A Big Thanks Doug Chalgian, one of Michigan’s best elder law litigation attorneys, who commented a court case, LaForest vs. Swiss, that otherwise may have passed unnoticed. More on this thanks later.
Let me relay two stories of a daughter who has a mother in a nursing home..
First Daughter.
The court case tells us of a lady in a nursing home. She had six children. One daughter handled all of her affairs. She was Mom’s agent under a power of attorney and the trustee of her trust. Mom went into a nursing home and the daughter hired an elder law attorney to engage in Medicaid planning. She saved virtually everything Mom owned from the nursing home. There were three major asset transfers. In chronological order:
- Daughter transferred $13,500 to herself to pay rent and maintenance on the condo that they jointly owned. Note that Medicaid allows no money to maintain a home but at that time did allow a contract where a person held the money for that purpose.
- A year later, she transferred the condo from joint name to herself. Note, Medicaid allows transfer of a home to a caregiver who kept the applicant out of the nursing for two years by providing care. It is unclear whether this was the case, but once again the condo transfer was done in the context of Medicaid benefits.
- Around the time of the first transfer the daughter-agent purchased a five year balloon annuity, which implies that the annuity was part of the Medicaid application strategy. The annuity matured and then she purchased a $37,000 car in her and Mom’s name. Medicaid allows a recipient to have a car and allows another to use it to drive her to various appointments and events. A year later she put the car in her own name. Note, at this time Medicaid did not penalize the transfer of cars.
The result of this daughter’s transactions was that she ended up with ALL of Mom’s assets. She claimed that her mother wanted her to have everything. The siblings took her to court and won.
Conclusion: This is clearly the case of a greedy daughter who used her power to get the property of her vulnerable mother.
Second Daughter.
This court case involves a daughter’s mom who was in a nursing home for 11 years. In all of those years some of her children visited once. Or, perhaps twice. The dutiful daughter, who was also responsible as her agent and trustee, visited her every day of those 11 years. The daughter, hired an attorney to engage in “Medicaid planning.” The attorney concluded that Mom, his client, wanted the dutiful daughter to have her property. One could understand if Mom felt she had been abandoned by her other children. Perhaps she was angry? We don’t know. The court does not say. She had a condo, a car and cash in the bank. These were transferred to the daughter. All of the transactions were allowable under the Medicaid rules. Of course, when Mom died the other children were there looking for their inheritance that the dutiful daughter preserved.
Conclusion: This is clearly the case of greedy children who cannot be bothered to help their mother while she was in a nursing home but have no bother at all helping themselves to “their inheritance.”
There is a relationship between the two daughters. They are the same person.
The Case
The court case is the Michigan Court of Appeals decision in LaForest vs. Swiss. It is an unpublished decision that might have otherwise gone unnoticed but for Doug Chalgian’s January 9th blog post Tangled Webs. Doug’s commentary is certainly worth a read and contemplation.
I would like to offer another take on the case. I work in the realm of government benefits, e.g. Medicaid, and not litigation. I am much more likely to see a child helping a parent through the nursing home Medicaid morass than I am to see children who never visit their parent. How does a child follow a parent’s intention? How does an attorney know and effect a clint’s intentions? LaForest gives some guidance in such situations. Here are a couple of pointers:
- First, the intent of the parent/applicant/client must be established. If the parent is of sound mind then her/his wishes must be duly noted and legally made effective. If the person does not have testamentary capacity then the wishes of his or her last testamentary instruction must be followed. The LaForest court held that the intent to save assets under the Medicaid rules does not necessarily mean that the parent meant any particular child to keep that property. For example, Medicaid will impose a “divestment penalty” if an applicant gives her home to her children. But, Medicaid will not impose a penalty if the home is transferred to a child caregiver provided in-home care for two years that kept the applicant out of the nursing home. However, the Medicaid allowance is not the same as a testamentary directive such as a Will or trust.
- Second: an agent or trustee must follow legal procedures. If the helpful child is a trustee or an agent under a power of attorney, and it is very difficult for this child to act if she does not have such authority, then she must follow the procedures to legally allow her to “self deal.” Again, this is a two part process. Ordinarily an agent or trustee cannot divert assets to herself. She either has the authority granted in the document or other grant of authority by the parent or must get it from the probate court to make the transaction “legal.” The second part is legal “determination” of who gets to keep the property. In LaForest the court found she had authority to transfer property to herself for the purpose of Medicaid planning, but did not have the authority to keep it.
The take away from LaForest is that the “story” is not enough. The legal procedures to effect the parent/applicant/client’s wishes must be followed lest the law will impose its own solution. I’ll be writing more about those procedures in later posts.
Moral: Do The Right Thing, The Right Way.
Jim
