Last night I went to a presentation about estate planning in a neighboring town. There in a library basement meeting room a financial planner and an attorney set out to educate a capacity crowd on the necessity of planning for an uncertain future. I am sure they each are able to add substantially to their client lists every time they do one of these.
Midway in the evening the attorney began to explain to us the provisions of NH Senate Bill 138, which was passed last summer. You'd think I'd be used to New Hampshire's skinflint ways by now, but some of the provisions in this law really surprised even me.
Follow me beyond the twisted legal maze for details.
By way of summary, here's an article written by Tina Annis for the NH Bar Association:
A new law that went into effect July 2 without the governor’s signature creates liability for fiduciaries and transferees and gives assisted living and nursing home facilities new ways to collect fees from residents.
Senate Bill 138 amends RSA 151-E to provide nursing homes and other residential care facilities with three new private causes of action.
Attorneys should study the law carefully, as it may impact advice to clients who make (or receive) gifts, or who serve as fiduciaries.
I'd add to this: all NH citizens need to study this law carefully, because if it stays on the books it's likely to affect all of us one way or another, sooner or later.
Here's one of the things this law does:
Since the Deficit Reduction Act of 2005, there is a 5 year lookback period when applying for Medicaid. Any gifts you made to anyone during the 5 years previous to your application result in a period of being disqualified for Medicaid, at a rate (according to materials passed out last night) of $8,624 per month.
So, if a parent pays a child's tuition bill of $17,000, and then a bit less than five years later has medical and financial issues resulting in their being admitted to a nursing home and needing Medicaid, this bill allows the nursing home to sue the child for the costs of 2 months of care.
As Tina Annis states in her article:
Current Medicaid rules presume that gifts made during the five-year look-back period were made for the purpose of improperly qualifying the resident for Medicaid benefits. That presumption is difficult and costly to rebut through an appeal process. Recipients of gifts (who would face personal liability under this new statute) might include “innocent” individuals who had no inkling that their benefactor would need nursing home care in the future.
So, beware all you NH parents and grandparents, setting out to help the next generation (and well they need it - since we have the lowest state aid to higher education in the nation, we also have the highest student debt loads): if anything happens to you, your gift could come back to bite the recipient in the form of a lawsuit from a nursing facility.
Of course this applies to people making gifts outside of their families as well. So, if you are tempted to help someone out, remember: Plainly the prudent thing to do unless you are young and/or invincible is not to give money to anyone who might need it. Only give money to people who can keep it in the bank for at least 5 years before they spend it. Failing that, polish up your crystal ball so you can stop helping others 5 years before your health issues send you to long term care.
Oh, and the fiduciary thing she mentioned: this law makes your Power of Attorney personally liable to be sued by the nursing home, if they are "negligent" in filling out your Medicaid application, and acceptance into Medicaid is thereby delayed: see #2 below.
Family members (as fiduciaries or gift recipients) must now be concerned about personal liability in three situations:
1. Where a gift by an applicant results in a “penalty period” during which the applicant is ineligible for Medicaid benefits, the recipient of that gift will be liable to the nursing home to pay any costs of care, up to the amount of the gift.
2. A fiduciary who has the “authority and duty” to file a Medicaid application on behalf of a resident will be liable to the nursing home if the fiduciary is negligent in “failing to promptly and fully complete and pursue” the Medicaid application.
3. A fiduciary or other person with authority over the income of a resident (which may include a joint owner of a bank account), will be liable to the nursing home for refusing to pay the resident’s income to the nursing home.
I can't see much problem with #3, but #1 and #2 are very concerning. NH Medicaid applications for those receiving long term care are complex, and require among other things the acquisition and organization of 5 years of financial records. Now we are going to add to the stress experienced by the fiduciary the threat of being sued by a nursing home if they fail to live up to a standard that is not well defined.
So we've got in this law a fracturing force that goes both ways: it encourages parents not to help their children financially, and it encourages children not to be willing to serve as fiduciaries for their parents.
We do need to address issues of how facilities get paid for providing long term care, but this particular law is a step in the wrong direction.