An Attorney Who Advised Against Life Estate While Conducting Medicaid Planning Is Liable for Legal Malpractice

An Attorney Who Advised Against Life Estate While Conducting Medicaid Planning Is Liable for Legal Malpractice

Medicaid Planning

A Massachusetts appeals court rules that an attorney who negligently advised a client that obtaining a life estate in property would hurt her chances of qualifying for Medicaid damaged the client because deprivation of a property right is actual damage. Brissette v. Ryan (Mass. Ct. App., No. 14-P-919, Oct. 29, 2015).

Marie Brissette and her husband consulted attorney Edward Ryan about protecting their house if they eventually needed Medicaid. Mr. Ryan advised them to transfer the house to their children and reserve a life estate, which they did. Thirteen years later, they wanted to sell that house and buy another house. Mr. Ryan advised them not to retain a life estate in the new property because it would make them ineligible for Medicaid and Medicaid could obtain a lien on the property. The Brissettes sold their house and used the money to buy a new house in the name of two of their children.

After her husband died, Mrs. Brissette sued Mr. Ryan for legal malpractice, arguing that due to his incorrect advice not to obtain a life estate on the new property, she had no legal right to it, which subjected her to the risk of being forced to move out by her children. A jury found Mr. Ryan liable for $100,000 in damages. Ryan appealed and the judge entered a judgment n.o.v., ruling that Mr. Ryan’s negligence did not cause Mrs. Brissette any actual harm because her children testified that they would never evict her. Mrs. Brissette appealed.

The Massachusetts Court of Appeals reverses and reinstates the jury’s verdict, holding that deprivation of a property right is actual damage. According to the court, “the fact that because of [Mr.] Ryan’s negligence [Mrs. Brissette] has no right to alienate the property during her lifetime by, for example, renting or mortgaging it, means that she did not obtain something of value that she otherwise would have. ”

TO READ THE TOP 8 MISTAKES IN MEDICAID PLANNING CLICK HERE.

For the full text of this decision, go to: http://www.mass.gov/courts/docs/sjc/reporter-of-decisions/new-opinions/14p0919.pdf

Be sure to consult with an experienced Medicaid Planning Attorney before making any planning decisions.

Questions? Email me at medicaid@RaphanLaw.com

Regards,

Brian

Careful…Gifting To Family Can Affect Medicaid Eligibility

By Matthew S. Raphan, Esq.  Attorney at The Law Offices of Brian A. Raphan, PC

View image | gettyimages.com
View image | gettyimages.com

Every so often a client says to me, “I’ve been gifting money to my children and grandchildren so I can apply for Medicaid.” While gifting may offer benefits to you and your family, if you think you may someday apply for Medicaid benefits, you should be aware that giving away money or property can interfere with your eligibility.

Under federal law, if you transfer certain assets within five years prior to applying, you may be ineligible for Medicaid benefits for a period of time. This is called a transfer penalty, and the length of the penalty depends on the amount of money transferred. (This waiting period can also be costly as you may pay for your care out of your own pocket.) Even small transfers can affect eligibility. Although federal law currently allows individuals to gift up to $14,000 a year without having to pay a gift tax, Medicaid still treats that gift as a transfer.

Any transfer that you make, however nominal, may be scrutinized. For example, Medicaid does not have an exception for gifts to charities. If you make a charitable donation, it could affect your Medicaid eligibility down the road. Similarly, gifts for holidays, weddings, birthdays, and graduations can all trigger a transfer penalty. If you buy something for a friend or relative, this could also result in a transfer penalty.

Some people have the notion that they can also go on a spending spree for themselves or family. Not so fast. Spending a large sum of cash at once or over time may prompt the state to request documentation showing how the money was spent. If you don’t have receipts showing that you received fair market value in return for a transferred asset, you could be subject to a transfer penalty.

While most transfers are penalized, certain transfers are exempt from this penalty. For example, even after entering a nursing home, you may transfer any asset to the following individuals without having to wait out a period of Medicaid ineligibility:

  • your spouse;
  • your child who is blind or permanently disabled;
  • a trust for the sole benefit of anyone under age 65 who is permanently disabled.

In addition, you may transfer your home to the following individuals (as well as to those listed above):

  • your child who is under age 21;
  • your child who has lived in your home for at least two years prior to your moving to a nursing home and who provided you with care that allowed you to stay at home during that time;
  • your sibling who already has an equity interest in the home and who lived there for at least one year before you moved to a nursing home.

Before transferring assets or property, check with us or your elder law attorney to ensure that it won’t affect your Medicaid eligibility.

For more information on Medicaid’s transfer rules, click here.

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