PAUL A. STURGUL
ATTORNEY AT LAW
312 SILVER STREET, HURLEY, WISCONSIN 54534
TELEPHONE (715) 561-4600
TOLL FREE 888-613-0600
FAX (715)561-2761
ElderLawAnswers Teleconference
September 19, 2006
MATERIALS ADAPTED FROM PRESENTATION AT
2001 NAELA Symposium
Vancouver, British Columbia
APRIL 20, 2001
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MEDICAID PLANNING
BY GUARDIANS
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I. INTRODUCTION
Note that while almost anything can be considered “Medicaid planning” (such as losing life savings in Las Vegas on brink of needing Medicaid and thus becoming immediately eligible), techniques elder law practitioners generally use most for competent individuals include gifting, transfers to spouses, transfers to trusts, and converting assets to “non-countable” forms. [1]
II. WHY MEDICAID PLANNING IN GUARDIANSHIPS IS DIFFERENT
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A. WHY MA PLANNING MAY BE DIFFICULT OR IMPOSSIBLE IN SOME
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JURISDICTIONS
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■ As regards Medicaid planning it might be broadly said that two types of state guardianship schemes exist: Those more closely abiding by strict, historic “best interests” standard governing power of guardians, and those which have adopted newer “substituted judgment” standard to a significant degree. Old “best interests” standard states have largest barriers to Medicaid planning, chiefly due to standard’s rigid prohibition on gifting by guardians. But there are still significant barriers in “substituted judgment” states, too.
■ “Best interests” model probably followed very closely by vast majority if not all states up to late 1960’s when landmark California case of Christiansen v. Christiansen decided which adopted and articulated new “substitute judgment” standard specifically so as to allow modern end-of-life planning technique of gifting to be used by guardians.[2] While there were earlier cases using such standard, Christiansen seems to have started the mass movement towards adoption of same.[3]
■ Historically, fundamental nature of “best interests” standard allowed guardians to do only what was clearly, indubitably in ward’s narrow interest; thus guardians could not make gifts of the ward’s property.[4]
■ “Best interests” standard appears very old; developed by judges in guardianships and eventually adopted by legislatures in guardianship statutes.[5] Can appear that perhaps due to age eventually meaning behind words “best interests” was forgotten leaving interpretive rules only, so that even after circumstances changed drastically (i.e., rise of Medicaid and estate tax systems making gifting advantageous), rules were too ossified to accommodate proposed MA and estate tax planning by guardians.
■ Wisconsin provides good example of view that “best interest” rule became overly rigid/ossified: In In re Pescinski (1975), Wisconsin Supreme Court applied best interests standard (after thunderingly rejecting adoption of the substitute judgment standard) and disallowed guardian’s request to authorize donation of one of ward’s kidneys to ward’s sister despite sister’s dire need of same. Court stated that “there is absolutely no evidence that any interests of the ward will be served by the transplant.” Sister died as a result.[6]
■ Due to ever-increasing “perverse incentives” to divest assets in old age due to estate tax and MA programs, however, gifting and other techniques became commonplace recommendations for competent elderly. Thus eventually courts faced guardians seeking permission to allow wards the same right via guardian action. Response in many states has been “substituted judgment” standard which, to varying degrees in different jurisdictions, has allowed some MA and estate tax planning by guardians.
■ Some states staunchly resisted adoption of “substituted judgment” tenets or elements; others have adopted only some, to varying degrees. In Wisconsin while state Supreme Court has rejected new standard, in 1985 Wisconsin legislature stepped in and allowed gifting by guardians of married wards,[7] so can be a mixed picture even within single state.
■ Note: Even in strong “substitute judgment” states, however, because of continued restrictions, limitations, requirements of court approval and etc., may still be extremely significant limitations on MA planning. E.g., limiting amounts of gifts, restricting who can be grantees, constraints on ability to make certain types of transfers, limitations on ability to disclaim property or enter into “service agreements” designed to reduce assets, etc.
B. THE CONSEQUENT DESIRABILITY OF AVOIDING GUARDIANSHIPS
Due to possible impediments to MA planning in guardianships̅even in many states with strong “substituted judgment” elements̅MA planning therefore generally extremely desirable prior to entrance into guardianship or in lieu of guardianship if at all possible. Thus, question is what might be done prior to establishment of a guardianship for person otherwise on brink of needing same, or what alternatives are available.
1. Making/executing gifts, transfers, durable powers of attorney, trusts, etc.,
prior to establishment of guardianship
■ In most cases primary problem considering pre-guardianship options/alternatives for those
who otherwise might be candidates for guardianship is probably one of competence: I.e., does individual in question have enough competence to validly perform/execute act or instrument under consideration?
■ Note: Merely because one may appear generally incompetent to handle all life’s daily challenges (and so perhaps may even qualify for guardianship), same does not necessarily mean they lack competence needed to make simple gift, transfer, validly execute simple durable power of attorney or etc.: Above all test of legal capacity needed to validly perform such acts in most states is functional: I.e., questioning competence as regards nature and particulars of the specific act, and not undertaking broad-brush evaluation of general competence such as performed in guardianships.[8] Thus, in general, question testing capacity to validly perform such acts is simply stated: whether at time in question person in question had general ability to understand what they were doing, and the effect thereof.[9]
■ Accordingly, the simpler the proposed act -such as making a one-time gift or transfer,- the less competence necessary. Thus making simple gifts, executing simple documents and etc. perhaps requires less competence than might otherwise be thought.
■ Note, however, due to inherent nature of instrument validly creating durable power of attorney undoubtedly requires more capacity than making simple one-time gift. But also note highly important yet frequently overlooked concept of “lucid moments” in capacity law: I.e., One who may otherwise be incompetent to perform certain act may have such moments, and if such act is performed within same act is perfectly valid.1[0] Moreover, is usually a presumption of competence in cases challenging capacity, so burden is usually somewhat doubled on challengers.1[1]
2. Using limited guardianships or other “less than full” guardianship-
like proceedings
■ Availability of judicial alternatives to guardianship which might allow continued gifting/other MA planning actions dependent on specific state law, but limited guardianships appear widespread. Note, however, to establish limited guardianship which still allows ward to gift/take other MA planning steps courts generally have to find specific competence to perform such acts first.
■ In Wisconsin “non-guardianship guardianships” exist known as “conservatorships”. Differ from guardianships in that no determination of incapacity is made,1[2] and both conservatee and conservator can make gifts, though court approval is needed.1[3] Basic nature of proceeding is that subject of same supposedly petitions for establishment; incapacity not an issue since intent of procedure is “to afford the protections akin to those provided by a guardianship but without the stigma of incompetency.”1[4] Interesting statutory provision states that if during conservatorship conservatee becomes incompetent then conservatorship not converted into a guardianship, but instead continues.1[5]
III. PLANNING ONCE YOU ARE ALREADY THERE
A. ATTEMPTING TO TERMINATE THE GUARDIANSHIP
■ Such may be more problematic than otherwise suspected even if ward does possess sufficient capacity to validly take/execute MA planning act/instrument if guardianship were terminated; e.g., under Wisconsin’s statutory scheme there is no clear, unambiguous authority allowing the court to terminate or dismiss guardianship other than due to death of ward or reversal of incompetency.1[6] Wisconsin statutory scheme further provides no basis for arguing that ward is better served without guardianship and that guardianship was mistakenly filed. Thus, for instance, no statutory grounds appear to exist allowing Wisconsin guardianship court to refuse to establish guardianship if same is not needed. (Due, for instance, to previously executed, comprehensive durable power of attorney.)
■ Contrast with provisions of Michigan’s recently reformed guardianship chapter: Same urges its courts to look for alternatives prior to establishing guardianship, and speaks of appointment of guardians (called “conservators” there) only if necessary.1[7] Has also clearly adopted much of “substituted judgment” philosophy, allowing gifting and other end-of-life planning by guardians,1[8] and even has provision stating that guardianship courts and guardians are to attempt to preserve prior estate planning engaged in by ward.1[9]
B. ATTEMPTING TO CONVERT GUARDIANSHIP TO LIMITED
GUARDIANSHIP OR A “LESS THAN FULL” (AND LESS
RESTRICTIVE) GUARDIANSHIP-LIKE PROCEDURE
■ Same may be easier than attempting to have guardianship dismissed totally due to alleviating qualms on part of guardianship judges that ward will be uncared for/taken advantage of. But major problems remain. If request is to convert full guardianship to limited guardianship, presumably competence to take whichever acts proposed that ward regain the power to accomplish need be clearly shown. As to converting to Wisconsin-style conservatorship where no incapacity need be found, in Wisconsin at least same would seem to require at least some minimal initial competence on part of ward to petition for such proceeding, yet by virtue of being a ward proposed petitioner has already been deemed incompetent in the guardianship, so maneuver appears problematic.
C. GUARDIANSHIP TRANSFERS/GIFTING/CONVERSION OF ASSETS:
THE PARAMETERS AND PROBLEMS
■ As noted ability to execute MA planning and extent to which it may be accomplished within guardianships is highly dependent on state law: typically, whether and to what extent state has adopted “substitute judgment” tenets. Note that even amongst states which have embraced “substituted judgment” philosophy great differences still exist: e.g., some perhaps allowing gifting for estate tax planning but not MA planning, etc.
■ Even in states which have adopted such tenets broadly note possible judicial opposition on grounds that same would be “cheating the (MA) system and the taxpayer.”2[0] Accordingly, need is great for education of judges in MA planning generally; e.g., noting that competents have such rights and use them frequently, clear careful, persuasive arguments explaining proposed planning, etc.
■ Note also possible need to remind guardianship courts -delicately- of duty to watch out for interests of ward - not those of state or of taxpayers.2[1]
D. ARGUING THAT GIFT OR IMPLIED TRUST SHOULD BE FOUND
EFFECTIVELY FINDING TRANSFER OF A WARD’S PROPERTY
PRIOR TO ESTABLISHMENT OF THE GUARDIANSHIP
■ In some circumstances where singular, important MA planning action not allowed in guardianship yet same would prove extremely helpful̅such as transferring a homestead to another such as to spouse or child of ward̅note possibility of argument that ward made valid pre-guardianship gift of same. Or argument that ward intended prior to incapacity that property go to spouse/child/another in recognition of pre-guardianship love, support, care or etc., and that implied constructive or resulting trust thus be judicially imposed so as to realize such intent.2[2]
■ Illustrative case: Adult daughter of elderly Wisconsin couple moved into couple’s farmstead home principally to assist in care of mother suffering from advanced Alzheimer’s. Mother eventually admitted to nursing home but father died unexpectedly sometime thereafter, leading MA system to begin process placing lien on farmstead so as to recoup nursing home costs. Daughter argued in mother’s guardianship case that implied constructive trust be recognized to transfer farmstead (including home) to her based on argument that mother/father wanted same in recognition of her care and devotion. Wisconsin guardianship court acceded, despite farmstead comprising essentially all of ward’s estate.2[3]
IV. FIGHTING FURTHER
A. POSSIBLE CHALLENGE BASED ON THEORY THAT AMERICANS’
WITH DISABILITIES ACT PRECLUDES DISCRIMINATION AGAINST
INCOMPETENTS VIA NOT ALLOWING SURROGATES (GUARDIANS)
TO ENGAGE IN MA PLANNING2[4]
Note that such challenge would appear to be matter of first impression, thus theory rather speculative at present.2[5]
1. A “First Blush” Look At The Arguments In Favor
Despite apparent lack of prior litigation as to issue note multitude of ADA provisions which seem directly relevant to claim:
a. Under Congress’ “findings” of need for Act, it is noted that individuals with disabilities have suffered from “overprotective rules,” “exclusionary standards and criteria,” and “relegation to lesser services, programs, activities, benefits [] and other opportunities.”2[6]
b. One of broadly stated “purposes” of Act is “to invoke the sweep of congressional authority, including the power to enforce the fourteenth amendment and to regulate commerce,2[7] showing broad, deep intent to exercise full national powers over states, and later provision specifically abrogates sovereign immunity of states under eleventh amendment making same fully susceptible to Act and remedies thereunder.2[8]
c. Would seem clear that to extent it might be argued that states aren’t discriminating against disabled in guardianships but only state courts are, note that Act not only expressly covers states but also “any department ... or other instrumentality of a State.”2[9]
d. Core of Title II ADA protection at issue states that no qualified individual with a disability “shall, by reason of disability, be excluded from participation in or be denied the benefits of the services, programs, or activities of a public entity, or be subjected to discrimination by any such party.”3[0] Note further that unlike Constitution’s protections via Due Process/Equal Protection clauses, ADA’s protections extend against unintentional discrimination.
2. A “First Blush” Look At The Arguments Against
Note initially apparent possible arguments against applicability of Act:
a. With guardianship bans/barriers to MA planning are states really discriminating on basis of disability, or on basis of who is in guardianships and who is not? Does this matter given it is still discrimination against those who are in guardianships?
b. Is MA really a state program to the extent that ADA bans it from discriminating in its administration? If not, and is a Federal program, can it be argued that ADA meant to “amend” federal MA statutes so as to bar states from discriminating against those in guardianships?
c. Does fact that only way those in guardianships can function is via surrogates (i.e., guardians) render situation so different that ADA doesn’t apply, since only surrogates are banned from MA planning? I.e., doesn’t incompetence somehow naturally preclude exercise of some rights? Note, however, that in Cruzan v. Director, Missouri Department of Health, (1990), U.S. Supreme Court gave strong indication that merely because some individuals can only act via surrogates, such does not on its own diminish their ability to claim rights open to others.3[1]