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Court Reviews Action Brought by Executor for Fathers Estate

A New York Probate Lawyer said this is a proceeding brought by B, the executor of the estate of her father, LS, to determine the validity of a claim made by the Nassau County Department of Social Services against the estate for public assistance rendered to ZS, LS’s wife, from June 10, 1996 to October 3, 2002, while LS was still alive.

LS and ZS had two children, B and MS, who is mentally retarded. On August 11, 1972, LS was shot four times in what B described as a “bungled mob” assassination attempt. According to newspaper articles, the gunman mistook LS and three others for the mobsters he intended to kill. LS suffered serious injuries that left him unable to work for the remainder of his life. He began receiving Social Security disability benefits in January 1976 and, according to B, also received a Worker’s Compensation award.

A New York Estate Lawyer said that ZS was diagnosed with Alzheimer’s disease in 1992. On December 22, 1995, LS, as attorney-in-fact for ZS, executed an “Assignment to Petition the Court for Support Pursuant to 18 NYCRR 360-3.2.” It states that, in consideration of the medical assistance and care provided and to be provided to ZS by the New York State and Nassau County Departments of Social Services, ZS assigned to the Nassau County Department of Social Services (DSS) “so much of her right, title and interest to petition the court for support from my legally responsible spouse.” LS, as ZS’s spouse, executed a “Declaration of the Legally Responsible Relative” on January 4, 1996. It states, “I, LS Schneider, declare that I refuse to make my income and/or resources available for the cost of necessary medical care and services for the Medicaid applicant/recipient listed above.”

ZS began receiving Medicaid on June 10, 1996 when she was placed in a nursing home. The record before the court includes a “Medical Assistance Institutionalized Spouse Budget Worksheet,” which was signed on March 11, 1997 by a representative of DSS. LS predeceased ZS. He died on October 3, 2002. By prior decision, the guardian ad litem appointed by the court to represent ZS’s interest in the probate proceeding in LS’s estate was directed to exercise the right of election on her behalf, as the surviving spouse, as the failure to exercise it would have resulted in ZS’s non-eligibility for Medicaid.

ZS died on December 3, 2003. The guardian ad litem had not yet exercised the right of election on ZS’s behalf and, the right being personal, with certain statutory exceptions, to the surviving spouse, was extinguished upon her death. A personal representative has not been appointed for her estate.

A Manhattan Probate Lawyer said that on or about June 9, 2003, DSS filed the subject claim for $386,382.77 for public assistance provided to ZS from June 10, 1996 to October 3, 2002, claiming preferred creditor status pursuant to Social Services Law §104 (1); the claim was rejected by the estate on September 5, 2003.

LS’s will was admitted to probate by decree of this court on February 24, 2004. The will created a supplemental needs trust for ZS to be funded with LS’s residuary estate. Upon ZS’s death, her supplemental needs trust was to be distributed in accordance with the terms of LS’s will, which contained bequests to M of $15,000 in a supplemental needs trust, $15,000 outright to a niece, $5,000 to Putnam ARC, and the rest to B.

New York City Probate Lawyers commenced the instant proceeding on December 1, 2005, asking the court to determine that DSS’s claim is invalid and should be disallowed. The petition alleges that LS’s gross taxable estate is approximately $566,000 and the net probate estate is approximately $350,625.

By order dated April 21, 2006, the court appointed a guardian ad litem to protect M’s interests in this proceeding. The guardian ad litem concludes that the claim should be denied.

DSS filed its verified answer to the petition on September 14, 2006, after the court issued Dec. No. 405 on August 16, 2006 giving DSS thirty days from the date of the decision and order to do so. The DSS asserts that the claim is valid under a theory of an “implied contract” between it and LS.

After the petitioner and DSS submitted memoranda of law, the matter was submitted for decision.

The petitioner asserts that the claim against the estate is invalid on the following grounds: (1) both federal and New York State law preclude the recovery of properly paid medical assistance, except in certain circumstances not applicable in this case; (2) DSS cannot recover against the estate of a Medicaid recipient’s spouse; (3) DSS cannot recover against the estate of a Medicaid recipient’s predeceased spouse; (4) recovery of a claim is prohibited where the Medicaid recipient is survived by a permanently disabled child; (5) DSS failed to meet its burden of proving “sufficient ability” on LS’s part at the time Medicaid assistance was rendered to ZS; and (6) the claim is barred by the equitable defense of laches. DSS counters that the claim is properly recoverable from LS’s estate.

Discussion:

Here B acknowledges that an implied contract is created between the Department of Social Security and the spouse of the recipient if the spouse has sufficient ability to contribute to the recipient’s care, but refuses to do so. However, she argues that DSS has failed to allege or prove that there was an implied contract between it and LS and that LS had the “sufficient ability” to pay at the time ZS was receiving Medicaid.

There is no question that LS refused to contribute his resources and income to ZS’s care. His declaration to that effect is attached as Exhibit 3 to DSS’s answer. Further, the Budget Worksheet, which B entirely ignores, shows that LS had excess income and resources at the time that ZS was receiving Medicaid that he could have contributed toward her care. Thus, the court concludes that an implied contract was created between LS and DSS.

In this proceeding, LS left $15,000, to be placed in a supplemental needs trust, to his permanently disabled son, M. There is no evidence that M was financially dependent on ZS or LS. Thus, this court finds, under the authority of Matter of Samuelson (110 AD2d 187 [2d Dept 1985]), that repayment of DSS’s claim is not precluded by Social Services Law § 369 (1) (b). However, since LS bequeathed to M $15,000 to be placed in a supplemental needs trust for his benefit, M is to receive that amount prior to the payment of the claim.

Also, B argues that DSS’s claim is barred by the equitable defense of laches (time barred). She claims that DSS should have brought suit against LS during his lifetime because, having not done so, LS reasonably concluded that because of his unique personal situation the Department of Social Services had acknowledged by its failure to act that he was not sufficiently able to contribute to his wife’s care during his lifetime and therefore would not seek financial contribution from him. The time for DSS to make a determination about whether the community spouse has sufficient ability to contribute is at the time the expenses are incurred.

At the time of the assessment, LS had the opportunity to request a hearing to attempt to establish that the Medicaid minimum monthly needs allowance was inadequate based on exceptional circumstances which resulted in significant financial distress. He did not avail himself of this right, and his estate is foreclosed from arguing now that he did not have the sufficient ability to contribute his support to ZS. Additionally, repayment of the claim, except to the extent such money would come from funds designated for M, will not injure any person the recoupment limitations were designed to protect.

The court is unpersuaded by B’s argument that federal law forecloses payment of the claim from LS’s estate. B bases her assertion on 42 USC § 1396p (b) (1), which limits recovery to the recipient’s estate for medical assistance correctly paid, when the recipient was over the age of fifty-five at the time he or she was receiving benefits. In support of her position, B has asked the court to consider the case of Hines v. Department of Public Aid (358 Ill App 3d 225 [App Ct, Ill 2005]) where the Appellate Court of Illinois determined that the Department of Public Aid could not recover from the estate of the recipient’s spouse for Medicaid benefits paid to the recipient.

The court stated, “Because federal law does not provide an exception to the general rule prohibiting recovery of medical assistance payments that would permit recovery from the estate of the surviving spouse of the recipient, Illinois law to the contrary exceeds the authority granted under federal law”.

This court has reviewed the Hines case and finds itself in agreement with the dissenting justice, who stated that the majority’s conclusion ignores the federal mandate that the State shall seek adjustment or recovery of any medical assistance correctly paid on behalf of an individual’ at the appropriate time prescribed by statute.

In 1997, Supreme Court, New York County, rendered its decision in Commissioner of the Department of Social Services of the City of New York v. Spellman (173 Misc 2d 979 [Sup Ct, NY County 1997]). The Department of Social Services relied on an implied contract theory under Social Services Law § 366 (3) (a) for its claim against the then-living community spouse. The issue in Spellman was whether, “under the Social Services Law, the Department may recover the Medicaid assistance paid for the care of an institutionalized spouse from the community spouse, or whether such recovery is barred because there is no analogous Federal statutory scheme”.

In reviewing the statutory framework of the title XIX of the Social Security Act, the court pointed out that it requires a state or local administering agency to take all reasonable measures to ascertain the legal liability of third parties to pay for care and services available under the plan. The court then analyzed, at length, whether federal law preempted state law on this issue and found that it did not.

The court also found that the Department did not have the authority to bring the action while the community spouse was alive, but could bring an action after he died against his estate, since he had sufficient means during the period the medical assistance was rendered to his wife. The court determined that Social Services Law § 366 (3) (a) created an implied contract between the Department and the community spouse and that Social Services Law § 366 (3) (c) specifically authorizes a proceeding to compel any responsible relative to contribute to the support of any person receiving or liable to become in need of medical assistance.

Based upon the governing statutes, the court finds that Nassau County DSS’s claim against LS’s estate is valid and payable from his net estate, except to the extent payment of the claim would impinge on the $15,000 bequest to M to be placed in a supplemental needs trust.

The settlement of an estate of a deceased loved one may entail hard questions of law that it will require the intervention of an expert legal representative. If the settlement an estate involves claims from different creditors, then it must be assisted by a Kings County Estate Attorneys or Kings County Probate Lawyers of Stephen Bilkis & Associates.

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