules That Awarding Attorneys Fees To The Wrongdoer In An Undue Influence Case Is An “Abuse Of Discretion” – January 28, 2010. This post describes the case of Rossius v. Krasheninnikoff, in which the trial court awarded attorneys fees in favor of defendant even through the court found that defendant exercised undue influence over decedent. The appellate division held that it was an abuse of discretion for the trial court to award attorneys fees to defendant where, as here, the wrongful conduct of one party triggers otherwise unnecessary litigation.

Medicaid Eligibility Denied Based Upon A Home Transfer To A “Caregiver Child” Who Was Employed Full-Time – December 15, 2009. This post summarizes the A.N. v. Division of Medical Assistance and Health Services case, an administrative appeal which affirmed the denial of Medicaid benefits, after the Medicaid applicant, A.N., who I represented in the case, transferred his home to his son T.N., a caregiver child, who was employed full-time outside the home.

Certain “Blue Water” Navy Vietnam Veterans Now Eligible For Agent Orange Presumptive Service-Connected Compensation Benefits – January 23, 2010. This post described a recent change in VA policy permitting certain “blue water” navy Vietnam veterans with designated diseases to receive compensation benefits and medical care from the VA without having to prove exposure to Agent Orange during their military service.

Top 10 New Jersey Family Law Cases Decided In 2009 – February 3, 2010. This post summarizes each of the top 10 family law cases decided by New Jersey courts in 2009.

Superior Court Judge Upholds Her Decision Authorizing The Establishment Of Third Party Special Needs Trusts Within An Intestate Estate – November 20, 2009. In this case. I described a decision by Hon. Patricia Del Bueno Cleary, J.S.C., who authorized my client, the Administrator of his mother’s intestate estate, to establish and fund two Supplemental Benefits Trusts to protect the intestate shares of the estate which passed to the decedent’s two disabled adult daughters, both of whom received needs-based government benefits for which they would have lost their eligibility had their intestate shares been distributed outright. Judge Cleary also denied a motion for reconsideration filed by the State of New Jersey.

In what may be considered a victory of judicial deference over equity, this week our 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 W.B. v. Division of Medical Assistance and Health Services (“DMAHS”), No. A-5658-07T1 (N.J. App. Div. Feb. 24, 2010), the applicant was a mentally incapacitated person residing in a nursing home. Her adult son was the agent under her power of attorney.

In July 2006, her son applied for Medicaid on W.B.’s behalf. After being denied for excess resources, the son reapplied for Medicaid in November 2006, apparently seeking a December 1, 2006 eligibility date.

In April 2007, while the application was pending, W.B.’s son and other family members discovered that W.B. owned stock worth $6,289.25 (above the $2,000 Medicaid resource limit). Upon this discovery, the son promptly sold the stock and, by the end of April 2007, used all of those funds to pay W.B.’s outstanding nursing home costs. The Board of Social Services determined that W.B. was eligible for Medicaid benefits as of May 1, 2007. The son appealed, contending that the December 1, 2006 eligibility date should apply. After the matter was appealed to an Administrative Law Judge, 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 Director concluded that W.B. was eligible as of May 1, 2007. The son appealed to the Appellate Division.

On appeal, the son claimed to have no knowledge of the assets, and the opinion makes no suggestion that there was any evidence to the contrary. Nevertheless, 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 relied on the Director’s conclusion that W.B. had the “right, authority, or power” to liquidate the stock, and found that the aforecited regulations “contain no exception for situations in which the applicant, or his or her guardians, profess ignorance of the asset.”

The court acknowledged that the Social Security Program Operations Manual System (“POMS”) Section SI 01110.117 states that, “if an individual is unaware of his or her ownership of an asset, the asset should not be treated as a countable resource ‘during the period in which the individual was unaware of his/her ownership.’” However, it found that the POMS “does not … create any rights enforceable at law by any party in a civil or criminal action.” It distinguished the illustrative examples given in the POMS because, in those examples, the applicant had never known of the existence of his/her property rights. In the instant case, as the court distinguished, “there was no proof adduced … that W.B. herself was oblivious to her original acquisition of the … stock before she became mentally incapacitated.”

In sum, the W.B. court professed its appreciation of the “competing equities” that existed in the case; unfortunately, it failed to consider those equities as they related to W.B. in reviewing Medicaid’s actions.

The W.B. case is annexed here – W.B. v. DMAHS and Hunterdon CBSS