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Original WP 5.1 Version
This case can also be found at 356 N.J. Super. 170, 811 A.2d 942.
SUPERIOR COURT OF NEW JERSEY
IN THE MATTER OF MILDRED KERI,
Submitted November 13, 2002 - Decided December 19, 2002
Before Judges Stern, Coburn, and Alley.
On appeal from Superior Court of New Jersey,
Chancery Division, Probate Part, Middlesex
County, Docket No. 197619.
Plaintiff, Richard Keri ("Richard"), sued in the Chancery
Division to be appointed guardian of the person and property of his
mother, Mildred Keri ("Mildred"), a mental incompetent. Relying on
the doctrine of "substituted judgment," he sought permission to
engage in "Medicaid planning" on "her" behalf. Mildred's major
asset is her home, where she now resides, and where she would like
to remain. In essence, Richard's plan was to sell Mildred's home;
put her in a nursing home that accepts Medicaid patients; take
$92,000 of the proceeds from the sale as a gift (to be shared
equally with his brother), and leave her about $78,000, which would
be sufficient to pay for her nursing home care during the period of
Medicaid ineligibility resulting from the gift. The Chancery judge
granted the guardianship application, ordered the sale of Mildred's
home and her placement in a nursing home, but refused to authorize
the Medicaid plan. We affirm the denial of Medicaid planning,
reverse the order requiring sale of the home and nursing home
placement, and remand for further proceedings.
More recently, when reviewing an application to make gifts on behalf of an incompetent, we defined the governing principle as the exercise of "substituted judgment," In re Labis, 314 N.J. Super. 140, 146 (App. Div. 1998), and we adopted the Trott criteria as the guiding standards for such determinations, id. at 147. Accord In re Cohen, 335 N.J. Super. 13, 29 (App. Div. 2000). Our authority in this regard has been endorsed by the Legislature, but "only if [the gift] is in the best interests of the ward." N.J.S.A. 3B:12- 50. We took note of that statute in Labis, 314 N.J. Super. at 147, and in Cohen, 335 N.J. Super. at 30.
"Substituted judgment" is a complex principle with variable meaning depending on the context. Thus, in Trott, where the goal was avoidance of estate taxes by gifts to the natural objects of the incompetent's bounty, the court limited approval of such gifts to circumstances where the gifts would not adversely affect the incompetent's life-style, and where "there is no substantial evidence that the incompetent, as a reasonably prudent person, would, if competent, not make the gifts proposed in order to effectuate a savings of taxes." Trott, 118 N.J. Super. at 443-44. In other words, even if the proposed gift was reasonable, it would not be approved if the incompetent had indicated a contrary intent. Thus, when the object is avoidance of estate taxes, "substituted judgment" is an objective standard, provided the incompetent has not expressed a contrary, subjective intent. On the other hand, when the issue is an incompetent's right, through a guardian, to refuse life-sustaining treatment, the test may be either a purely subjective one, a limited-objective one, or a purely objective one, depending on the precise circumstances. In re Conroy, 98 N.J. 321, 360-67 (1985). However, the Court clearly expressed a preference for resolution of the issue by the subjective test, whenever possible, so as to be "consistent with the notion that the right that we are seeking to effectuate is a very personal right to control one's own life." Id. 360.
In Labis, the court was directly concerned with Medicaid planning on behalf of an incompetent in need of long-term nursing home care; but the beneficiary of the proposed gifts was the incompetent's needy wife of twenty-seven years, and the gifts (half of $100,000 plus the incompetent's undivided one-half interest in the marital home), if made by the husband before he became incompetent, would not have been subject to the "look-back" rules. 314 N.J. Super. at 144-45. In that circumstance, the court applied what might be described as the limited-objective test of Trott. In other words, absent the incompetent's expressed contrary intent, the court would permit the gifts to the natural object of his bounty, as set forth in his last will. Id. at 148.
The limited-objective test of Trott, makes sense when the goal is saving on estate taxes. Moreover, that goal is not inconsistent with one's obligations as a citizen. As Judge Learned Hand has observed, "Any one may so arrange his affairs that his taxes shall be as low as possible; he is not bound to choose that pattern which will best pay the Treasury; there is not even a patriotic duty to increase one's taxes." Helvering v. Gregory, 69 F.2d 809, 810 (2d Cir.), aff'd, 293 U.S. 538, 55 S.Ct. 82, 79 L.Ed. 645 (1934) (citations omitted).
But application of the limited-objective test to Medicaid planning is troublesome. While there is no moral duty to increase one's taxes, many people might well be reluctant to become wards of the state by unnecessary self-impoverishment, even if that course would benefit their children. In short, Medicaid planning in this context poses a moral and personal dilemma:
Many elderly people, . . . are reluctant to apply for Medicaid, even when . . . it makes sense to do so. After a lifetime of self- sufficiency they feel humiliated to have to turn to the government for help.
[Claire Berman, Caring for Yourself While Caring For Your Aging Parents 133-34 (Owl Books, Henry Holt and Company, 2d ed. 2001).]
For some people, protecting assets and then going on Medicaid raises troubling moral questions. Medicaid and other public programs certainly are not intended to protect anyone's inheritance or extra spending money; they are meant for those who are truly needy. What your parent saves, taxpayers pay.
Your family has to be guided by its own moral and political code on this matter. Some people argue that whatever money an older person has should be spent on making his last years as comfortable as possible - it should not be protected for his children - and that receiving public assistance is demeaning. Others believe that using public monies when personal funds are available is criminal.
A third group contends that lifelong taxpayers who believed they were sufficiently covered by Medicare and were not offered adequate long-term care insurance (because until recently, it didn't exist) are justified in protecting whatever assets they can. Affluent people set up trusts to protect their estates from taxes, so why shouldn't people with smaller estates protect themselves from nursing home bills? The decision is up to your family. Familiarize yourself with the facts and do what's right for you.
[Virginia Morris, A Complete Guide, How to Care For Aging Parents 263 (Workman Publishing 1996).]
Nonetheless, some courts in other states, when faced with plans similar to the one proposed here, use a purely objective test. See In re Shah, 694 N.Y.S.2d 82, 86-87 (App. Div. 199); aff'd, 733 N.E.2d 1093 (2000); In re John XX, supra, 652 N.Y.S. 2d at 331-31; In re Guardianship of F.E.H., 453 N.W.2d 882 (Wis. 1990); and Rainey v. Mackey, 773 So.2d 118 (Fla. Dist. Ct. App. 2000). Thus, for example, in In re John XX, the New York court held that when a person "will require nursing home care, the cost of which will exhaust his [or her] assets, it cannot be reasonably contended that a competent, reasonable individual in his [or her] position would not engage in . . . Medicaid planning [involving transfer of the assets to his or her children.]" 652 N.Y.S. 2d at 331. By contrast, the Connecticut Supreme Court has observed that it did not "believe that federal law requires a presumption" that a person would have so acted. Probate of Marcus, 509 A.2d 1, 7 (Conn. 1986).
In New Jersey, we have permitted Medicaid planning, but so far only when the beneficiary is the incompetent's spouse. We did so in Labis, supra, and the Supreme Court followed the same course in L.M., supra, approving a guardian's decision to transfer the incompetent's pension to his ward's wife, as part of equitable distribution in a divorce case, so that the ward would qualify for Medicaid nursing home benefits. But even in L.M., the Court expressed concern about the effect of generally permitting the transfer of assets to obtain Medicaid, stating that the practice "would unfairly place a further burden on the limited resources of the State." 104 N.J. at 500.
Mildred's situation is different and distinguishable from that of the incompetents in L.M. and Labis: the proposed beneficiaries are her self-sufficient, adult children, not a needy spouse. Moreover, while incompetent, she was nonetheless able to express a desire to remain in her own home, an option her guardian did not pursue.
Without necessarily expressing any view with respect to which course is more commendable, we conclude that a competent and reasonable adult might or might not engage in this type of "Medicaid planning" for the benefit of adult, self-sufficient children. Indeed, a competent and reasonable adult might expect that if he or she became incompetent, the children would select the best nursing home for their parent's comfort while avoiding premature application for welfare. Moreover, preserving Mildred's assets for nursing home care may well be important to insure the best care possible within her means. As noted above: "If your parent has savings _ enough to cover at least six months of nursing home care, and preferably more _ he will have a far better chance of being accepted in the home of his choice." Morris, supra, at 263 (emphasis added).
Therefore, when the incompetent has not indicated a preference for Medicaid planning while competent, we will not prematurely force enrollment on the public dole at the guardian's request for the benefit of the incompetent's self-sufficient children. A purely subjective standard is called for in this context to protect the incompetent's right to self-determination. Since the evidence in this case provides no support for the course proposed by the guardian, we affirm this aspect of the judgment.
One other point deserves comment. Unlike the situation involving spouses, there is a greater likelihood of conflict of interest when the gift-beneficiaries are children. As the Florida court observed in Rainey, supra: "Courts must make room for the possibility that some children may try to pressure vulnerable parents into divesting themselves of assets so that the estate is not depleted by the costs of nursing home care." 773 So. 2d at 122.
In this case, the trial court dealt with that possibility by appointing an attorney to represent the incompetent pursuant to R. 4:86-4(b). As we have noted, the attorney's participation in this case was minimal (including his failure to file a brief on the appeal), and the record lacks any indication that the attorney had the requisite expertise for so sensitive a matter.
Absent extraordinary circumstances, a court faced with an application of this nature should appoint the Public Guardian to represent the incompetent under the Public Guardian For Elderly Adults Act, N.J.S.A. 52:27G-20 to -31. Since we are concerned about whether Mildred's best interests are being protected in this case, both with respect to whether she must be placed in a nursing home, see Home Care Services, N.J.A.C. 10:60-1.1 to 11.2, and, if so, the quality of the nursing home, we remand the case to the trial court with the direction that it ask the Public Guardian to intervene on Mildred's behalf pursuant to N.J.S.A. 52:27G-25h.
Affirmed in part; reversed in part; and remanded for further proceedings consistent with this opinion.
Footnote: 1 1See State v. Kennedy, 61 N.J. 509, 512 (1972), and D'Amato by McPherson v. D'Amato, 305 N.J. Super. 109, 115 (App. Div. 1997), both holding that a general power of attorney does not authorize gifts of the principal's assets.
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