Marquette Elder's Advisor Volume 1 Article 9 Issue 4 Spring

Disclaimer and Elective Share in the Medicaid Context Cynthia L. Barrett

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Repository Citation Barrett, Cynthia L. (2000) "Disclaimer and Elective Share in the Medicaid Context," Marquette Elder's Advisor: Vol. 1: Iss. 4, Article 9. Available at: http://scholarship.law.marquette.edu/elders/vol1/iss4/9

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Disclaimers must be handled with care isclaimer of an or (sometimes referred to as renuncia- to ensure that they do not harm the tion) is a standard postmortem planning technique. In traditional public, long-term care benefits provid- , the disclaimant is treated as though he or she never received the ed by the federal Medicaid program. inheritance. That is, the disclaimant is held not to have transferred the inheritance to the eventual Explored in this article are some dis- taker. In the debtor-creditor context, "[c]ourts have claimer situations in law practice, as generally taken the position that a creditor cannot prevent a debtor from disclaiming an inheritance."' well as various techniques to utilize this However, this general rule is being eroded in recent years by cases interpreting the effect of modern estate planning method effectively to fraudulent conveyance law on disclaimer. For example, the Ohio Supreme Court, in a declarato- avoid forced elective share. How can a ry relief action brought by the personal representa- tive, denied a disclaimer after finding the dis- client plan for Medicaid and elective- claimant had actual intent to defraud his creditor.' Where the use of Medicaid long-term care ben- share challenges? Various means are efits is contemplated, disclaimer is a dangerous technique. Use of the standard technique of dis- discussed and checklists provided to claimer may disqualify the disclaimant and his or her spouse from currently received and future help in this endeavor. Medicaid benefits. Where the potential disclaimant (or spouse) has medical problems, and may seek By Cynthia L. Barrett public benefits in the foreseeable future to pay medical costs, the attorney considering use of the disclaimer should be aware of recent developments in the Medicaid law. This article discusses the impact of a disclaimer on only one type of public benefits, long-term care Cynthia L. Barrett, J.D., is a past president of the benefits through the federal Medicaid program.' National Association of Elder Law Attorneys and a Other benefit programs, such as public housing or Fellow of the Academy. Her solo practice in Portland, Medicaid linked to cash assistance programs,' are Oregon, is concentrated in the areas of elder law, con- beyond the scope of this article; however, exercise of sumer health issues, and retirement decisions. disclaimer can harm these benefit packages as well.

40 ARTICLE Disclaimer and Elective Share in the Medicaid Context 4:1

Disclaimer as a Medicaid Transfer care, during a period of Medicaid disqualification. Before 1993, whether a disclaimer was a disquali- If other funds are available to pay the cost of nurs- fying transfer for Medicaid purposes was an open ing home care for the disclaimant and spouse, per- question. In 1993, after passage of the federal haps the disclaimer would still be useful. Omnibus Reconciliation Act (hereinafter OBRA How should the lawyer proceed if the potential '93),' the transfer-of-assets definitions for long- disclaimant is incapacitated and cannot exercise his term care Medicaid were broadened so that a dis- or her disclaimer right? Where the capacity of the claimer became a disqualifying transfer. The Health ill person is not clear, the state law on renunciation Care Financing Administration (hereinafter should be consulted to determine who has the HCFA), which administers the federal Medicaid authority to disclaim. The ill person may have program, expressly declared that "[w]aiving the planned for incapacity and granted authority to right to receive an inheritance" is an example of a disclaim to an agent under a power of attorney. disqualifying transfer.6 Typical power-of-attorney language permitting dis- Some states adopted administrative rules explic- claimer is as follows: itly declaring that disclaimer or renunciation of an inheritance constitutes a Medicaid disqualifying To make renunciations or disclaimers, including the transfer. The Medicaid agencies in several states power to disclaim or refuse to accept an inheritance, began to deny benefits to disclaimants and their other property interests, and life insurance proceeds, spouses. In 1995, a New York appellate court and to waive, release, disclaim or renounce property upheld denial of benefits to a Medicaid recipient or an interest therein, or the right of succession there- who gave up her inheritance.' The court held that in, including a future interest, in whole or in part. "renunciation of a potentially available asset was the functional equivalent of a transfer of an asset In some states, the law on renunciation may since by refusing to accept it herself, she effectively require permission of a court or a court-appointed funneled it to other familial distributees."' The guardian or conservator. Complying strictly with court acknowledged that at a creditor the renunciation law and time deadlines is crucial may not force an individual to accept a gift, yet the to the disclaimer's effectiveness, as all estate plan- court concluded that in the Medicaid context, pub- ners know. lic policy permits the state to force a Medicaid If the lawyer learns that the potential dis- recipient to accept an inheritance and spend it claimant is already receiving Medicaid, expect that down.9 the disclaimer will be treated as a gift, that is, as a Every disclaimer, then, triggers a period of dis- disqualifying transfer. Congress considers those qualification for Medicaid benefits for the dis- who advise Medicaid disqualifying transfers to be claimant and the disclaimant's spouse. The length criminals, although a federal judge in New York of the period of disqualification varies by state. has enjoined enforcement of the 1997 criminaliza- Calculating a period of disqualification is different tion statute.10 in each of the 50 states, because each state is per- Where the institutionalized person or spouse, if mitted to divide the transferred sum by its own not already on Medicaid, does not have sufficient state's average cost of nursing home care. In resources to privately pay for nursing care during a Oregon, the average cost of care is $3,200, so that projected disqualification period, the lawyer a disclaimer of $32,000 would trigger a 10-month should advise against disclaimer. disqualification period. In a state with a $7,000 average monthly cost of nursing care, such as New Disclaimer Situations in the Law Practice York, the same disclaimer ($32,000) would trigger In the routine administration, an heir who a four-month disqualification period. stands to benefit from the transaction usually rais- What should the lawyer considering the use of es the issue of disclaimer. The sick heir or frail heir a disclaimer take into account? Ask if the potential rarely initiates the discussion of disclaimer. In the disclaimant is a current Medicaid recipient or has a most complicated scenario, the lawyer is asked spouse who might need Medicaid. Ask who would about disclaimer by a person who serves as admin- pay his or her cost of care, or the spouse's cost of istrator of the estate or trust and is the agent or 42 Elder's Advisor 42 Elder's Advisor

guardian for the incapacitated heir and also stands clear of any obligation would be a violation of pub- to gain a greater share of the estate if the disclaimer lic policy.""6 The court concluded that the dis- is effected. claimer was valid, and that the sisters who received Two recent cases from New York and Maryland the disclaimed $100,000 took subject to the claims illustrate how unfavorably the Medicaid adminis- of the state of Maryland "for Medicaid benefits trative agencies and courts are treating disclaimer improperly paid as a result of Lettich's failure to today." In Molloy v. Bane, the institutionalized inform DSS of his acquisition of property while Medicaid recipient's daughter died, and the mother receiving Medicaid benefits."" The court called for executed a disclaimer of her intestate share of the a 10-day notice to the state from a Medicaid recip- estate.' New York's Medicaid agency, and its ient contemplating disclaimer in order to give the court, treated the disclaimer as a disqualifying state a chance to disclaim. "The failure to do so transfer. A close reading of the facts in Troy v. Hart clearly deprives the State of its ability to exercise its illustrates how convoluted a simple disclaimer rights and may well result in the unjust enrichment becomes in the Medicaid context. Troy was the of those who surreptitiously dine upon the fruits of agent under power of attorney for Paul Lettich, an inheritance while cloaked by the veil of non-disclo- institutionalized Medicaid recipient." Hart was sure." 8 both Lettich's sister and the of an estate benefiting both. Hart prepared a dis- Disclaimer Practice Checklist claimer for Lettich, visited him in the nursing home, and helped him sign the document. Lettich " Does the potential disclaimant now receive thereby gave up the right to a $100,000 share of public benefits? Review proof of the sorts of the estate. The agent, upon discovering the dis- benefits and the impact of disclaimer on that claimer, filed a proceeding to rescind the disclaimer, person's eligibility. Who would pay if the state and incidentally, to remove Hart as personal repre- imposed a disqualification period? Which sentative. child signed the "personal responsibility" line The trial court eventually removed the sister as of the nursing home ? Who has the personal representative, but it did not rescind the obligation to advise the state within 10 days disclaimer." Lettich died. Troy became personal of receipt of assets by the Medicaid recipient? representative of Lettich's estate yet appealed the Will the state seek "improperly paid" benefits trial court's decision denying the rescission. The (those paid after the disclaimer) by direct suit state of Maryland appeared as amicus curiae to try against the other heirs on a to get the judge to throw out the disclaimer as a vio- or other theory? lation of public policy. The appellate court affirmed * If you represent the personal representative, the trial court and found that the disclaimer did not do not let the disclaimant believe you also rep- violate public policy simply because it kept the dis- resent him or her. Refer the disclaimant to claimant on Medicaid. However, the appellate court another lawyer for advice. did not stop there. It also fashioned a remedy for * If the potential disclaimant could be incapaci- the state that the state had not sought in this dispute tated, determine who has legal authority to between the two personal representatives. The court sign the disclaimer document (court, agent, or encouraged Maryland to seek reimbursement of guardian). Medicaid benefits paid for Lettich from the other * If the potential disclaimant, or the potential estate heirs by a constructive trust. disclaimant's spouse, might need public bene- The court pointed out that the Medicaid recipi- fits for long-term care Medicaid in the next ent was required to report all changes in financial three to five years, because his or her circumstances within 10 days." Lettich, the sick resources would not pay for $4,000 to $7,000 disclaimant, should have notified the state upon his a month in nursing home care during a period acquisition of an equitable interest in his sister's of disqualification, make sure the individual estate. "Lettich had an obligation to 'pay his own receives independent advice about the impact way' (by means of the inheritance) until such time of disclaimer on Medicaid eligibility. Who will as his resources were exhausted. . . . To permit dis- pay for care during the period of disqualifica- claimed property to pass to transferees free and tion? If the disclaimant and spouse have long- ARTICLE : Disclaimer and Elective Share in the Medicaid Context 43 ARTICLE Disclaimer and Elective Share in the Medicaid Context 43

term care insurance, or substantial savings, tutionalized spouse will continue to receive public they are less likely to need Medicaid during a benefits. Inherited assets will disqualify the institu- period of disqualification. tionalized spouse from Medicaid and be spent down for care. Of course, some spouses intend to Elective Share and Medicaid leave funds for the institutionalized spouse, know- Some expressly disinherit an institutional- ing the spouse will then leave the Medicaid pro- ized spouse. Unless the disabled spouse seeks the gram and pay his or her own nursing costs until the elective or forced share, the assets will pass to the funds are spent down. children or other heirs. At common law, the credi- If the institutionalized spouse was bypassed to tors of a surviving spouse may not force the spouse any degree, the lawyer advising the personal repre- to claim the elective share. Recent cases involving sentative should consider the issue of the elective or Medicaid and the elective share make it clear that, forced share. in some jurisdictions, a surviving spouse's refusal to claim the elective share will cause a period of Simple Renunciation by Surviving Spouse Medicaid disqualification. The lawyer who meets with the personal represen- All common-law states, other than the one tative may learn that a spouse who is an heir by holdout, Georgia, "grant the surviving spouse the or a devisee under the will is in one of the right to renounce a 's will and claim a statu- following situations: tory share of the testator's estate."" Spousal enti- tlement varies greatly, with some states permitting * In a nursing home (then the lawyer should claims against an "augmented estate" beyond the learn who pays for that nursing home care) probate estate. " Ill, but not yet in a nursing home (then the In the nine community property states," the lawyer for the estate should be aware that spouses own equally the property earned by either Medicaid might be needed in the foreseeable during marriage. The community property state future). widow makes a "widow's election"-to take under the will or to reject the will and retain his or her If the decedent left the surviving spouse some or all share of the community property." The term of the estate, then an interested person may ask "widow's election trust" in those jurisdictions has whether the spouse can disclaim. come to mean a trust of all the community proper- Does the surviving spouse need separate repre- ty until the death of the widow. Community prop- sentation? Who is likely to challenge the disclaimer erty state spouses interested in avoiding spend- for the disclaimant's lack of capacity? Help the per- down of all assets on one spouse's care sign agree- sonal representative understand the conflict ments transmuting community property into sepa- between the interests of heirs who stand to benefit rate property, and they may also waive any state and the disclaimant. Do not let your clients get in right of homestead or separate maintenance rights, the position of the heirs in Troy v. Hart, where the if the state law permits such waivers. court advised the state of Maryland to seek return of the assets by constructive trust suit.23 Simple dis- Bypass Planning Is Common Where One Spouse claimer of an inheritance is a Medicaid disqualify- Receives Medicaid ing transfer and will preclude immediate Medicaid In elder law practice, the lawyer frequently encoun- eligibility. ters an estate planning client whose spouse has been institutionalized for nursing care. If the couple Failure to Claim the Elective Share as a protected some assets and the home from nursing Medicaid Disqualifying Transfer home costs by qualifying the ill spouse for If the spouse is completely disinherited or receives Medicaid, the healthy spouse may, and usually less than the elective share under the will, the does, alter his or her will to bypass the institution- lawyer should explore whether the state can force alized spouse to some degree. the surviving Medicaid beneficiary spouse to elect Should the healthier spouse unexpectedly die against the will. before the institutionalized spouse, the personal The elective share is a personal right of the sur- representative and heirs usually wonder if the insti- viving spouse,24 and creditors may not force an 44 Elder's Advisor

exercise or levy against the elective share." Yet, in institutionalized spouse is incapacitated and a the Medicaid context, some courts treat the failure responsible child or relative is overseeing the to exercise the elective share as a disqualifying Medicaid-paid care. The responsible relative may transfer. In several recent cases dealing with the be the person who benefits from the failure of a elective share rights of Medicaid recipients, courts spouse to claim the elective share. If the nursing permit the state agency to deny benefits to a sur- home is not paid, it looks to the responsible relative viving spouse. 26 for payment. Fearing nursing home collection For the purposes of Medicaid eligibility, HCFA efforts, the responsible relative may simply cave in defines "assets" to include items that the recipient and arrange to have the elective share paid to the could get but did not receive due to action on his or institutionalized spouse. her part. If the relatives stand immovable and the state The courts have creatively interpreted the term denies benefits to the elder, who will be paying for " action" in the HCFA State Medicaid Manual to the care? The child or friend who signed the include a failure to act. In the lead Medicaid elec- "responsible party" line on the nursing home tive share case, the Wisconsin Supreme Court entrance agreement? Pressure from the care facility found that failure to assert a claim against a to get the bill paid or evict the ill spouse for non- deceased spouse's estate constituted an "action" payment may bring the interested persons to the within the meaning of the Medicaid transfer prohi- lawyer's office. bitions." In Tannler, Medicaid recipient Phyllis This article will not go further into the interest- Tannler received nothing in her husband's will. ing issues of relative responsibility for nursing Mrs. Tannler made no claim against her deceased home care, the enforceability of responsible party husband's estate, and the Wisconsin agency issued nursing home admission agreements, or the nursing a denial-of-benefits notice. She appealed, but the home transfer prohibitions. But where the relatives agency decision to cut off benefits was upheld. The do not pay, and the state continues to pay on personal representative of the estate eventually "hardship" theory after a disqualifying transfer, the paid Mrs. Tannler's forced share (a small sum in state could conceivably sue the relatives who bene- this case) to the state of Wisconsin to resolve the fit from the transferred property for "improperly case. Substantial assets held in the decedent's sepa- paid benefits" under some state statutes. rate name passed to heirs under the will as permit- ted by Wisconsin's forced-share and community State Involves Probate Court to Make Election property laws." In Ohio, a probate judge sua sponte elected a spousal share for an incapacitated surviving Forcing the Medicaid Recipient to Claim an spouse, as permitted by the state elective share Elective Share statute, to take the surviving spouse off Medicaid To force the Medicaid recipient to claim an elective benefits."' In 1996, the Ohio Supreme Court upheld share, the state Medicaid agencies developed two the trial judge's exercise of the spouse's election. In basic approaches: that case, the court relied solely on Ohio adminis- trative regulations to find that the surviving widow 1. Issue a simple denial-of-benefits notice, and had a legal interest in her right to take against the stop paying the nursing home bill; or will. The decedent had left his entire estate to his 2. Petition the probate court for authority to make son from a first marriage. The probate judge the claim for elective share on behalf of the ill appointed a commissioner to investigate, and con- surviving spouse. cluded that election to take against the will was necessary for the surviving spouse's future support. Both of these approaches have been successful. In Oregon, the state nominates a private attor- ney to be appointed as conservator of the institu- State Issues Denial-of-Benefits Notice tionalized surviving spouse. The conservator claims Whether the institutionalized spouse is incompe- the protected person's elective share. Where the tent or not, the state Medicaid agency can pressure state chooses to seek appointment of a conservator, the recipient to make the election by issuing a the family can oppose the state strategy using two denial-of-benefits notice." In most of the cases, the arguments: (1) upon petition for appointment of a ARTICLE Disclaimer and Elective Share in the Medicaid Context 45

conservator, the family members can object to transfer would have occurred, and Mrs. Bezzini appointment of a nonrelative whose interests are would have been entitled to her elective share. 6 solely those of the state, not those of the incapaci- Connecticut permits the elective share only against tated person; and (2) the family can argue that the the probate estate, not an augmented estate. surviving spouse's circumstances would not be Because a revocable trust was used, rather than a altered or improved if the elective share were to be will, an actual transfer of an interest of the spouse exercised. In most cases, the ill surviving spouse occurred on the date of death, when the trust remains in the same bed at the same nursing home became irrevocable and the trustor's interest was receiving the same level of care whether the bill is extinguished. Use of the trust to bypass the spouse paid from the inheritance or from public benefits. and benefit the children backfired. Mrs. Bezzini, In a pre-OBRA '93 New York transfer case, the who did not apply for benefits until a year after her court denied a petition to claim an elective share husband created his trust and eight months after he where no actual improvement in care or benefit to died, was disqualified for Medicaid benefits. the impaired spouse would have resulted. Connecticut practitioners now ask questions Oregon has no reported cases on this tech- such as the following: If the ill wife fails to elect, is nique-all of these cases to date have been resolved that a disqualifying transfer of assets? If the spouse by settlement (many by payment of some part of leaves the ill spouse an income interest in a trust the elective share to the state-nominated conserva- containing the family home, would mandatory tor, who spends it down for care). payment of the rental income to the wife prevent In a post-OBRA '93 transfer case, a New York the state from claiming a disqualifying transfer? court ruled that a guardian was deemed to have exercised a recipient's right of election against the Planning for Medicaid and an Elective Share estate of a deceased husband to the extent needed Challenge to provide for the recipient during a period of inel- In light of the harsh reaction of courts to the com- igibility.33 The best interests of a ward are irrelevant plete disinheritance of the surviving spouse, the if the state can get a court to rule that the guardian elder law attorney rarely advises the client to com- is "deemed" to make the election. pletely bypass an ill spouse who may become eligi- ble for Medicaid. Where one spouse is ill and on Use of Revocable Trust to Get Around Elective Medicaid, the elder law attorney may simply sug- Share Backfires gest that the client leave the elective share outright In a very recent reported decision from to the ill spouse. If the spouse wanted to avoid Connecticut, the court strongly criticized the avoid- spending down the entire elective share amount, ance of probate by use of a revocable living trust to the spouse could provide for "half-a-loaf" gifting bypass the Medicaid recipient spouse.34 In in his or her power of attorney. Connecticut, the surviving spouse can elect only However, some elder law attorneys are being against the probate estate. more creative. Charles Bezzini, ill with prostate cancer, estab- lished and funded a revocable living trust in March Waiver of Elective Share by Prenuptial or 1993. The trust contained no provisions benefiting Postnuptial Agreement Mrs. Bezzini. On June 3, 1993, Mr. Bezzini died. Of course, some spouses may waive elective share Four months later, Mrs. Bezzini went to a nursing rights in prenuptial or postnuptial agreements. home. In February 1994, eight months after her Elective share waivers in prenuptial and postnup- husband died, Mrs. Bezzini applied for Medicaid tial agreements are enforceable." However, at least benefits. The agency found that a Medicaid dis- one court in New York deemed execution of a post- qualifying transfer occurred on June 3, the date of nuptial agreement waiving the elective share to be death, when the sons became entitled to a disqualifying transfer." $469,142.80 as sole beneficiaries of the husband's The New York Medicaid administrative agency revocable trust. issued a denial of benefits to Jeanette Dionisio, The Connecticut Appeals Court agreed with the declaring that her execution of a waiver of elective state agency, remarking that had the husband share (two weeks before entering a nursing facility transferred his property by will, no disqualifying and 20 months before applying for Medicaid) was 46 Eler's Advisor 46 Elder's Advisor

a disqualifying transfer. In a very unusual twist, the period commence? Does the Medicaid disqualifica- agency found that the period of disqualification tion starting date wait until death, as in Dionisio? began with the date of death, not the date the waiv- Some planners suggest that the mutual waivers er was signed.40 of the elective shares be for consideration other than mutual promises. Some also suggest the con- Jeanette Dionisio executed a waiver of her right to sideration be creation of an elective share trust, of receive any property or assets from the estate of her one of the varieties below, in the will of each husband two weeks before she entered a nursing facil- spouse. ity, and approximately 20 months before applying for medical assistance. When her husband died testate four Creating an Elective Share Trust in the Will months after she entered the facility he left an estate Once an ill spouse has qualified for Medicaid, the valued at $469,500, and he had made no provisions in healthier spouse usually reconsiders his or her own his will to provide for his wife. Mrs. Dionisio's share of estate planning. If the institutionalized spouse is her husband's estate would have been one-third, or disinherited, or receives insufficient assets to fully $156,500. The Westchester County Department of fund the elective share, then the estate risks an elec- Social Services ultimately denied Mrs. Dionisio's appli- tive share claim. In Oregon, the elective share is cation for medical assistance on the ground that, by reduced by the value of what is given under the will waiving her marital rights to a portion of her husband's to the surviving spouse. In some states, such as estate, she had transferred resources for the purpose of New York, the spouse can reject what the will gives qualifying for medical assistance. Mrs. Dionisio died and claim the share outright. 4 after this determination was made. 1 Public policy does not favor disinheritance of spouses. In Utah, disinheriting the spouse is dis- The estate argued that the postnuptial waiver fit couraged-the omitted spouse gets the intestate an exception to the regular Medicaid transfer share unless the testator provides for the spouse restrictions, in that it occurred solely for regular with other assets, or the testator declares in the will estate planning reasons, and not for the purpose of itself that his or her spouse was intentionally omit- divestment of assets to qualify for Medicaid.4 2 ted." Many of our clients agree with this public However, the court held that a presumption exist- policy and do not want to completely disinherit the ed that the postnuptial waiver of elective share was surviving spouse. for Medicaid qualification purposes, and further Some of my clients with sick spouses on found that the personal representative had not Medicaid leave all of their estates to the ill spouse, rebutted that presumption in the hearing. knowing that the inheritance will disqualify the In the Medicaid context, transfers of assets survivor from public benefits but intending that the made "exclusively for a purpose other than to qual- inheritance be used to pay the sick spouse's hospi- ify for medical assistance" are not disqualifying.43 tals, nursing homes, care managers, and other care Waivers executed long before an illness, as part of providers. The well spouse's estate plan should, of normal estate and marital planning, should with- course, include a spousal trust to provide manage- stand scrutiny. When conventional postnuptial ment of assets or income left to the institutionalized agreements are done, which typically include spouse. waivers of elective share, practitioners might docu- Healthier spouses may, however, leave only part ment in the agreement all of the consideration, so of their preserved resources to the ill spouse. If the that the estate planning (non-Medicaid) reasons are healthier spouse has revised his or her estate plan apparent on the face of the document. to bypass the institutionalized spouse, and leave his How will a state's Medicaid agency, interested or her estate to the children, the elective share in forcing the Medicaid recipients to exercise their rights of the institutionalized spouse may be used elective shares, learn about the recipient's inheri- by the state as a method of taking control of new tance after death of a spouse? Each state will gath- assets for spend-down on care costs. er facts differently, but the estate or trust adminis- The manner in which the elective share is satis- tration advisor should anticipate the inquiry. fied will be different in each state. For example, in If an elective share waiver is a Medicaid dis- Utah the electing spouse must allow credit against qualifying transfer, when does the disqualification the share for all sums received by him or her on ARTICLE Disclaimer and Elective Share in the Medicaid Context 47

account of the death of the spouse, including I have been developing a special-needs right-of- entireties real estate and life insurance." election trust. The special-needs trust (hereinafter The lawyer should carefully examine the elec- SNT) is funded with the elective share amount. The tive share law of the state(s) where assets are locat- is required to use income for special needs ed, and consider drafting a trust for just the elective and also has discretion to use principal for special share amount of the probate or augmented estate. needs. Elder law attorneys are calling testamentary trusts I have found that my clients routinely execute drafted in light of the elective share a "right-of- new wills after a spouse is institutionalized. More election trust." These right-of-election trusts could than half of my clients have chosen to leave the be full support, completely discretionary, income elective share amount in Oregon (25 percent) to a only, or special needs in nature. special-needs trust for the spouse. However, the The right-of-election trust could be a full-sup- right-of-election trust in special-needs format does port spousal , intended to be not guarantee that the state will not claim the elec- spent down entirely on nursing and other medical tive share. care, without regard to public benefits eligibility. A spousal trust in any form (full support, This sort of trust can be written with instructions income only, or special needs) pleases the clients, to disregard the interests of remainder beneficia- who want the children rather than a state-nomi- ries. The right-of-election trust could be a fully dis- nated conservator to determine how the inheri- cretionary trust, but this sort of trust is difficult to tance is spent. Should the state seek appointment of value, and its value would not completely offset the a conservator for an institutionalized spouse after elective share. Alternatively, it could restrict pay- the death of the community spouse, this SNT ments in some way, and not be drafted as a full- design permits the personal representative to argue support trust. In Virginia and New York, a form of that simply spending down an elective share for the income-only right-of-election trust is sometimes $4,000-a-month nursing home bill will not benefit used. the ill surviving spouse as much as special-needs Virginia practitioner Andrew Hook drafts wills expenditures, and that the SNT should be valued for the community spouse leaving an income-only and kept in place instead of an outright inheritance trust to the ill spouse, which also permits discre- and spend-down. I am investigating valuation of tionary principal distributions for special needs. 6 the mandatory income SNT. Evaluate the state elec- In 1997, New York practitioner Vincent Russo tive, state statute, or common-law valuation meth- suggested using a right-of-election trust, funded ods in your own state. with all or part of the estate, to provide income For valuation purposes, if the Medicaid recipi- only to the ill spouse.4 7 As Russo pointed out in his ent spouse is given all right to income and the practice guide, the trust income will pay for part of power to appoint who receives the remainder, then the care, reducing the payout by the Medicaid 100 percent of the value of the trust will be consid- agency. The Medicaid agency is less likely to claim ered in computing the elective share. But I am the elective share if the decedent's estate plan reluctant to give the to an reduces the use of public funds for the surviving incapacitated person, because that might expose spouse's support. However, the New York spouse the trust remainder to Medicaid estate recovery may simply elect completely against the will, taking under Oregon's expanded estate recovery statute, 33 percent of the assets, and the right-of-election or its successor, at some point in the future. I leave trust will never be implemented. In 1999, New the power of appointment out of the right-of-elec- York denied benefits to an ill spouse who was the tion trust currently, but I am giving that issue fur- beneficiary of a right-of-election income-only trust. ther study. The effectiveness of the right-of-election trust in Should the state wish to appoint a conservator New York is unclear. to claim the elective share, the personal representa- The income-only right-of-election trust would tive will argue that the will already leaves the ill produce excess income in income cap states such as spouse a 25 percent elective share special-needs Oregon. While excess income can be managed cur- trust. If the state is successful in forcing an election, rently with an income cap trust, 48 preserving bene- then the amount of cash to be paid will be reduced fits while reducing the use of tax dollars, in Oregon by the value of the SNT. 48 48Elder's Advisor

I have not yet had to value a special-needs right- moved to be nearer other relatives, treat the of-election trust in the crucible of litigation. failure to claim an elective share? However, if the trust is valued at less than 25 per- 5. In estate planning, do not recommend that your cent (the elective share amount in Oregon), then client totally disinherit a disabled spouse-con- additional resources may be paid to the state's sider the impact of the elective share claim on nominated conservator to make up the full elective the disabled spouse's public benefits (if needed). share. The conservator will spend down the addi- Who will pay for the care if the state denies ben- tional resources for nursing care and other needs, efits during the transfer penalty period of dis- and when the ill spouse goes back on Medicaid, the qualification? special-needs trust will be available to supplement 6. Where the spouses are entering into a postnup- the public benefits. tial or prenuptial agreement, be explicit about Because the special-needs right-of-election trust the waiver of elective share. However, the other is contained in a will, and is not part of a living estate planning goals that are relevant to the trust, it need not have the OBRA '93 payback pro- clients' situations should all appear on the face visions, and is not subject to OBRA '93 trust rules of the agreement. When one spouse is already that count all principal as an available asset of the ill, understand that a simple waiver of elective grantor or spouse. share might fall under the definition of a However, I want to caution the readers that Medicaid disqualifying transfer if the state nothing is certain in the Medicaid setting. I learned determines that the waiver's purpose was to of an unreported New York case, where the health- shift the burden of a surviving spouse's nursing ier spouse in consideration of the waiver of elective care cost from other heirs to the state. share left a portion of the estate in an SNT for the institutionalized spouse. The state ignored the SNT Form of Special-Needs Right-of-Election Trust and issued a denial notice. The elder law practi- (drafted in light of Oregon law) tioner argued, unsuccessfully, that no transfer DISCLAIMER: The following form is not warrant- penalty should be imposed because the value of the ed as suitable except to illustrate concepts dis- asset transferred at the time the waiver was signed cussed in this article, and may not be appropriate was uncertain. The trial court upheld the agency's for any general or specific use. The user is respon- denial and imposed a disqualification period on the sible for determining how the form should be beneficiary spouse beginning with the Medicaid adapted to any particular situation. date of death. This case was eventually settled before hearing on appeal, so no reported decision 3.2 INSTITUTIONALIZED HUSBAND TES- was issued. TAMENTARY . I give to the trustee, in trust, for the benefit of INSTITU- Elective Share Practice Checklist TIONALIZED HUSBAND, one-fourth of the 1. In estate administration, is a spouse receiving value of my net estate reduced by the value of the less than the elective share? following property: 2. In estate planning, is one spouse ill and likely to need Medicaid assistance with nursing home 3.2.1 Property given under this will, including care? the present value of legal life estates property 3. In estate administration, is a spouse disabled given outright, if any, and already receiving) public and likely to need (or 3.2.2 The property not passing under the will of an inheritance is benefits? If a renunciation but received by INSTITUTIONALIZED HUS- considered, review the law on disqualifying BAND on account of my death in any form of transfer in this article and give the renouncing ownership with right of survivorship, including spouse (or his or her fiduciary) independent joint annuities, life insurance, life estates, and advice about the impact on public benefits and 49 jointly held real and personal property. the additional possibility of forced elective share. My trustee shall administer those net estate 4. How does the state where the ill spouse now funds for the benefit of my disabled husband, lives, or the states where he or she might live if INSTITUTIONALIZED HUSBAND, for the ARTICLE Disclaimer and Elective Share in the Medicaid Contept 49 ARTICLE Disclaimer and Elective Share in the Medicaid Context 49 spouse's special needs, as a supplement to any pub- burse funds from this trust only for non-support lic or private benefits which might be available to needs. However, the trustee may choose which meet the basic needs of INSTITUTIONALIZED non-support needs to meet, in the trustee's sole dis- HUSBAND, according to the purposes and plan set cretion, from the many possible expenditures forth below in ARTICLE 6. The trust may be which will maintain the beneficiary's health, safety known as the INSTITUTIONALIZED HUSBAND and welfare when such requisites are not being pro- TESTAMENTARY TRUST, and shall be adminis- vided by the public or private resources available to tered as set forth below. the beneficiary, or are not otherwise being provid- ed using the income available to the beneficiary. ARTICLE 6 The trustee shall make no payments for services or products benefiting the beneficiary if the trustee INSTITUTIONALIZED HUSBAND SPECIAL shall determine that payment for the services and NEEDS TESTAMENTARY TRUST products is the obligation of any county, state, fed- eral or other governmental agency which has a 6.1 PURPOSES OF TRUST. It is the intention legal responsibility to serve persons with disabili- of the trustor to create a purely discretionary sup- ties which are the same or similar to the impair- plemental and emergency fund for the benefit of ments of the beneficiary. the beneficiary, and not to displace any assistance that might otherwise be available from any public 6.3(a) The trustor does not intend to displace or private sources. In the event the beneficiary is any source of income otherwise available to the unable to maintain or support himself indepen- beneficiary, for basic support such as food and dently, the trustee may seek support and mainte- shelter, including any governmental assistance nance for the beneficiary from all available public program to which the beneficiary is or may be and private resources. The trustee shall take into entitled. This trust is not intended to be a consideration the applicable resource and income resource of any beneficiary, and is not available limitations of any public assistance program for to the beneficiary. It is intended that a spend- which the beneficiary is eligible. In carrying out the thrift trust be created for non-support purposes. provisions of this trust, the trustee shall be mindful No part of a corpus or income of this trust may of the probable future special and supplemental be used to supplant or replace any public assis- needs of the beneficiary, but not of the remainder tance benefits received by or through any coun- beneficiaries.s0 The trustor intends that the trustee ty, State, Federal or other governmental agency. increase the choices available to the beneficiary so 6.3(b) To the extent that public benefits are not that the comfort and personal dignity of the bene- made available to the beneficiary for other than ficiary are enhanced by trust expenditures. basic living expenses, including food and shel- 6.2 NO DISTRIBUTION FOR FOOD, ter, the trustee may disburse for the benefit of CLOTHING, AND SHELTER. The trustee is not the beneficiary such amounts from the income authorized to make trust distributions for basic or principal of this trust up to the whole there- food, shelter, and clothing for the beneficiary. of, for the satisfaction of the following types of 6.3 SUPPLEMENTAL NEEDS DISTRIBU- supplemental needs: TION. The trustee shall distribute to or apply for the benefit of INSTITUTIONALIZED HUSBAND * Health insurance premiums for the spouse's lifetime all the net income, and so * Dental care much of the principal up to the whole thereof as * Plastic or cosmetic surgery or other medical the trustee may determine, in his or her sole discre- care considered not medically necessary by tion, to be advisable for the satisfaction of INSTI- insurers or benefit programs TUTIONALIZED HUSBAND's special non-sup- * Psychological support services port supplemental needs. All net income should be * Recreation and transportation distributed annually for the special needs of my * Differentials in costs between housing and spouse. However, any net income inadvertently not shelter for shared and private rooms distributed shall be added annually to principal. It * Supplemental nursing care and similar care is the intention of the trustor that the dis- which public assistance programs may not 50 Elder's Advisor

otherwise provide, including payments to ify for home and community-based waiver and those providing services in the home nursing facility care, the individual may have no * Telephone, communication and television ser- more than $1,452 per month income from social vices security, pension and other sources. In no case shall * Mechanical bed or other furniture with thera- payments be made directly to the beneficiary if peutic potential receipt of income will disqualify the beneficiary * Periodic outings and vacations from public benefits otherwise available to him, * Companions' expenses for travel, reading, dri- using then-current payment standards. ving, and recreation or cultural experiences 6.5 PURCHASE OF EXEMPT ASSETS AND * Hair and nail care TRANSFER TO BENEFICIARY. The trustee may * More sophisticated medical, dental or diag- purchase items for the use of the beneficiary that nostic treatment, including experimental would be considered "exempt" assets for purposes treatment, for which there are not funds oth- of public benefit law, such as personal household erwise available items, transportation devices, medical equipment, or * Private rehabilitative training a home. The trustee may, in his or her sole and * Payments to bring in family and friends for absolute discretion, distribute such exempt items to visitation if the trustee deems that appropriate the beneficiary. Once distributed, such items are free and reasonable of trust and the trustee need not account for them; * Private case management to assist the benefi- the trustee must report such distributions in the fol- ciary, or to aid the trustee lowing regular accounting. * Medication, drugs or treatment prescribed by 6.6 AUTHORITY TO INITIATE PROCEED- a physician or other healing art practitioner INGS FOR ELIGIBILITY. In determining whether for which there are not other funds available the existence of this trust has the effect of render- * Fees and Costs for Protective Proceedings or ing the beneficiary ineligible for any program of Criminal Proceedings public benefit, the trustee is hereby granted full and complete discretion to initiate action to render Expenditures for the above or other supplemental the beneficiary eligible for any such program or needs shall be made only if public benefit programs public benefit, and is hereby granted full and com- do not provide them, and only if the trustee deter- plete discretion to initiate either administrative or mines in the trustee's sole and absolute discretion judicial proceedings, or both, for the purpose of to allow them. The above list is intended to be illus- determining eligibility. All costs relating thereto, trative and not inclusive of all kinds of non-support including reasonable attorney fees, shall be disbursements that would be appropriate for the charged to the trust. Should the trustee be request- trustee to make. It is important to the trustor that ed to pay for equipment, medication or services the beneficiary maintains a high level of dignity and which publicly funded organizations or agencies receives humane care. are authorized or expected to provide, the trustee 6.4 SUPPLEMENTAL INCOME PAYMENTS shall deny such request. The trustee is directed to TO THE BENEFICIARY (AMOUNTS LESS defend, at the expense of the trust estate, all con- THAN DISQUALIFYING INCOME FOR PRO- test or attacks of any nature against the trust, and GRAMS). The trustee may pay to or apply for the has authority to settle or compromise such claims benefit of beneficiary's basic support needs such if the settlement terms are not inconsistent with amounts from the income of the trust as the trustee the trustor's intent. may deem advisable, but in any event not more The trustee may cooperate with any guardian, than the sum which, when combined with other conservator or authorized representative of the income from other sources for the beneficiary, beneficiary to seek support from all available would exceed the income standard of the public resources, including but not limited to public pro- benefit programs for which beneficiary may quali- grams and private programs, if the trustee deter- fy. For example, under regulations in effect at time mines that the guardian or authorized representa- of execution of this will (1997), to qualify for basic tive is acting so as to effect the intent of the trustor. Medicaid as an SSI recipient, the individual may Any expense of the trustee, including reasonable have no more than $470 monthly income; to qual- attorney fees, shall be a proper charge to the trust. ARTICLE Disclaimer and Elective Share in the Medicaid Context 51

6.7 PREFERENTIAL RIGHTS OF BENEFI- ARTICLE 7 CIARY. The supplemental needs of the beneficiary, if such can be met within the terms of this trust, are SPECIAL NEEDS TESTAMENTARY TRUST preferred to the rights of any remainder beneficia- ADMINISTRATION ry. The trustee may distribute all income and prin- cipal of the trust, leaving nothing for remainder 7.1 RESIGNATION OF TRUSTEE. The trustee beneficiaries, in order to accomplish the trust pur- may resign the trusteeship at any time. Any resig- poses. nation shall be in writing and shall become effec- 6.8 TRUST NOT AVAILABLE FOR SUPPORT tive only upon written acceptance of the office of OF DEPENDENTS. The trustee shall in no event trustee by a successor trustee. make distributions for the support of any depen- 7.2 TRANSFER TO SUCCESSOR TRUSTEE. dents of the disabled beneficiary. Upon acceptance of the trustee office in writing, a 6.9 NONASSIGNMENT/SPENDTHRIFT. No successor trustee shall succeed to all rights, powers, interest in the principal or income of this trust and duties of the trustee. All right, title, and inter- shall be anticipated, assigned or encumbered, or be est in the trust property shall then vest in the suc- subject to any creditor's claim or to legal process. cessor trustee. The prior trustee shall execute any Furthermore, because this trust is to be conserved documents necessary or deemed advisable by the and maintained entirely for the special needs of the successor trustee to acknowledge transfer of the beneficiary, no part of the corpus hereof, nor prin- existing trust property to the successor trustee, and cipal, nor undistributed income, shall be subject to shall immediately transfer any property in his or the claims of voluntary or involuntary creditors her possession to the successor trustee without for the provision of care and services including res- warranty. A successor trustee shall not have any idential care, by any private or public entity, office, duty to examine the records or actions of any for- department or agency of any state, or of the mer trustee and shall not be liable for the conse- United States or any other governmental agency. quences of any act or failure to act of any former No beneficiary shall have the power to sell, assign, trustee. transfer, encumber, or in any other manner antici- 7.3 NO BOND REQUIRED. No bond or other pate or dispose of his or her interest in the trust or undertaking shall be required of any individual the income produced thereby, prior to its actual trustee of any trust. However, should a Court of distribution by the trustee for the benefit of the competent jurisdiction determine, upon the appli- beneficiary in the manner authorized by this agree- cation of any interested person, that it is contrary ment. No beneficiary shall have any assignable to the best interests of the beneficiary for the interest in any trust created under this agreement trustee not to be bonded, then the trustee shall, as or in the income therefrom. Neither the principal a trust expense, be bonded in such amount as the nor the income shall be liable for any debts of the Court shall determine. beneficiary. The limitations herein shall not 7.4 ACCOUNTING. The trustee shall furnish restrict the exercise of any power of appointment at least once a year to the beneficiary, and to the or disclaimer. next nominated successor trustee, a statement of 6.10 NEW YORK RESIDENCY. Should the account showing in detail all receipts, disburse- beneficiary live in the state of New York, or in a ments, investment transactions, distributions of state with restrictions on trusts such as New both principal and income since the last statement York, then I direct that the provisions of Section of account and an inventory of current trust assets. 7-1.6 of the Estates, Powers and Trusts Law of The statement of account shall be deemed to have the State of New York, or any similar or succes- been furnished to the person entitled thereto when sor statute thereto, shall not be available to it has been placed in the United States Mail require any invasion of trust funds by the trustee addressed to that person at the person's last known or any court." address even if that person is under a legal disabil- ity. Copies of documents evidencing ownership of 52 Elder's Advisor

assets in the name of the trust, and a copy of the 7.9 TRUSTEE DECISION FINAL. Under no most recent trust tax return shall be attached to the circumstances can any beneficiary compel a distrib- accounting. ution from the trust for any purpose. The trustee's 7.5 INDEMNIFICATION. The trustee may decision in choosing among particular non-support require indemnification to the trustee's satisfaction disbursements is final as to all interested parties, at the cost of the trust, before accepting the trust or even if the trustee elects to make no disbursements taking any step authorized hereunder. at all. The trustee's sole and independent judgment, 7.6 RULE AGAINST PERPETUITIES. Despite rather than any other person's determination, is any other provision of this instrument, the trust intended to be the criterion by which disbursements shall terminate and be distributed as if it had been are made. No judge or any other person should sub- terminated in accordance with its terms not later stitute judgment for the judgment of the trustee. than 21 years after the death of the beneficiaries 7.10 TERMINATION. Unless sooner terminat- named in this instrument who are living at the time ed as described below, the trust shall terminate of exercise of any special power of appointment, or upon the death of the beneficiary. if not exercised, then at the time of the death of the 7.10(a) TERMINATION OF TRUST BASED second of the grantors to die. ON ADMINISTRATIVE COST. If the trustee 7.7 TRUSTEE PROTECTION SO LONG AS shall determine, in the trustee's sole and TRUSTEE ACTS IN GOOD FAITH. In adminis- absolute discretion, that the market value of the tration of the special needs trust, trustor recog- trust is so small compared to the costs of nizes that the trustee is not licensed nor skilled in administration that continuing the trust will all possibly relevant fields including medicine, defeat or substantially impair its purposes, the social services, investment management, and pub- trustee may terminate the trust and distribute lic benefits law. The trustee may seek the counsel the remainder of the trust property including and assistance of experts, at the cost of the trust, any accrued and undistributed net income out- and of the beneficiary's guardian or conservator, if right as though the beneficiary had died. any, and any State and local agencies that have been established to assist the disabled in similar 7.10(b) TERMINATION UPON INELIGIBILI- circumstances as the beneficiary. The trustee may TY OF BENEFICIARY. In the event the exis- use these resources to aid the beneficiary, or the tence of this trust for special and supplemental beneficiary's guardian or conservator, as appropri- needs of INSTITUTIONALIZED HUSBAND in ate, in identifying programs which may be of any respect has the effect of rendering the ben- social, financial, or developmental assistance to eficiary ineligible for Supplemental Security the beneficiary. However, the trustee shall not in Income (SSI), or Medicaid or any other benefit any event be liable to the beneficiary, the remain- or entitlement provided by any public agency, der beneficiaries of the trust, or any other party for office or department of the State of Oregon, or the trustee's acts so long as the trustee acts in good any other State of the United States or of the faith. For example, the trustee and the beneficia- Federal Government, the trustee is directed to ry's guardian or conservator, if any, shall not be TERMINATE THIS TRUST and the undistrib- liable for the failure to identify each program or uted balance of the trust estate, including any resource that might be available to the beneficiary accrued and undistributed net income, shall be because of disability. distributed in the same manner as if the benefi- 7.8 NO COMMINGLING OF ASSETS. Public ciary had died. assistance benefits of any beneficiary of this trust 7.10(b)(1) It is the trustor's wish that there- shall not be commingled with trust assets but shall upon the distributees shall conserve, manage be separately held by the trustee, should the trustee and distribute the proceeds of the former be a payee or the recipient of those benefits. trust estate for the benefit of Nothing in this provision shall be construed to the beneficiary, but this request pertaining to management require the addition to the trust estate of public of trust proceeds and trust distribution after assistance benefits received by, or on behalf of, the the termination of the trust is precatory, not beneficiary. mandatory. ARTICLE Disclaimer and Elective Share in the Medicaid Context 53 ARTICLE Disclaimer and Elective Share in the Medicaid Context 53

7.10(b)(2) In determining whether the exis- Renunciation of Benefit Under Will or Debtor's tence of the trust or trustee's powers has the Election to Take Under Will, 39 A.L.R. 4th ed. effect of rendering said beneficiary ineligible 633 (1986). for any State or Federal public benefit, the 2. See Stein v. Brown, 480 N.E.2d 1121 (Ohio 1985). trustee is hereby granted full and complete My thanks to Michael Millonig of Dayton, Ohio, discretion to initiate either administrative or for bringing this case to my attention. judicial proceedings, or both, for the pur- pose of determining eligibility, and all costs 3. See generally 42 U.S.C. S 1382 et seq. relating thereto, including reasonable attor- ney fees, shall be a proper charge to the trust 4. See, e.g., Aid to Families with Dependent estate. Children (AFDC) and Supplemental Security 7.11 DISTRIBUTION UPON TERMINA- Income (SSI). TION. Upon termination of the trust, the trust 5. See 42 U.S.C. 5 1396p(c). shall be divided into equal shares, one share for each child of mine who is then living and one share 6. Health Care Financing Administration State by right of representation for the then surviving lin- Medicaid Manual, pt. 3, S 3257B (3). eal descendants of each deceased child. 7. See Molloy v. Bane, 631 N.Y.S.2d 910, 913 (N.Y. 7.11(a) A share established for a surviving child App. Div. 1995). of mine shall be distributed forthwith to the child. 8. Id. at 913. 7.11(b) If a child has died before termination, leaving lineal descendants, the deceased child's 9. See id. share shall be distributed in equal shares to the 10. Balanced Budget Act of 1997, Pub. L. No. 105-33, lineal descendants, who shall take by right of S 4734, Ill. Stat. 522 (codified as amended at 42 representation. U.S.C. 1320a-7b(a). 7.12 GENERAL TRUSTEE POWERS. The 11. See Molloy v. Bane, 631 N.Y.S.2d 910 (N.Y. App. trustee shall have all powers permitted by Oregon Div. 1995); see also Troy v. Hart, 697 A.2d 113 law to trustees, except where the exercise of such (Md. Ct. Spec. App. 1997). powers will conflict with the trust purposes or with the special administrative powers or restrictions 12. 631 N.Y.S.2d at 910. described in this article. 7.13 TRUST AMENDMENT. Trustor grants 13. The judge took umbrage, and his attitude is the trustee the power to amend this Trust revealed in the final words of the opinion, where Agreement to ensure that trustor's purposes are he seeks to avoid "the unjust enrichment of those met and that this trust is not considered a resource who surreptitiously dine upon the fruits of inheri- tance while cloaked by the veil of non-disclosure." or income so as to disqualify the beneficiary from Troy v. Hart, 697 A.2d 113, 119 (Md. Ct. Spec. state or federal assistance. The trustee may not, App. 1997). however, alter the remainder beneficiaries of the trust. If the trust cannot be modified or amended to 14. See id. prevent its existence from disqualifying the benefi- ciary from public benefits, then the trustee shall ter- 15. See id. at 118. minate the trust as if the beneficiary had died. 16. Id.

17. Id. at 119.

Endnotes 18. Id. 1. Dyer v. Eckols, 808 S.W.2d 531, 535 (Tex. App. 1991); see also Sara L. Johnson, LL.B., 19. CASNER & PENNELL, ESTATE PLANNING, S 3.4, at Annotation, Creditor's Right to Prevent Debtor's 3-260 (6th ed. 1998). This book contains an excel- 54 SElder's Ad-visor 54 Elder's Advisor

lent description of how the elective share operates, 33. See In re Mattei, 647 N.Y.S. 2d 415 (N.Y. 1996). and I highly recommend it. 34. See Bezzini v. Dep't of Social Services, 715 A.2d 20. Arizona, California, Idaho, Louisiana, Nevada, 791 (Conn. App. Ct. 1998). New Mexico, Texas, Washington, and Wisconsin. 35. See id. 21. JOHN R. PRICE, PRICE ON CONTEMPORARY ESTATE PLANNING, 5 9.25, at 790 (Little, Brown 1992). 36. See id.

22. Private communication from community property 37. See 42 U.S.C. S 1396p(c)(1)(B)(i) (allowing a 60- practitioners Janine Lawless, Seattle, Washington; month "lookback" period for transfers from a Peter Stern, California (where the court can enter revocable trust). such an agreement for an incapacitated spouse); Robert Fleming, Tucson, Arizona (where failure to 38. See Day v. Vitus, 792 P.2d 1240 (Or. Ct. App. assert the claim to a statutory allowance is a dis- 1990); see also OR. REV. STAT. S 114.115. qualifying transfer by regulation). 39. See Dionisio v. Westchester County Dep't of Social 23. 697 A.2d at 119. Services, 665 N.Y.S.2d 904 (N.Y. App. Div. 1997).

24. See UTAH CODE ANN. S 75-2-203; see also OR. 40. See id. at 905. REV. STAT. 5 114.105. 41. Id. 25. See Aragon v. Estate of Snyder, 715 A.2d 1045 (N.J. 1998) (citing cases in Missouri, New York, 42. See 42 U.S.C. 5 1396p(c)(2)(C). Pennsylvania, and Florida). 43. Id. 26. Some pre-OBRA '93 elective share/Medicaid cases are instructive. See, e.g., Hinschberger v. Griggs 44. See UTAH CODE ANN. S 75-2-203. County Social Services, 499 N.W.2d 876 (N.D. 1993); In re Flynn and Bates, 413 N.Y.S.2d 446 45. See UTAH CODE ANN. S 75-2-202. (N.Y. 1979); Bradley v. Hill, 457 S.W.2d 212 (Mo. Ct. App. 1970). 46. Private communication from Andrew Hook, Virginia lawyer. 27. Examples of such action (including waiver of an inheritance) are given in HCFA Transmittal No. 47. VINCENT Russo & MARVIN RACHLIN, NEW YORK 64, STATE MEDICAID MANUAL, pt. 3, S 3257.B (3). ELDER LAW PRACTICE, S 16.4 at 708 (West 1997). Eligibility, November 1994, reprintedin MEDICARE 48. See 42 U.S.C. S 1396p(d)(4)(B). & MEDICAID GUIDE (CCH) 1 14,311.81 (March 20, 1997). 49. In many elder law situations, although attempts 28. See Barbara Hughes, Tannler Decision Interprets are made to place most assets into the name of the community spouse at the time the institutionalized "Action," STATE BAR OF WISCONSIN, Fall 1997, at 15-18 (citing Tannler v. Wisconsin Dep't of Health spouse goes on Medicaid, some assets (especially and Social Services, 564 N.W.2d 735 (Wis. 1997)). beneficiary designation sorts of assets such as IRAs, pension rights, life insurance, and a joint 29. Private correspondence from Wisconsin attorney account) will pass to the Medicaid recipient spouse Paul Sturgel. at death. These sums passing at death outside of probate can limit the elective share amount in 30. See Tannler v. Wisconsin Dep't of Health and Oregon. See, e.g., OR. REV. STAT. SS 114.105(1), Social Services, 564 N.W.2d 735 (Wis. 1997) (issu- 114.125. ing a denial notice). 50. This sample form of SNT is not a parking lot for 31. See In re Estate of Cross, 664 N.E.2d 905 (Ohio assets, to preserve them for the children. If your 1996). client wants a parking lot, you should not include the bolded language or Article 6.7 below. My 32. See In re Street, 616 N.Y.S.2d 455 (N.Y. 1994). clients seem to want the trust used for the ill ARTICLE Disclaimer and Elective Share in the Medicaid Context 55 55

spouse. I want to be able to argue that the SNT drafting necessary to make the trust work in the will benefit the elder more than a cash-out spend- state where a beneficiary may live. Do not do down of the inheritance by the state's nominated cross-state planning without consultation with an conservator in an elective share fight. attorney in the states where the children might move the elder, or where the elder intends to 51. See Russo & RACHLIN, supra note 47, at 747-48; retire. this provision is an example of the sort of special