I often work with people who, in the administration of the estate of a deceased loved one, find themselves in the position of having to sell the deceased person’s house. Useful to such clients, and to anyone else who is selling a house, are these tips, the Steps to Selling Your House Quickly, which tips one of my mentors, who has much experience investing in and selling homes, shared with me.
In Maryland, if one asks a Court to appoint a guardian for a person who is alleged to be disabled (the “alleged disabled person”) where such alleged disabled person is believed to be unable to manage his or her own affairs, the Court will appoint a lawyer to represent the alleged disabled person (the “court appointed counsel”). Sometimes, if there is a need to take immediate action to protect the alleged disabled person, the Court might, on the strength of a petition alone, appoint a temporary guardian for the alleged disabled person, which temporary guardian often is a lawyer chosen by the court.
In theory, the court appointed counsel and the temporary guardian are fiduciaries whose job it is to protect the interests of the alleged disabled person. Sometimes, however, it appears that such court appointed fiduciaries do not fulfill that responsibility.
Consider the following circumstance.
A health care facility is caring for Husband. Wife is unhappy with the facility’s treatment and wants husband to come home, and for the moment is withholding payment. Wife holds a financial power of attorney and a medical power of attorney for her husband, meaning that she has authority to manage his personal, medical, and financial affairs.
If one applies for Medicaid to pay for long term care in a nursing home, the state will look to see if the applicant made any gifts in the five years preceding the Medicaid application. If so, then (with some exceptions addressed in various articles on this website) a period of Medicaid ineligibility will be imposed.
For many years before 2014, the period of ineligibility was determined by dividing the amount of the gift by $6,800, which amount was supposed to be the average monthly cost of care in a nursing home. In July, 2014, that number was changed to $7,940. Medicaid has again updated the divisor to take into account Nursing Home care cost inflation.
Effective July 1, 2016, the divisor to determine the number of months of Medicaid ineligibility for gift transfers is $8,684, which means that one would be ineligible for one month for every $8,684 in gifts made during the five years preceding the Medicaid application. Please be aware that this number is revised from time to time. Please contact us to find out the current divisor amount.
Bear in mind that the term “gift” means any transfer of resources with respect to which the transferor did not receive full value. Thus, if a person sold her house for less than it’s fair market value (Medicaid uses assessed value or an appraisal to determine fair market value), then Medicaid will treat the difference between the sales price and the deemed fair market value to be a gift transfer even if such sale was made to a third party in a bona fide arms length transaction.
We at the Gatesman Law Office endeavor to stay at the cutting edge of new developments in Medicaid law and policy.
Should you have any questions as to how this new policy might affect you or a loved one, please contact us by clicking the Contact link on this website.
A client recently posted a review of my services on AVVO, the independent legal resource website. You may CLICK HERE to read the review.
This client referred to me as “A People’s Lawyer,” and wrote the following:
William Gatesman assisted me in having my father’s trust terminated and the trust assets distributed to me and the other beneficiaries of the trust before the time that those assets were supposed to be distributed. We did this with a petition to the circuit court and the court allowed the distribution without holding a hearing based upon Mr. Gatesman’s written petition. And, while I engaged Mr. Gatesman to obtain this result, he went a step further and negotiated with the Trustee’s attorney to get the trustee to reimburse me for expenses I had paid relating to my father’s death, something I had been trying to do without success. Finally, Mr. Gatesman proposed and worked out an arrangement whereby the other trust beneficiaries agreed to reimburse me for a portion of my legal fees.
I am very pleased with Mr. Gatesman’s representation. He was easy to work with, he got me the result I had requested, and he made suggestions for other ways I could benefit from the representation and succeeded in obtaining those results. I highly recommend William M. Gatesman.
When a parent dies owning a house that is subject to a mortgage, the question arises whether a child or other beneficiary of the parent’s estate can inherit the real property without obtaining a new mortgage by simply continuing to make the payments on the existing mortgage.
In general, mortgages are subject to a “due on sale clause,” which is a term in the mortgage agreement that allows the lender to accelerate the loan (that is, immediately collect the balance due) upon the transfer, or retitling of the real property to another person. However, under Federal law, there are a number of transfers that may be made without triggering a due on sale clause, including a transfer of the property to a relative of the deceased owner as a consequence of the owner’s death.
That Federal law is known as the “Garn-St Germain Depository Institutions Act of 1982”, which is codified at 12 USC 1701j-3.
In Maryland, creditors may not make a claim against a deceased person’s estate once six months have passed since the person’s death. What that means is that a creditor seeking to assert a claim six months or more following someone’s death will not be allowed to collect the debt.
One exception to this rule is that a creditor who has a secured interest, for example, a bank that holds a mortgage on the deceased person’s real property, will still be able to collect against the proceeds of the sale of such real property, and retains the right to foreclose on the real property if the mortgage payments are not being made. However, such bank would be precluded from collecting more than the sales proceeds if the house sells for less than the mortgage loan balance if the bank did not make a claim in the estate of the deceased person within six months following that person’s death.
The Internal Revenue Service will no longer routinely issue estate tax closing letters when it finishes satisfactorily processing an estate tax return. In an online Notice published -HERE-, the IRS states that “estate tax closing letters will be issued only upon request by the taxpayer.” That Notice sets forth the procedure whereby a taxpayer or tax preparer may obtain a Transcript in lieu of a closing letter to ascertain that an estate tax return has been accepted by the IRS.
On December 1, I wrote an article, Medicaid Exclusion for Joint Assets Under Attack. That article addresses an instance where the State of Maryland Medicaid authority reversed its long time practice of disregarding jointly owned stock where a co-owner who is not the Medicaid applicant refused to sell such stock. This exclusion is based upon a provision of the Maryland Medicaid Manual that allows for such treatment.
The matter was appealed and an administrative law judge upheld the decision of the Medicaid regulator, so the individual appealed to the Circuit Court of Maryland. That court has now issued its opinion upholding the decision of the Administrative Law Judge.
My December 1, article concluded that: “This is not the proper way for the Medicaid authorities to change their policy. The proper way is to propose rule changes, either by changing the Code of Maryland Regulations, or by changing the Maryland Medicaid manual. Simply leaving a rule in place that exempts joint assets from consideration, but then attacking such an arrangement by imposing Medicaid ineligibility on a case-by-case basis on unsuspecting Medicaid applicants is bad public policy.”
Now that the Circuit Court has upheld the Administrative Law Judge’s decision, there is great uncertainty as to how jointly owned assets will be treated if one of the joint owners refuses to participate in a sale of such property. If the Circuit Court ruling were to be treated as binding, then such exemption may no longer be in force, however, there still is a rule in the Medicaid Manual that allows such exemption.
William M. Gatesman stands ready to assist clients in navigating the troubled waters of the Medicaid rules in light of rapidly changing currents, the most recent being the Circuit Court decision eliminating the exemption for joint property where there is a refusal to sell by a co-owner.
It is a well established principle of the Maryland Medicaid rules that certain jointly owned assets such as stocks or real property will not be counted as available resources to a nursing home resident who applies for Medicaid benefits if the other joint owner refuses to participate in a sale of the property.
For decades, such assets have been disclosed by nursing home residents on their Medicaid applications and such assets have been valued at zero for purposes of determining Medicaid eligibility.
Recently, however, a Medicaid applicant was denied Medicaid coverage for nursing home care because the applicant owned stock, in certificate form, with her son in joint ownership, even though the son had refused to participate in a sale of the stock. Ordinarily, such a denial by a Medicaid caseworker would be overturned when the case was appealed to an Administrative Law Judge, but in this case, the Administrative Law Judge ignored the specific regulation in the Maryland Medicaid Manual that explicitly states that jointly owned stock should not be a countable asset where the joint owner refuses to sell.
Such denial has implications, not only for the particular individual whose Medicaid application was denied, but for Medicaid applicants statewide. Indeed, this case has been appealed to the Circuit Court of Maryland where a senior Assistant Attorney General, representing Maryland’s Medicaid authority, the Department of Health and Mental Hygiene, essentially has requested the Circuit Court to issue a decision that radically revises the long standing Medicaid policy concerning such jointly owned assets.
If the Circuit Court were to uphold the decision of the Administrative Law Judge in this particular case, then it would shroud the process of dealing with jointly owned assets in a cloud of uncertainty. No longer would Medicaid applicants and their advisers be able to act with certainty regarding jointly owned assets, as there would exist the possibility that Medicaid caseworkers could arbitrarily ignore the applicable rule on the strength of judicial precedent.
This is not the proper way for the Medicaid authorities to change their policy. The proper way is to propose rule changes, either by changing the Code of Maryland Regulations, or by changing the Maryland Medicaid manual. Simply leaving a rule in place that exempts joint assets from consideration, but then attacking such an arrangement by imposing Medicaid ineligibility on a case-by-case basis on unsuspecting Medicaid applicants is bad public policy.
The State’s efforts to deny benefits in the case under discussion in this article is an example of such bad public policy.
William M. Gatesman is following the progress of this case closely and will inform the readers of this website of any new developments as they arise.
In the meantime, Mr. Gatesman stands ready to assist clients with prudent Medicaid eligibility and asset protection planning in the context of a changing landscape.
Mother dies with a will leaving all of her assets to her three children in equal shares. One of her adult daughters receives Medicaid benefits because her assets are less than $2,000 and she has a very low income due to a disability. Such daughter is expected to receive a distribution of $25,000 from mother’s estate. This will cause daughter to lose her public benefits, which will be disastrous for daughter given the very high costs of her medications.
While daughter could petition a court to create a special type of Supplemental Needs Trust, known as a “d4a trust” and once she receives the distribution from the estate, deposit the funds into such trust, there are significant costs to establishing such a d4a trust, and there are administrative burdens associated with such trust, including annual reporting to the State Medicaid authority. Moreover, a d4a trust requires payback to the state for any Medicaid benefits if there are funds remaining in the trust when the trust beneficiary dies. Given the amount to be distributed, one must weigh whether it is worth the cost of setting up a d4a trust if there are other less costly alternatives.
Fortunately, Maryland law provides an opportunity for a trust to be created in a simpler way. Under the Maryland Discretionary Trust Act, a trust may be established for a beneficiary, and the assets in the trust will not be considered to be available resources for Medicaid purposes. Moreover, unlike a d4a trust, there is no requirement to pay back Medicaid for benefits received during lifetime after the beneficiary dies.
While Mother in her will could have provided for a Maryland Discretionary Act trust for daughter, she failed to do so. Nevertheless, the Maryland Discretionary Trust Act provides that “any person having a right to transfer property to another person may create a trust as a transferor under [the Maryland Discretionary Trust Act].” Under this law, the term “person” includes any legal entity, and a probate estate is a legal entity.
William M. Gatesman presently is working with clients to come up with creative solutions to allow estate beneficiaries to retain their essential public benefits where the decedent’s will did not provide for asset protection in light of those public benefits. Establishing a Maryland Discretionary Trust Act trust is one of the tools in Mr. Gatesman’s tool kit to achieve the objective of protecting a beneficiary’s eligibility for public benefits.