Law Office of Donald D. Vanarelli Blog

In McAuliffe vs. Benish, Superior Court of New Jersey, Appellate Division, plaintiffs, the adult daughters of the decedent testator, brought a lawsuit against the romantic partner of their deceased father, seeking an order directing her to pay the estate and inheritance taxes on the home that she inherited from the decedent as joint tenant with right of survivorship. Plaintiffs claimed that “taxes upon the property passing to defendant must be apportioned to her” because “decedent’s will contains no directions to the contrary.” The defendant romantic partner claimed that the language in decedent’s will, which directs his executor or administrator to pay all “estate and inheritance taxes imposed by reason of [his] death … with respect to any property, whether disposed of by this Will or otherwise,” required the estate to pay the taxes. The trial court granted summary judgment in favor of the plaintiff adult daughters. On appeal, the appellate court reversed and remanded for discovery and trial. The appellate court held that, because the decedent’s will did not evidence a clear intent to overcome the statutory presumption of tax apportionment, but instead was ambiguous, the trial court should have admitted extrinsic evidence “to shed light on the testator’s actual intent.”

Until recently, I paid absolutely no attention to the annual announcement of New Jersey’s Super Lawyers. Having practiced law for 25 years, I’d seen my share of wins and losses, both the result of hard work, mental toughness and grit, with the wins often separated from the losses by what seemed to me to be little more than sheer luck. So, identifying a “Super Lawyer” from the rest of the more than 83,000 lawyers in New Jersey seemed superficial, at best. All of that changed in 2007 when I was named a New Jersey Super Lawyer in the Elder Law category (also published in the April print edition of New Jersey Monthly magazine). In 2008, I was again named a New Jersey Super Lawyer, this time in the Elder Law, Estate Planning and Probate, and Alternative Dispute Resolution categories.

I don’t know what made me a Super Lawyer in 2007 and 2008, or why some terrific lawyers I know who practice Elder Law or Estate Planning have yet to make the list. But I confess that I’d rather be on the list than not. The “Super Lawyers” web site says that I was nominated and voted for by my peers, and if that is the case, I am grateful. I have colleagues I respect who have been selected as Super Lawyers but refused to accept the designation. I wish I could say that I didn’t care that I got selected, but I do. I also admit that I bought the plaque commemorating the event in both of the years I was named a New Jersey Super Lawyer. I don’t know why, but now that I’ve been recognized as a Super Lawyer the entire process seems somehow valid, fair-minded and accurate, at least much more so than in those bad, past years when others were recognized but not me.

Our office offers Collaborative Divorce services. In a Collaborative Divorce, each of the spouses and their attorneys sign an agreement committing themselves to resolving the issues in the divorce without going to court. The agreement also provides that if either spouse decides to litigate the case in court, both of the attorneys will withdraw from the case and will not be allowed to perform any further services in connection for either spouse. In a Collaborative Divorce, informal meetings with the spouses and their attorneys are used to settle all issues. The parties, NOT a court, make all decisions.

The Collaborative Divorce process involves the assembly of a team of professionals who are all dedicated to achieving an amicable resolution of the divorce without going to court. In addition to the attorneys, the Collaborative Divorce team can include one or more of the following professionals:

Divorce Coach - Each spouse has his/her own mental health professional who functions as a “divorce coach,” assisting the spouses to deal with the emotional issues in the case.

Child Specialist – If needed, a mental health professional focuses on the needs of the children.

Financial Specialist - An expert, such as an accountant or financial planner, who assists the spouses in creating household budgets and dividing the community property.

Other than the Divorce Coach, the professionals in a Collaborative Divorce, such as the Child Specialist, Financial Planner or Accountant, Appraiser or Mental Health Professional are often employed jointly by the spouses, instead of each spouse hiring adversarial and expensive “hired guns.” The professionals work together to cooperatively resolve family conflicts.

A Collaborative Divorce differs from the traditional litigated divorce in several important respects:

The collaborative process focuses on the needs and interests of both spouses and the children.

A Collaborative Divorce can usually be completed in a few months. A typical litigated divorce takes between six and eighteen months to complete, sometimes longer.

A Collaborative Divorce usually costs between one-third and one-half the cost of a litigated divorce

The spouses in a Collaborative Divorce case use joint accountants, mental health consultants, appraisers, and other consultants, instead of hiring their own separately retained experts.

At the end of a Collaborative Divorce the spouses are more likely to retain goodwill and respect, reducing the possibility of post-divorce motions in court.

The feelings and desires of the children are considered throughout the entire process.

Unlike the situation in a divorce mediation, each spouse is supported and represented by their own lawyer, and yet each spouses and his/her lawyer works cooperatively with the other spouse and lawyer in resolving the issues in the divorce.

To determine if a Collaborative Divorce is right for you, the International Academy of Collaborative Professionals has created a kit that answers many of the common questions about collaborative divorce. The kit is available here.

In the next few months, I will be presenting public information seminars covering the basics of the collaborative divorce process with other members of the Central Jersey Collaborative Law Group. The presenters will include the typical members of a collaborative divorce team, including attorneys, mental health professionals, child specialists and accountants, all of whom have been trained in the interdisciplinary collaborative approach to divorce. Attendees will receive a broad overview of the collaborative divorce process from the professional presenters, who will offer comparisons to traditional divorce and divorce mediation. For further information, or to register to attend, call 908-232-7400 and ask for my assistant, Ginny Morrissey.

Elder law a niche legal practice area. Only 39 lawyers in New Jersey have been certified as elder law attorneys by the National Elder Law Foundation (NELF) of Tucson, Ariz., which is authorized by the American Bar Association to grant the certification. The foundation has certified fewer than 400 elder law attorneys nationwide. Certified elder law attorneys commit to the niche practice by meeting requirements set by the NELF that include a written test and ongoing courses on elder law issues. These lawyers focus on representing older or disabled persons in various matters including financing long-term medical care, nursing home issues, qualifying for Medicare, Medicaid and other public benefits, estate planning and administration, trust creation and administration, probate, retirement benefit disputes, estate litigation and guardianships.

Elder Law is the only area of law defined by the clients served rather than the areas of law in which the attorney practices. Elder Law attorneys deal “holistically” with their clients in talking about long-term planning for health care and financial viability, family dynamics, end-of-life decisions, personal values and personal preferences.

Donald D. Vanarelli, Esq. has been a certified elder law attorney since 1998.

The federal Deficit Reduction Act of 2005 (DRA), which became effective on February 8, 2006, made major changes to the federal Medicaid law. One such major change in the federal law is in the treatment of annuities owned by the spouse of a Medicaid applicant (called the “Community Spouse” in the law) . Under the federal DRA, an annuity which is irrevocable and meets certain other requirements and which is owned by the Community Spouse is not counted in determining the eligibility of the spouse applying for Medicaid benefits. The favorable way that the federal DRA treats annuities is a major change in New Jersey. New Jersey has resisted the use of annuities in Medicaid eligibility planning for years. See, Estate of F.K. v. Division of Medical Assistance and Health Services, 374 N.J. Super. 126 (App.Div.), certif., den., 184 N.J. 209(2005); and Estate of A.B. v. Division of Medical Assistance and Health Services, 374 N.J. Super. 460. As a result, New Jersey has neither issued new state regulations implementing the legislative changes in the federal DRA nor incorporated the DRA into state regulations.

Unlike New Jersey, other states have not resisted the use of annuities in Medicaid planning. For example, the State of Pennsylvania has accepted annuities as a legitimate strategy in long-term care planning, permitted under the DRA. A recent case involving annuities and long-term care planning in Pennsylvania is Ross v. Department of Public Welfare, 936 A.2d. 552 (PA. 2007). In Ross, the wife entered a nursing home and, soon thereafter, her husband transferred $418,026.66 into a single premium immediate annuity. The annuity contract paid the husband $10,211.83 per month. The husband established the annuity in order to qualify his wife for Nursing Home Medicaid and to pass assets to his children. The husband was the sole owner of the annuity, and his three children are the sole beneficiaries. After the annuity purchase, the wife had no funds to pay the nursing home.

The husband filed a Medicaid application, and the agency determined that the annuity was an available resource. The husband filed an appeal on behalf of his wife, and an Administrative Law Judge (ALJ) denied the appeal. The ALJ determined that: (1) the language of the annuity did not interfere with the husband’s ability to sell his right to the income stream, thereby converting the annuity into immediate cash; (2) the present value of the income stream exceeds the resource limit; and (3) the annuity was purchased not only for the benefit of the husband and wife, but also as a way to pass assets to the children and qualify the wife for Medicaid benefits. On further appeal, the Department of Public Welfare (DPW) affirmed the ALJ’s decision. The husband and wife petitioned the court for review, claiming that the DPW erred.

The court agreed and reversed the DPW order. The court stated that under 42 U.S.C. §1396r-5, income and resources are treated differently, and that “no income of the community spouse shall be deemed available to the institutionalized spouse.” Therefore, “[t]he community spouse’s income does not affect the determination [of] whether the institutionalized spouse qualifies for Medicaid.” The court said that if the payment of income is made solely in the name of the community spouse, the income is income only to that spouse. In this case, since the payment of the income from the annuity is made solely in the husband’s name, the income is considered income only to the husband, and none of the income is deemed available to the wife. The court concluded that the DPW “improperly considered [the husband’s] income stream from an irrevocable and non-assignable annuity as an available resource … .”

On March 12, 2008, Washington State Governor Christine Gregoire signed into law House Bill 3104, extending 170 legal rights and responsibilities to couples in same-sex relationships. Among the new responsibilities is that the state will treat surviving members of same-sex couples (”domestic partners” in the law) the same as surviving spouses of married couples for purposes of estate recovery by Medicaid.

The new law, which takes effect June 12, 2008, prohibits recovery by Medicaid if the agency would not have been permitted to recover from a surviving spouse in similar circumstances.

To read the full text of House Bill 3104 in PDF format, go to: 3104-S2.PL.pdf . The section relating to estate recovery is Sec. 302 (p. 20).

To date, New Jersey has no law governing the responsibility of same sex couples who have been united in a civil union to reimburse the State if one member of the couple receives long-term care services paid for by Medicaid.

In Estate of Spencer v. Gavin (N.J. Sup. Ct., App. Div., No. A-0424-06T5, April 23, 2008), a lawyer, while acting in his capacity as an executor and administrator, stole $400,000 or more from his clients’ three related estates. Within months after absconding with those funds and dissipating them, the lawyer-executor died of cancer. In addition to suing the lawyer-executor, the clients’ substitute executors sued a independent contract attorney who performed services for the estates and was paid by the lawyer-executor. The contract attorney did not participate in the theft.

The Appellate Court of New Jersey, reversing a trial court’s dismissal of the action against the contract attorney, held that the contract attorney, even though he did not participate in the thief but only performed legal work at the lawyer-executor’s request for one of the estates, had a duty to report the lawyer-executor’s malfeasance upon learning of it. The court held that a reporting duty in such circumstances is mandated by principles of legal ethics, tort law, and public policy, so long as the attorney is shown to have had actual knowledge of the other lawyer’s wrongdoing.

The case can be found at: http://www.judiciary.state.nj.us/opinions/a0424-06redacted.pdf.

I recently read two interesting articles and a study on the ever-increasing costs of long-term care, both in the nation and New Jersey. The articles are found in the Houston-Chronicle and the Star-Ledger, while the study, in which researchers examined data from more than 10,000 nursing homes, assisted living facilities and in-home care providers nationwide. was released by Genworth Financial.

The study found that, in the nation, private rooms in a nursing home this year on average cost $76,460 annually, or $209 daily, a 17% increase from $65,185 in 2004. In addition, the study found that assisted living facilities this year on average cost $36,090 annually, a 25% increase from $28,763 in 2004. The study also found that Medicare-certified home health aides this year on average cost $38 per hour and that the cost has increased by 7% annually over the past four years. Non-Medicare certified in-home care providers this year on average cost $18 per hour for homemaker services and $19 per hour for home health aide services, about the same as in 2004.

However, the costs of long-term care in New Jersey were found to be substantially higher than the national average. The study showed that the annual cost of a year’s stay in a private nursing home in the 12 northernmost counties of New Jersey is $105,779. Overall, the annual cost of nursing home care in New Jersey has increased 9 percent since 2004, with those in the Newark/Edison area being the fourth most expensive in the nation, averaging $129,570 a year. For assisted living facilities, New Jersey residents pay more than $50,000 for a year’s stay in a private, one-bedroom unit. Adult day care is also higher in New Jersey, costing an average of $21,000 a year for five days a week of care. Home care turns out to be the only area of the survey where costs in New Jersey were pretty much on par with the rest of the nation. The $19.33 hourly rate for a home health aide in the suburbs surrounding New York City was comparable to the national hourly rate of $19.18. On an annual basis, the cost equates to $44,227 per year in New Jersey, compared to a national average of $43,884 for 44 hours of care per week.

Buck Stinson, president of the long-term care insurance business at Genworth, said the study indicates that the “expense of just a few years of long-term care in a facility or at home can very quickly wipe out a lifetime of savings.” He added that baby boomers “need to do more thinking about their own retirement plan and how they’re going to age.”

A companion study released by Genworth found that low wages and benefits, as well as a lack of training and career-advancement potential, have led to problems with recruitment and retention of employees in the elder care industry.

Donald D. Vanarelli, Esq. was among the 140 attendees of the 2^nd Annual Meeting of the Academy of Special Needs Planners, which took place March 28-29 in New Orleans.

Special needs planning is one of the fastest-growing areas of estate planning. Attorneys in the field focus on helping individuals with special needs and their families plan for a more secure future. The attorneys must combine compassion with skilled estate planning and a knowledge of the public benefit programs on which many individuals with special needs must rely.

The Academy of Special Needs Planners (ASNP), of which Mr. Vanarelli is a founding member, was established in 2006 to provide attorneys in this growing field of law with access to a collegial community and practice tools to assist them in fulfilling their clients’ needs.

ASNP’s 2^nd Annual Meeting featured presentations by nationally recognized leaders in special needs planning and related disciplines who shared insights on the latest developments and legal strategies in the field. Session topics included “Special Needs Trusts for High Net-Worth Families,” “The Attorney Acting As a Trustee: Ethical Pitfalls,” “SSI Rules for Trust Administration,” and “The Interaction Between Section 8 And Special Needs Trusts.”

To learn more about ASNP, visit Academy of Special Needs Planners and its companion consumer site, SpecialNeedsAnswers, at Academy of Special Needs Answers.

An administrative law judge has concluded that an individual who is trying to avoid nursing home care by applying for home- or community-based coverage under a Medicaid waiver program, but who has made a transfer during the look-back period, must have the penalty period begin on the date on which the applicant would otherwise be eligible for the waiver services, but for the transfer. (D.B., et al. v. Division of Medical Assistance and Health Services)

New Jersey’s Medicaid agency had taken the position that pursuant to the Deficit Reduction Act of 2005 (DRA), the penalty period for waiver applicants cannot start until the applicant is actually receiving services because only then would the applicant be considered an “institutionalized individual” under the law. This, of course means that the penalty period would never begin because the transfer itself prohibits the receipt of services.

A number of New Jersey applicants for waiver services who had made transfers after enactment of the DRA on February 8, 2006, challenged this interpretation, arguing that the actual receipt of services is not necessary to be an “institutionalized individual” and therefore the penalty period begins when the applicant would be otherwise eligible for Medicaid benefits but for the application of the penalty.

In an April 9, 2008, decision, the ALJ agreed with the applicants’ interpretation. Calling the state’s construction of the DRA “tortured” and “strained,” the ALJ found that “petitioners’ applications seeking community-based waiver services are sufficient to classify petitioners as institutionalized individuals.”

Significantly, the ALJ determined that an enclosure in a July 27, 2006, CMS letter to the effect that the penalty period begins when the applicant “is receiving institutional level of care” misquotes the statute and the state’s “reliance on it is misplaced.”

The ALJ went on to write that the state’s “interpretation would actually encourage placement in a nursing facility over less-costly waiver services and undermine the impetus for the DRA’s enactment.”

The ALJ concluded that “[t]he plain meeting of 42 U.S.C.A. § 1396p(c)(1)(D)(ii) is clear and the [State’s] strained interpretation is conflicting, contrived and inconsistent with the statute’s legislative history.”

The ALJ’s decision now goes to the Director of the Division of Medical Assistance and Health Services, who is expected to overturn it. An appeal of that decision is anticipated.

For a copy of the ALJ’s decision, click here.

For a copy of an earlier CMS PowerPoint outlining its position on the penalty period for waiver applicants, click here.