Tuesday, September 16, 2014
Following several months of investigation of complaints from older adults and their family members, in 2004 the Pennsylvania Attorney General announced a civil suit against an array of companies and individuals, including several attorneys, alleging their participation in a scheme to defraud through sales of unnecessary revocable living trusts and unsuitable annuities and insurance products. The alleged target was "senior citizens age 65 and older."
Ten years later, one of the Pennsylvania attorneys named in that original investigation, Brett B. Weinstein, has been disbarred. This particular disciplinary action has been a lo-o-o-o-ng-time coming.
Beginning as early as 2000, the Pennsylvania disciplinary board received complaints about Weinstein's role in the sales by non-lawyer third-parties of so-called "living trusts," often packaged with high-priced annuities. Weinstein himself rarely met with the clients, and provided little in the way of legal advice or counseling. He was formally cautioned about his use of unsupervised non-lawyers to provide legal advice and in 2001 he entered into a written Assurance of Voluntary Compliance.
The conduct, however, apparently did not stop. An undercover investigator was used to document continued problems. In recommending disbarrment, the Disciplinary Office concluded that from 2002 to 2012, acting on his own and in concert with others, Weinstein "assisted sales and delivery agents for a series of estate planning companies in the un-authorized practice of law." Further, he engaged in "false and misleading conduct, failed to consult with his clients concerning their objectives and placed his own interests above his responsibilities to his clients."
In discussing the case against Weinstein and rejecting his attempts to justify his conduct, the Disciplinary opinion points to a long-history of concerns about attorneys involved with living trust "mills" in other states (including Colorado, Missouri, and Ohio), where the products are pushed on older persons with little or no analysis of the clients' real legal needs and specific financial circumstances. Read here for the complete Disciplinary findings and the PA Supreme Court Order dated July 28, 2014.
September 16, 2014 in Consumer Information, Elder Abuse/Guardianship/Conservatorship, Estates and Trusts, Ethical Issues, Legal Practice/Practice Management, State Cases, State Statutes/Regulations | Permalink | Comments (0) | TrackBack (0)
Thursday, August 28, 2014
Pennsylvania has a long and colorful history with charitable trusts and bequests coming from wealthy entrepreneurs, including the histories of The Barnes Foundation and The Hershey Trust, both of which have generated "classic" cases studied in law school courses.
This week, a Philadelphia Court of Common Pleas (the trial level court) issued the latest decision on the Stephen Girard Trust from 1831, the "painstaking details" of which created Girard College. For much of its existence Girard College functioned as a multi-year, residential boarding school program for orphan boys. Past court cases have resulted in rulings that permitted significant "deviations" from the terms of the wealthy philanthropist's will, including admission of minority students, female students, and expansion of the definition of "orphans" to admit students who still had one living parent.
At issue now is whether the trustees (actually a "Board of City Trusts" created by statute in 1869 to administer trusts left to Philadelphia for charitable purposes) will be permitted to further "deviate" from the settlor's original vision for the school, in order to create a more "financially sustainable" model.
Despite the long history of changes, leading the court to describe Stephen Girard's will as "the most litigated will in history," the court treated the latest proposals -- elimination of the residential program and "high school" classes -- as triggering a stricter standard of review, under the doctrine of cy pres:
"This Court does not agree that the requested modifications relate to administrative provisions of Stephen Girard's Will. The design of Girard College as a boarding school, intended to provide a residence, as well as an education to its students is reflected in the very terms of the Will....
Rather than an administrative decision, this Board [of City Trusts, acting as trustees] is seeking a cy pres remedy. This doctrine, unlike administrative deviation, is applied where a change is sought to the purpose of the trust.... Divorcing the residential aspect of Girard College and the high school program from a Girard education is inconsistent with the very terms of the Will and the directions of the testator.
The cy pres doctrine, now codified,... permits this Court to approve a change in the terms of a Trust to direct it to purposes that are as close as reasonably possible to the settlor's original intent and that are possible to fulfill. The cy pres doctrine cannot be invoked until it is clearly established that the direction of the donor cannot be carried into effect."
After reviewing the evidence about the operating finances of Girard College, the court takes the time to commend the trustees "for beginning to confront the myriad of financial, educational and institutional challenges currently facing Girard College." Nonetheless, the court concludes that based on the financial information it "cannot permit the Board to modify the Will of Stephen Girard as requested.... This Court cannot treat those proposed changes as administrative deviations and will not apply the cy pres doctrine absent a showing that achieving those objectives is impracticable."
In addition to the discussion that clearly distinguishes the law of "deviation" from "cy pres," the outcome is also notable because:
- The court had earlier rejected "standing" for a Girard College alumni group that sought to oppose the proposed changes;
- The changes were denied despite the fact that the Attorney General, who has statutory standing to enforce terms of charitable estates in Pennsylvania, had apparently declined to take action;
- The court appointed an individual to serve as "amicus curiae" to examine and report on the Trustees' proposal to modify the trust terms and the individual's recommendations were clearly important to the ruling.
Pennsylvania Attorney Neil Hendershot (and Dickinson Law alum) who represented the Girard College Alumni Association, and who alerted me to this interesting decision, has additional details on his Pa Elder, Estate and Fiduciary Law Blog. Thanks, Neil!
Whether the trial court's decision will be appealed is not yet known.
And by the way, as evidence of the long litigation history of the Stephen Girard Trust, this latest ruling is filed under what appears to be the original -- or at least a very early -- Orphan's Court docket number: "O.C. No. 10 DE of 1885." A docket number that lasts 129 years? Impressive.
Monday, August 25, 2014
In a feature article on Medicare's "star ratings," the New York Times reports that some nursing homes are able to "game the system" through self-reports of data that fail to include complaints filed with state agencies. The article uses examples to show that even five star ratings, the highest available, can be obtained despite pending state investigations into serious allegations of mishandled care. The ratings by Medicare were intended to provide an objective measure for consumers and in recent years a growing proportion of nursing homes have obtained higher ratings.
"But some nursing homes are not truly improving. Instead, they have learned how to game the rating system, according to ]New York Times] interviews with current and former nursing home employees, lawyers and patient advocacy groups. Nationally, the proportion of homes with above-average ratings has risen steadily. In 2009, when the program began, 37 percent of them received four- or five-star ratings. By 2013, nearly half did.
The Times analysis shows that even nursing homes with a history of poor care rate highly in the areas that rely on self-reported data. Of more than 50 nursing homes on a federal watch list for quality, nearly two-thirds hold four- or five-star ratings for their staff levels and quality statistics. The same homes do not fare as well on the sole criterion that is based on an independent review. More than 95 percent of the homes on the watch list received one or two stars for the health inspection, which is conducted by state workers."
For more, see "Medicare Star Ratings Allow Nursing Homes to Game the System" by Kate Thomas.
Sunday, August 24, 2014
We've reported several times, including here and here, on recent academic and professional publications that address the sensitive topic of "consent" to sexual relations for individuals residing in nursing homes.
The Huffington Post and other media reports now bring the topic into the general public realm with coverage of a complicated case emerging in Iowa, where a husband has been arrested on charges connected to sexual relations with his wife, a resident with Alzheimer's, in her nursing home room.
Two items that may be critical to the outcome of the case: Alleged "notice" to the husband by the facility that his wife was no longer legally able to give consent to sexual relations, and the identity of the husband as a public figure. The fact that the husband is a state legislator is a reason why the case may get wide news coverage. But that wider coverage could also generate important discussion and debate about the deeper legal, personal and public issues. From one article:
"An Iowa legislator who allegedly had sex with his mentally incapacitated late wife has been charged with sexual abuse. Henry Rayhons, 78, a Republican state representative from Iowa House District 8, was told by medical staff on May 15 that his wife, 78-year-old Donna Rayhons, no longer had the mental ability to consent to sexual activity, according to a criminal complaint obtained by WHO-TV. Donna Rayhons, who suffered from Alzheimer's disease, had been living in Concord Care Center in Garner, Iowa, since March, according to the Des Moines Register....
In an interview with law enforcement in June,Rayhons allegedly confessed to 'having sexual contact' with his wife, according to KCCI. He also allegedly admitted that he had a copy of the document that stated his wife did not have the cognitive ability to give consent. Rayhons was charged with third-degree sexual abuse on Friday.
Elizabeth Barnhill, executive director of the Iowa Coalition Against Sexual Assault, told the Des Moines Register that even though spousal rape has been illegal in Iowa for about 25 years, arrests for the crime are rare and 'convictions are even rarer.' Barnhill also noted that sexual assault between spouses is not considered a 'forcible felony' in Iowa."
According to new sources, the family has also made a statement.
August 24, 2014 in Cognitive Impairment, Crimes, Dementia/Alzheimer’s, Elder Abuse/Guardianship/Conservatorship, Ethical Issues, State Cases, State Statutes/Regulations | Permalink | Comments (0) | TrackBack (0)
The Pennsyvania Joint State Government Commission issued a final report of its Advisory Committee on Long Term Care Services and Support for Older Pennsylvanians on August 21, 2014, following a year-long assessment of existing concerns of independent and care-dependent elders in Pennsylvania.
In a one-page summary of the 200 page report, the Commision makes the following Recommendations:
"Opportunities exist to improve system structure and organization, reduce barriers, and break down silos that characterize service delivery and payment. Better care transitions and improved coordination of service providers are also crucial, along with increased support for family caregivers. Focused information and awareness for consumers and families helps ensure they know where to turn when a crisis hits, which is often their first exposure to long term care. Expanding access to services and supports, through a tiered system that shares costs, will help improve quality and increase accountability. Enhancements to local resources, including Area Agency on Aging networks, will focus services and advance more equal community, facility, and home care options. These reforms will help ensure access to long term care for all Pennsylvania seniors, and prevent those who need assistance but don’t qualify for supports, from falling between the cracks."
Now comes the hard work . . . getting to an implementation stage.
Thursday, August 21, 2014
Wow! Medicaid transfer rules argued in prime time! (Well, almost...)
On August 20, the Ohio Supreme Court heard oral argument on Estate of Atkinson v. Ohio Dept. of Job & Family Services, Case No. 2013-1773. Video of the presentations (including the very interesting questions from the bench) can now be viewed here on the Ohio Channel.
This strikes me as a great opportunity for Elder Law course students to read briefs and observe lawyers in oral argument tackle technical, challenging legal issues (listen to the Court ask one attorney to slow down and explain his use of pronouns). Can you predict the outcome? Note: The Supreme Court's arguments on Ohio Channel appear as high quality productions, well edited, with subtitles indicating the names of the speakers and the identity of the issues on appeal, and the website is searchable for other appellate cases for faculty members looking for examples to use in other classes.
As framed in the appeal, the issue is whether the community husband's actions triggered a period of ineligibility for Medicaid benefits for his wife in the nursing home. The record showed the husband transfered the couple's home "out" of the couple's long-standing revocable trust to the name of the institutionalized spouse, and then in turn, the same day, to the community spouse. As described in one news account:
"The county department of job and family services found that the transfer of the home, valued at $53,750, was improper because it violated federal and state Medicaid rules. While Mrs. Atkinson’s Medicaid benefits were approved, the agency temporarily excluded nursing-home care from her coverage because of the transfer."
The state has been successful with its arguments before state agencies up to this point. The Ohio Supreme Court, however, asked the attorneys about the applicability and relevance of the 6th Circuit's 2013 decision in Hughes v. McCarthy regarding permitted use of spousal annuities in Medicaid planning in Ohio. During the oral argument, one Justice also asks whether the state should be bound by the position taken by the federal agency, Health and Human Services (apparently in an amicus brief), in support of the family's argument.
There are also opportunities here to think about whether -- and how -- this particular transfer issue might have been avoided with different planning.
Wednesday, August 6, 2014
In recent Formal Ethics Opinion 2014-F-158, the Board of Professional Responsibility for the Supreme Court of Tennessee addressed the following interesting question:
"Can a lawyer who represented a testator refuse to honor a court order or subpoena to disclose, prior to the client's death, a Will or other testamenatry document executed when the testator was competent on the basis that the document is protected against disclosure by the attorney-client privilege or confidentiality."
The Board's opinion indicates that not only "may" the lawyer refuse to disclose the will, but where circumstances indicate the client is no longer able to give informed consent because of intervening dementia, the lawyer may have a duty to raise all "nonfrivolous grounds" to protect the will from disclosure, including privileges under Tennessee statutes, citing Rule of Professional Conduct 1.6(c)(2).
In opening its analysis, the Board noted that it has become "increasingly common for courts to appoint attorneys in a representative capacity to represent individuals suffering from dementia and/or Alzheimer's who are the subject of a dispute or litigation regarding management of the individual's funds and/or person." During the course of the dispute, parties may attempt to seek review of the will prior to the death of the testator, citing reasons such as the need to "engage in estate planning."
The Board acknowledged the potential for facts that would permit the lawyer to disclose the contents of the disabled client's will, such as when a "lawyer believes the disclosure of the contents ... would be in furtherance of client's interest."
In commentary on the Tennessee Board Ethics Opinion, the ABA/BNA Manual on Professsional Conduct, in Vol. 30, No. 15, observed that "a 2010 law review article cites demographic patterns that have increased the likelihood of such scenarios," pointing to "A Common Thread to Weave a Patchwork: Advocating for Testatmentary Exception Rules," 3 Phoenix L. Rev. 729, 734-35 (2010) by then law student Andrew B. Mazoff, now an attorney in Phoenix.
Thanks to my colleague and ethics guru, Laurel Terry, for sharing this ethics opinion.
Monday, July 28, 2014
Recently a former law student who is considering a career change asked me about elder law, wanting to meet with me to discuss what is involved. I'm happy to chat any time with current and former students, especially about elder law, but this time my advice was simple: "Drop everything and go to Pennsylvania's 2014 Elder Law Institute." Indeed, this year saw some 400 individuals attend.
Important to my advice was the fact that ELI is organized well for both "newbies" and more experienced practitioners. After the first two-hour joint session, over the course of two days there are four sessions offered every hour. One entire track is devoted to "Just the Basics" and is perfect for the aspiring elder law attorney. Indeed, I usually sponsor two Penn State law students to attend. As in most specializations, in elder law there will is a steep learning curve just to understand the basic jargon, and the more exposure the better.
One of my favorite sessions is the first, "The Year in Review," a long tradition at ELI and currently presented by Marielle Hazen and Rob Clofine. Marielle reviews new legislation and regulations, both at the state and federal level, while Rob does a "Top Ten Cases" review. Both speakers focus not just on what happened in the last 12 months, but what could or should happen in the future. They frequently pose important policy perspectives, based on recent events.
Among the highlights from the year in review session:
- Analysis of the GAO Report on "Medicaid: Financial Characteristics of Approved Applicants and Methods Used to Reduce Assets to Qualify for Nursing Home Coverage" released in late June 2014. Data collection efforts focused on four states and reportedly included "under cover" individuals posing as potential applicants. The report summarizes techniques used to reduce countable resources, most occuring well within the rules and thus triggering no question of penalty periods. Whether Congress uses the report in any way to confirm or change existing rules remains to be seen.
- A GAO Report on Medicaid Managed Care programs, also released in June, concluding that additional oversight efforts are needed to ensure the integrity of programs in the states, which are already reporting higher increases in outgoing funds than fee-for-service programs.
- The need to keep an eye open for Pennsylvania's Long Term Care Comission report, expected by December 2014. Will it take issue with the Governor's rejection of the Affordable Care Act's funding for expansion of Medicaid?
- Report on a number of lower court decisions involving nursing home payment issues, including a report on a troubling case, Estate of Parker, 4 Pa. Fiduciary Reporter 3d 183 (Orphans' Court, Montgomery County, PA 2014), in which a court-appointed guardian of the estate of an elderly nursing home patient "agreed" to entry of a judgment, not just for nursing home charges, but also for pre- and post-judgment interest, plus attorneys' fees for the nursing home's lawyer of almost 20% of the stipulated judgment, in what was an uncontested guardianship.
In light of the number of nursing home payment cases in Rob's review, perhaps it wasn't a surprise that my co-presenter, Stanley Vasiliadis, and I had a full house for our session on "Why Am I Being Sued for My Parents' Nursing Home Bill?" We examined how adult children (and sometimes elderly parents of adult children in care) are finding themselves the target of collection efforts by nursing homes, including actions based on theories of breach of promise (contract, quatum meruit, and promissory estoppel), fault (common law fraud or statutory claims of "fraudulent transfers), or family status, such as statutory filial support.
The extensive course materials from all of the presenters, both in hard copy and electronic formats, are available for purchase directly from the Pennsylvania Bar Institute.
July 28, 2014 in Current Affairs, Elder Abuse/Guardianship/Conservatorship, Estates and Trusts, Ethical Issues, Federal Cases, Health Care/Long Term Care, Housing, Legal Practice/Practice Management, Medicaid, Medicare, Programs/CLEs, State Cases, State Statutes/Regulations | Permalink | Comments (0) | TrackBack (0)
Sunday, July 20, 2014
The growing significance and scope of "elder law" is demonstrated by the program for the upcoming 2014 Elder Law Institute in Philadelphia, Pennsylvania, to be held on July 24-25. In addition to key updates on Medicare, Medicaid, Veterans and Social Security law, plus updates on the very recent changes to Pennsylvania law affecting powers of attorney, here are a few highlights from the multi-track sessions (48 in number!):
- Nationally recognized elder law practitioner, Nell Graham Sale (from one of my other "home" states, New Mexico!) will present on planning and tax implications of trusts, including special needs trusts;
- North Carolina elder law expert Bob Mason will offer limited enrollment sessions on drafting irrevocable trusts;
- We'll hear the latest on representing same-sex couples following Pennsylvania's recent court decision that struck down the state's ban on same-sex marriages;
- Julian Gray, Pittsburgh attorney and outgoing chair of the Pennsylvania Bar's Elder Law Section will present on "firearm laws and gun trusts." By coincidence, I've had two people this week ask me about what happens when you "inherit" guns.
Be there or be square! (Who said that first, anyway?)
July 20, 2014 in Advance Directives/End-of-Life, Elder Abuse/Guardianship/Conservatorship, Estates and Trusts, Ethical Issues, Federal Cases, Federal Statutes/Regulations, Health Care/Long Term Care, Housing, Legal Practice/Practice Management, Medicaid, Medicare, Programs/CLEs, Property Management, Retirement, Social Security, State Cases, State Statutes/Regulations | Permalink | Comments (0) | TrackBack (0)
Monday, July 14, 2014
Professional guardians have become important players in the world of adult and elder care. As the need has grown, so have efforts to establish standards or oversight mechanisms. The Center for Guardianship Certification (CGC), for example, offers a national certification process that requires applicants to pass a test, meet minimum eligibility requirements, pay a fee, and make attestations about their background. As reported recently by Sally Hurme for the ABA's Commission on Law and Aging, "as of April 2013, CGC had approved over 1,600 National Certified Guardians and 65 National Master Guardians throughout the country."
Some states have required professional guardians (as opposed to family member or similar one-time guardians) to obtain CGC certification or have adopted state-specific certification standards. In some states, such as Texas and Washington, certification combines with a state entity to receive and evaluate complaints about professional guardians, combined with a disciplinary process. Such disciplinary boards are usually treated as a supplemental option, rather than as a substitution for court reviews, where parties seek review of a guardian's performance.
Having the power to affect the career of a guardian, disciplinary boards for professional guardians have generated questions about procedural fairness. In a recent decision by the Washington Supreme Court, the court was called upon to review the procedural fairness of anctions imposed by the Washington's Certified Professional Guardian Board. At the heart of the challenge was the defendant's allegations of bias against her by an influential member of the Board, someone with whom she had previously served on the Board, and further asserting that the hearing officer had a financial interest in the outcome of the disciplinary proceedings, because of desire to continue his paid role for the Board.
The allegations against the defendant, who had more than 10 years of experience as a certified guardian and who maintained an active caseload of more than 60 guardianships, focused on her role as guardian for an elderly woman and for a disabled younger adult. She was alleged to have failed to assist in timely purchase of new glasses for the elderly woman with dementia, and to consult regarding movement of the younger adult to a hospice facility. The defendant contended that all actions taken by her were appropriate and consistent with the discretion accorded her under a "substitute judgment" standard.
In its July 3, 2014 decision in The Matter of Disciplinary Proceedings against Lori A. Petersen, the Washington Supreme Court, sitting en banc, rejected the defendant's arguments about a "personal vendetta" against her, upheld the findings and conclusions regarding defendant's alleged violation of state guardianship standards in serving the two wards, and rejected the defendant's arguments about procedural unfairness.
Nonetheless, the Washington Supreme Court ruled that "[b]ecause this is a case of first impression and the Board aspires to consistency with disciplinary sanctions, we remand to the Board to consider whether the sanctions sought against [the defendant], including the monetary fees, are consistent with those imposed in other cases." The Court questioned the imposition of a one year suspension from practice and more than $30,000 in costs and fees, stating its belief that the "circumstances of this case and the severity of the sanctions and fees in light of the charges brought by Petersen warrant an explicit proportionality inquiry."
In 2010, a Seattle Times news article raised questions about the oversight role of the Washington board, reporting that in "five years, the board has taken action against seven guardians or guardian companies. One lost certification. The others negotiated deals in which they promised not to break the rules. Some agreed to additional monitoring."
In the Petersen case, the Washington Academy of Elder Law Attorneys (through Rajiv Nagaich, Esq.) submitted an amicus brief, challenging the procedural fairness of proceedings against professional guardians in Washington.
For additional thoughts about oversight of guardians, see "A Call for Standards: An Overview of the Current Status and Need for Guardian Standards of Conduct and Codes of Ethics," by University of Washington Law Professor Karen Boxx and Texas attorney and former executive director for the National Guardianship Association, Terry W. Hammond.
Tuesday, July 8, 2014
If one looks at the Uniform Law Commission website, it appears that slow but steady progress is being made by states in adopting recommended legislation governing Powers of Attorney (POAs). The ULC recommendation reflected more than four years of research and drafting, culminating in a detailed proposal for POAs issued in 2006. According to the website, 16 states have enacted the uniform law, with an additional four states, Connecticut, Mississippi, Washington, and my own home state, Pennsylvania, considering adoption in 2014. The ULC's recommendations were a deliberate attempt to "preserve the durable power of attorney as a low-cost, flexible, and private form of surrogate decision making while deterring use of the power of attorney as a tool of financial abuse of incapacitated individuals."
On July 3 last week, Pennsylvania's Governor Corbett signed legislation, now designated as Act 95 of 2014, making significant changes to the existing law governing POAs in Pennsylvania. However, the passage of this law also demonstrates how so-called "uniform" laws may be less than uniform from state-to-state in terms of their actual requirements, and I tend to wonder whether other states have also enacted some variation on the ULC's recommendation.
Pennsylvania Act 95 of 2014 (available as HB 1429 here) took more than 3 years of drafting, redrafting, hearings, negotiations, and compromises to accomplish. The spur for adoption was a court decision invalidating transactions executed in reliance on a "void" power of attorney, one purportedly "signed" with an X by a woman while hospitalized. The majority decision put the financial impact on the party accepting the POA, without regard to whether it was using good faith in relying on a document that may appear valid on its face. After that decision, many Pennsylvania retirement plan administrators, banks or other financial institutions were reluctant to honor POAs, fearing they could become the guarantor of misused authority. See Vine v. Commonwealth of Pennsylvania State Employees Retirement Board, 9 A.3d 1150 (Pa. 2010).
PA Act 95 of 2014 addresses the "Vine" question by clarifying a grant of immunity for any person who in "good faith accepts a power of attorney without actual knowledge" of voidness or other invalidity. But Act 95 also mandates certain execution protocols, including:
- for most but not all POAs, requiring the principal's signature, mark or third-party signature to occur in front of two adult witnesses;
- requiring the principal to acknowledge his or her signature before a notary public or other individual authorized by law to take acknowledgments;
- continuing the requirement that principals must sign "notice" forms, but now with enhanced warnings about the significance of POAs, including the recommendation that "before signing this document, you should seek the advice of an attorney at law to make sure you understand it;"
- continuing the requirement that agents must sign an acknowledgement of certain responsibilities, now including an obligation to "act in accordance with the principal's reasonable expectations."
Each of these execution requirements, although certainly permitted by ULC's proposal (and perhaps also entirely consistent with the ULC's concern about the potential for financial abuse), is greater than what is required by the Uniform Law on Powers of Attorney.
At the same time, the Uniform Power of Attorney Act includes potential remedies for abuses of POAs not addressed by old or new law in Pennsylvania, including Section 116 that would grant spouses, parents, descendants and presumptive heirs the right to seek judicial review of an agent's conduct. One open question in Pennsylvania is whether wider standing to challenge suspected abuse is necessary.
One takeaway message from the history of more than 8 years of consideration by states of the Uniform Law on POAs, and more than 3 years of consideration in Pennsylvania about how or whether to adopt some or all of UCL's specific approach, is that achieving uniformity of state civil laws is not an easy task. That makes me even more appreciative of the effort and comparative "ease" of adoption of early efforts at uniformity, such as the uniform commercial code and the recognition that interstate sales transactions would benefit from consistency.
Portions of Pennsylvania Act 95 of 2014, including the grant of immunity for good faith reliance on POAs by third-parties, are immediately effective, while other portions of the law take effect on January 1, 2015. The Pennsylvania Elder Law Institute on July 24-25 in Philadelphia will have several sessions addressing the effect of the new law.
ElderLawGuy Jeff Marshall also has a great overview of the new Pennsylvania law on his blog. Hat tip also goes to Pennsylvania attorney Bob Gerhard for keeping Pennsylvania practitioners up-to-date on the bill numbers and enactment details.
July 8, 2014 in Advance Directives/End-of-Life, Elder Abuse/Guardianship/Conservatorship, Estates and Trusts, Ethical Issues, Programs/CLEs, State Cases, State Statutes/Regulations | Permalink | Comments (0) | TrackBack (0)
Wednesday, June 18, 2014
Last week's news of a Chapter 11 Bankruptcy proceeding in the Texas-based senior living company Sears Methodist Retirement Systems, Inc. (SMRS) has once again generated questions about "entrance fees" paid by residents at the outset of their move to a Continuing Care Retirement Community (CCRC). CCRCs typically involve a tiered system of payments, often including a substantial (very substantial) upfront fee, plus monthly "service" fees. The upfront fee will carry a label, such as "admission fee" or "entrance fee" or even entrance "deposit," depending on whether and how state regulations require or permit certain labels to be used.
As a suggestion of the significance of the dollars, a resident's key upfront fee at a CCRC operated by SMRS reportedly ranged from $115,000 to $208,000. And it can be much higher with other companies. So, let's move away from the SMRS case for this "blog" outline of potential issues with upfront resident fees.
Even without talking about bankruptcy court, for residents of CCRCs there can be a basic level of confusion about upfront fees. In some instances, the CCRC marketing materials will indicate the upfront fee is "refundable," in whole or in part, in the event the resident moves out of the community or passes away. Thus, residents may assume the fees are somehow placed in a protected account or escrow account. In fact, even if the upfront fee is not "refundable," when there is a promise of "life time care," residents may assume upfront fees are somehow set aside to pay for such care. How the facility is marketed may increase the opportunity for resident confusion. Residents are looking for reassurances about the costs of future care and how upfront fees could impact their bottom line. That is often why they are looking at CCRCs to begin with. "Refundable fees" or "life care plans" can be important marketing tools for CCRCs. But discussions in the sales office of a CCRC may not mirror the "contract" terms.
One of the most important aspects of CCRCs is the "contract" between the CCRC and the resident. First, smaller "pre move-in" deposits may be paid to "hold" a unit, and this deposit may be expressly subject to an "escrow" obligation. But, larger upfront fees -- paid as part of the residency right -- are typically not escrowed. It is important not to confuse the "escrow" treatment of these fees. Of course, the "hold" fee is not usually the problem. It is the larger upfront fees --such as the $100k+ fees at SMRS -- that can become the focus of questions, especially if a bankruptcy proceeding is initiated.
The resident's contract requires very careful reading, and it will usually explain whether and how a CCRC company will make any refund of large upfront admission fees. In my experience of reading CCRC contracts, CCRCs rarely "guarantee" or "secure" (as opposed to promise) a refund, nor do they promise to escrow such upfront fees for the entire time the payer resides at the CCRC. In some states there is a "reserve" requirement (by contract or state law) for large upfront fees whereby the CCRC has a phased right to release or use the fees for its operation costs. Thus, the contract terms are the starting place for what will happen with upfront fees.
Why doesn't state regulation mandate escrow of large upfront fees? States have been reluctant to give-in to pressure from some resident groups seeking greater mandatory "protection" of their upfront fees. There's often a "free enterprise, let the market control" element to one side of regulatory debates. On the other side, there is the question of whether life savings of the older adult are proper targets for free enterprise theories. Professor Michael Floyd, for example, has asked, "Should Government Regulate the Financial Management of Continuing Care Retirement Communities?"
My research has helped me realize how upfront fees are a key financial "pool" for the CCRC, especially in the early years of operation where the developer is looking to pay off construction costs and loans. CCRCs want -- and often need -- to use those funds for current operations. and debt service. Thus, they don't want to have those fees encumbered by guarantees to residents. They take the position they cannot "afford" to have that pool of money sitting idle in a bank account, earning minimal interest. This is not to say the large entrance fees will be "misspent," but rather, the CCRC owners may wish to preserve flexibility about how and when to spend the upfront fees.
The treatment of "upfront fees" paid by residents of CCRCs also implicates questions about application of accounting and actuarial rules and principles. That important topic is worthy of a whole "law review article" -- and frankly it is a topic I've been working on for months.
In additional to looking for actuarial soundness, analysts who examine CCRCs as a matter of academic interest or practical concern have looked at whether CCRC companies and lenders may have a "fiduciary duty" to older adults/residents, a duty that is independent of any contract law obligations. Analysts further question whether a particular CCRC's marketing or financial practices violate consumer protection or elder protection laws.
There can also be confusion about what happens during a Chapter 11 process. First, during the Chapter 11 Bankruptcy process, a facility may be able to honor pre-bankruptcy petition "refund" requests or requests for refund of fees for a resident who does not move into the facility. Second, to permit continued operation as part of the reorganization plan, a facility will typically be permitted by the Court to accept new residents during the Chapter 11 proceeding and those specific new residents will have their upfront fees placed into a special escrow account, an account that cannot be used to pay the pre-petition debts of the company.
But what about the upfront fees already paid pre-petition by residents who also moved in before the bankruptcy petition? Usually those upfront fees are not escrowed during the bankruptcy process. Indeed, other "secured" creditors could object to refunds of "unsecured" fees. The Bankruptcy Court will usually issue an order -- as it did in SRMS's bankruptcy court case in Texas last week -- specifying how current residents' upfront fees will be treated now and in the future. A bit complicated, right? (And if I'm missing something please feel free to comment. I'm always interested in additional viewpoints on CCRCs. Again, the specific contract and any state laws or regulations governing for handling of fees will be important.)
Of course, this history is one reason some of us have been suggesting for years that prospective residents should have an experienced lawyer or financial consultant help them understand their contracts and evaluate risks before signing and again in the event of any bankruptcy court proceeding. "Get thee to a competent advisor." See also University of New Mexico Law Professor Nathalie Martin's articles on life-care planning risks and bankruptcy law.
As I mentioned briefly in writing last week about the SMRS Chapter 11 proceeding, CCRC operators have learned -- especially after the post-2008 financial crisis -- that the ability of a CCRC to have a viable "second chance" at success in attracting future residents will often depend on the treatment of existing residents. Thus, one key question in any insolvency will be whether the company either (a) finds a new "owner" during the Chapter 11 process or (2) is able to reorganize the other debts, thereby making it possible for the CCRC company to "honor" the resident refund obligations after emerging from the Chapter 11 process.
During the last five years we have seen one "big" default on residents' upfront. refundable entrance fees during the bankruptcy of Covenant at South Hills, a CCRC near Pittsburgh. A new, strong operator eventually did take over the CCRC, and operations continued. However, the new operator did not "assume" an obligation to refund approximately $26 million in upfront fees paid pre-petition by residents to the old owner. In contrast, Chapter 11 proceedings for some other CCRCs have had "gentler" results for residents, with new partners or new financial terms emerging from the proceedings, thereby making refunds possible as new residents take over the departed residents' units.
For more on how CCRC companies view "use" of upfront fees, here's a link to a short and clear discussion prepared by DLA Piper law firm, which, by the way, is the law firm representing the Debtor SMRS in the Texas Chapter 11 proceeding.
June 18, 2014 in Consumer Information, Federal Cases, Federal Statutes/Regulations, Health Care/Long Term Care, Housing, Retirement, State Cases, State Statutes/Regulations | Permalink | Comments (1) | TrackBack (0)
Wednesday, June 11, 2014
The Spring 2014 issue of the ABA magazine "Experience" has a very interesting article on "Senior Drivers," written from the perspective of a traffic judge. It is the final article in a issue devoted to the theme of "Courts and the Elderly." (I reported on elder abuse articles yesterday.) Here's how Cook County, Illinois Judge Freddrenna M. Lyle opens:
"As the prosecutor and defense argued aggravation and mitigation in the trial I was conducting, I flashed back to the signs I had missed. I remembered the little dings and scratches on my dad’s car that he never wanted to discuss. At first, it was “that other driver” in the parking lot causing the damage. He then feigned ignorance as to how and when that dent appeared in the rear quarter panel. I realized I could no longer ignore the signs and began to research how to initiate 'the conversation.' Looking at the daughter accompanying her elderly dad to my courtroom that day, I knew that she, too, was about to have this talk. In fact, after I entered the sentence in her dad’s case, she asked me to have 'the conversation' because she frankly did not know what to say."
I suspect that having a copy of this article available as a family "conversation" tool -- perhaps to show your concern as a loving family member is part of a larger public concern -- might be useful.
Many thanks to Frances Del Duca, Esq., in Carlisle Pennsyvlania for sharing a hard copy of the recent issue of Experience magazine, published by the American Bar Association. It's a jam-packed issue for those concerned with elder justice, bringing to bear multiple perspectives. I just wish the articles were fully available to the public on the ABA website!
Friday, June 6, 2014
Is Community Spouse's IRA Countable in Determining Medicaid Eligibility? Arkansas Supreme Court Says "Yes"
In Arkansas Department of Human Services v. Pierce, the Arkansas Supreme Court ruled on May 29 that individual retirement accounts owned by a wife were "countable" in determining her husband's eligibility for Medicaid as a resident in a nursing home in Arkansas. In so ruling, and treating the issue as a matter of first impression in Arkansas, the Court rejected the analysis of a Wisconsin court, and aligned itself with the analysis of a New Jersey Court in determining that the state's decision -- to include IRAs owned by either spouse in the "snapshot" of resources subject to spend-down -- did not violate federal law.
In this case, the community spouse may be significantly affected, depending on her own lifespan. Hoping that her husband of 46 years would improve and not need to stay in a nursing home, it appears she had already paid "privately" for nursing home care for 18 months. With the ruling, if her husband continues to need nursing care, she will be allowed to keep $109,560, and thereby will likely spend much of her IRA savings (totaling about $350,000) towards his care.
This fact pattern arguably explains one of the reasons why Elder Law professionals have turned to Medicaid-qualified annuities and other permitted planning tools, to convert countable "resources" into uncountable "income," thereby better assisting the community spouse in financing his or her own final years, particularly if the community spouse hopes to stay at home as long as possible. Will community spouses get timely, qualified assistance with such planning?
Monday, June 2, 2014
We've written here about the high profile Mancini case of alleged assisted suicide here in Pennsylvania, that was resolved in 2014 when the trial court dismissed the charges pending against the daughter, a nurse, who was alleged to have facilitated her ill, elderly father's death by a morphine overdose.
Charges have now been filed in another Pennsylvania case that is, perhaps even more troubling, although probably less likely to attract support from "death with dignity" movements. The case does, however, raise important questions about both mental health and income supports for persons at risk, including those facing poverty.
Last week, Koustantinos "Gus" Yiambilisis, age 30, from Bucks County, PA, was charged both with assisted suicide and homicide for the death of his 59 year old mother by carbon monoxide, following his alleged use of a borrowed generator to accomplish a mutual suicide pact. News reports, including articles by Jo Ciavaglia for the Bucks County Courier Times, suggest that the son had recently lost his job and needed surgery for a brain tumor, while both mother and son are reported to have left suicide notes behind. The son survived, revived after emergency workers summoned to the house found the mother and son unconscious in the home. The mother later died in the hospital.
Tuesday, May 27, 2014
Continuing Care Retirement Communities (CCRCs) utilize a variety of payment arrangements to attract potential residents. One option popular prior to the 2008 recession was a "100% refundable entrance fee" model, where the new resident was promised return of his or her upfront entrance fee upon "termination," subject to certain conditions, usually including re-occupancy of the unit in question by a new resident. During good financial times, this refund option benefited both parties. The company could rely on a quick "resale" of the unit, either for the same or a higher entrance fee. Thus the company often took the position it was able to "use" the original resident's entrance fee immediately, subject to any state regulations for mandatory reserves or other repayment guarantees or restrictions.
But who bears the risk of a downturn in the senior living market, especially the dramatic downturn that accompanied the 2008-2010 recession?
In Stewart v. Henry Ford Village, Inc., the issue was whether a departing resident must accept the company's offer of a lower refund, tied to what any new resident would pay as an entrance fee to reside in that unit. The difference was hefty, as the resident had paid $137k in 1998 when she moved in, but when she left the community in 2010, comparable units were reportedly going for $89k.
In a rare court decision analyzing a refundable fee, the Court of Appeals for Michigan ruled that the parties' contract language controlled, and in this contract the contract did not provide for a lower refund amount. Further, the company's obligation to comply with the contract terms was subject to an implied obligation of good faith (a Contract Law concept my students would, I hope, recognize!) to promptly market and "resell" the unit, thus suggesting a CCRC would not be in good faith for delaying a unit's resale as a negotiation tool. Here is the heart of the court's analysis:
"Given the totality of the circumstances, the status of the parties, and the rights and obligations as set forth in the Agreement, the Disclosure Statement, and the [state's Living Care Disclosure Act] we find no support for the conclusion that plaintiff should or is obliged to bear the risks of a declining real estate market. To the contrary, those risks would seem properly to fall to defendant. By way of example, when a lessee properly complies with his or her lease in vacating a rental property, the lessee bears no responsibility for the fact that the landlord may need to lower the rent to attract a subsequent tenant. Rather, it is the landlord alone who must bear the consequences of the existing market risks. Additionally, plaintiff notes that if the unit was subsequently reoccupied with a higher entrance deposit, defendant would not furnish additional monies to plaintiff. Defendant has not suggested otherwise.... It strikes us as incongruous, as unsupported contractually, and as of questionable good faith (without adequate disclosure), that plaintiff be held to bear the risks of a declining real estate market without the ability to reap the rewards of a booming one."
In the "unpublished" (and therefore nonprecedential) opinion, the Michigan appellate court remanded for an evidentiary hearing. The ruling demonstrates the importance of the contract language, state regulations, and, I suspect, the likelihood that future refundable fee CCRC contracts will provide clearly that refunds will be tied in whole or in part to "resale" amounts, at least for any so-called 100% refundable fee agreements.
It should also be noted that refundability of admission fees is potentially a separate issue from actuarially sound practices for CCRCs in the handling of such fees. Along that line, I note that one of the residents who pioneered concerns about financial soundness in CCRCs, Charles Prine of Pittsburgh, passed away recently. Mr. Prine's articulate advocacy included testimony before the Senate Special Committee on Aging. Chuck will be missed.
Tuesday, May 20, 2014
In Doe v. South Carolina Department of Social Services, the state's Supreme Court analyzes the standards for state intervention to provide involuntary protective services on the grounds the individual is a "vulnerable adult" under South Carolina's statutory authority. In a 3 to 2 decision filed on April 30, 2014, the majority of the court Court concludes:
"Although we believe the family court was well intentioned, we find that it erred in classifying Doe as a vulnerable adult under the Act. Specifically, there was no evidence that Doe's advanced age impaired her ability to adequately provide for her own care and protection. Without this threshold determination, the court erred in ordering Doe to remain in protective custody until the identified protective services were completed."
The dissent finds the majority's reasoning too narrow, pointing to the following facts:
"On July 31, 2012, law enforcement officers went to the home of Doe, then age 86. Doe, suffering from a heart condition, lived alone. Doe refused entry to the officers. The doors and windows to the home were barricaded. The officers noticed a hose running from a neighbor's home through a hole in the roof of Doe's home. This was Doe's only source of water, for water service had been stopped for nonpayment. The inside of the home was, according to the officers, 'in an unsanitary and deplorable condition.' There was mold present as well."
The outcome of the case is influenced by the testimony of a physician, who despite the conditions of the home and the physical infirmities of Doe, observed that she "appeared to have 'the minimum levels of competency to function independently' as there was no evidence of dementia, severe emotional issues, or obvious physical limitations." Doe was apparently either without adequate financial resoures or unable to manage her resources to live more safely in the home, but she firmly rejected the alternative of transfer to another setting.
Although overruling the trial court's conclusion that Doe was a vulnerable adult, the Superme Court also remanded for additional findings of the current status of Doe, who received emergency services in the interim.
Tough facts that demonstrate the challenge of balancing safety for persons at risk of "self neglect" with respect for the autonomy of the individual, a challenge that can arise at any age. Poverty adds to the challenge.
Friday, May 16, 2014
Okay, let the song metaphors begin, and please, let's sing them with a nice falsetto.
Singer Frankie Valli, now age 80, has been starring in a long-running divorce proceeding. (He and his wife separated in 2004). On May 15, it was the California Supreme Court harmonizing with him over his claim that a $3.75 million life insurance policy he purchased in 2003 with "community funds," and on which he named his then-wife as the sole beneficiary, retains its character as community property. In other words, the surrender value of the policy ($400,000) is not entirely hers to keep.
Here's a link to In re Marriage of Frankie and Randy Valli.
I'll start with "Big Girls Don't Cry" -- or maybe "My Eyes Adored You."
Thursday, May 15, 2014
Maryland Elder Law and Disability Law specialist Ron Landsman provides a thoughtful analysis of use of trusts, especially "special needs trusts," to assist families in effective managment of assets. His most recent article, "When Worlds Collides: State Trust Law and Federal Welfare Programs," appears in the Spring 2014 issue of the National Academy of Elder Law Attorneys (NAELA) Journal. Minus the footnotes, his article begins:
"'Special needs trusts,' which enable people with assets to qualify for Supplemental Security Income (SSI) and Medicaid, are the intersection of two different worlds: poverty programs and the tools of wealth management. Introducing trusts into the world of public benefits has resulted in deep confusion for public benefit administrators. . . . The confusion arising from the merger of trust law with public benefits is sharply drawn in the agencies' [Social Security Administration (SSA) and Centers for Medicare and Medicaid Services (CMS)] attempts to define what it means for a trust to be for the sole benefit of the public benefits recipient. Public benefits administrators have focused on the distributions a trustee makes rather than the fiduciary standards that guide the trustee. The agencies have imposed detailed distribution rules that range from the picayune to the counterproductive and without regard, and sometimes contrary, to the best interests of the disabled beneficiary."
Drawing upon his experience in drafting trusts for disabled persons, Ron takes on the challenge of explaining how and where he sees the agencies' focus on "distribution" as misguided. He contends, for example:
"The [better] task for CMS and SSA [would be] to use their authority to develop standards and guidelines that utilize, rather than thwart, competent, responsible, properly trained trustees as their partners in making special needs trusts an effective tool in serving the needs of people with disabilities. If this were done properly, capable trustees would be the allies of the federal and state agencies in the efficient use of limited private resources. Beneficiaries would live better, more rewarding lives to the extent that resources can make a difference, at a lower cost to Medicaid, with a greater possibility of more funds recovered through payback."
Ron is detailed in his critique of agency guidelines and manuals, and he provides clear examples of his "better" sole benefit analysis.
May 15, 2014 in Estates and Trusts, Federal Cases, Health Care/Long Term Care, Housing, Medicaid, Property Management, Social Security, State Cases, State Statutes/Regulations | Permalink | Comments (0) | TrackBack (0)
Tuesday, May 13, 2014
One of the tough questions in the arena of "law and aging," which is arguably broader than "elder law," is the scope of liability for negligence or mismanagement in long-term care. A lot rides on this issue. For example, recently one friend mentioned to me that a large law firm in his city was spending most of its litigation time defending nursing homes, not doctors or hospitals, on personal injury claims.
Hints of the "scope" of corporate long-term care liability issues appear as early as 2003. In Cases and Materials on Corporations (LexisNexis 2d 2005) by Professors Thomas Hurst (Univ. of Florida) and William Gregory (Georgia State), in the chapter on "Piercing the Corporate Veil," the authors include the case of Hill v. Beverly Enterprises-Mississippi, Inc., 305 F.Supp. 2d 644 (S.D. Miss. 2003), in which the court permits a nursing home resident's personal injury case to go forward for trial against the nursing home's "administrator" and two "licensees." The court rejects the defendants' arguments that without direct involvement or personal participation in the plaintiff's care, no liability can attach.
In the notes after the Beverly case, the textbook authors ask whether this ruling is an example of "piercing the corporate veil." The answer appears to be no; rather, the point of the authors' inclusion of the case in that chapter is that high level administrators may still face personal liability without hands-on involvement, because they have statutory or common law "duties," such as hiring, supervision, or training of employees. The court emphasized, "There is no requirement of personal contact, but rather of personal participation in the tort; and a breach by the administrator of her own duties constitutes direct, personal participation."
Fast forward 11 years. As recently discussed in McKnight's News, a 2014 federal bankruptcy court recently issued a ruling analyzing parties' attempts to pierce a particular for-profit nursing home enterprise's corporate veil in order to collect some $1 billion dollars in judgments. Success in collection apparently depends upon the judgment holders' ability to recover from a "bankrupt" corporate defendant's current or former "parent" corporations, the former parent's shareholders, lenders (private equity firms), or other individuals and entities alleged to have received the bankrupt subsidiary's assets as part of a "bust-out scheme."
In March 2014, the Bankruptcy Court for the Middle District of Florida ruled these more remote defendants can face potential liability. The court concludes that while the plaintiffs have failed to state a claim permitting "veil-piercing," the plaintiffs have stated a claim for relief against corporate directors and "upstream" entities on either a direct allegation of breach of fiduciary duty (for a director who served in multiple boards) or on an indirect theory of liability, "aiding and abetting a breach of fiduciary duty." The court also permits the plaintiffs to proceed on theories of fraudulent transfers or conspiracy to commit fraudulent transfers against the parent company, successor entities, and certain individuals who appear to be corporate officers or directors. Of course, a decision on a pretrial motion to dismiss does not mean the defendants will ultimately be found liable.
The judge takes pains to outline the series of corporate entities and transactions, which appear to include overlapping officers or directors, that were used to build a national long-term care empire, but also, as alleged by the plaintiffs, to give separate entities control over physical assets or daily operations or incoming revenue, and to isolate and limit liability for debts. To highlight one of the alleged sham transactions, the court describes the debtor corporation's "sole shareholder" as "an elderly graphic artist who currently lives in a nursing home" and who may have had some recollection of being asked to invest in "computer equipment," but who did not, in fact have or spend any money for his shares.
The Bankruptcy Court's memorandum opinion, in In re Fundamental Long Term Care Inc., Jackson v. General Electric Capital Corp., 507 B.R. 359 (M.D. Fla. March 14, 2014), is "colorful" in the way that only legal geeks probably appreciate, although at one point the court observes that the "'bust-out' scheme alleged in the complaint . . . has all the makings of a legal thriller." Plus, there are political implications of the Florida decision reverberating in Illinois, as described by the Chicago Tribune, here. Scott Turow, this is in your backyard. Are you taking notes?
As for the $1 billion in judgments that triggered the collection efforts, they apparently represent 6 separate cases, and it appears that at least one was entered when no lawyer appeared to defend the nursing home at a jury trial against claims of negligence, as explained in a Tampa Bay Times news account in 2012 about one of the cases, where a wheelchair-bound resident was alleged to have fallen to her death in an unlocked stairwell.
And by the way, just because a nursing home is organized as a nonprofit corporation does not mean that it can necessarily escape liability for officers and directors, as we recounted last December in discussing In re Lemington Home for the Aged.