Who Is Your Legal Advisor?

Most states, including New York, regulate the unauthorized practice of law (“UPL”). These rules are intended to protect the public from receiving or acting on incorrect legal advice that can lead to adverse or even disastrous consequences.

At the same time, some people believe that UPL statutes unfairly protect lawyers and their profitable franchise. Many of them think that sources such as Legal Zoom or Suze Orman provide valid, low cost, alternatives to seeing a lawyer and paying high legal fees.

The tension between these points of view is plainly visible in the Elder Law field, where uninformed social workers, unsupervised paralegals, and others in the health care arena, sometimes advise clients on Medicaid planning and preparing Medicaid applications. In some instances, nursing homes and home care agencies prefer to deal with non-lawyers, because they believe that attorneys can be insensitive to their financial interests.

While it might be argued that our view is colored by self-interest, we believe that clients are poorly served and risk financial disaster when non-lawyers provide services that are not within their area of expertise. Here are several examples:

The daughters of their elderly mother who was about to enter a nursing home sought our advice about protecting mom’s substantial assets (over $1 million). Mom’s social worker had proposed to handle her Medicaid planning, and had given the daughters a written proposal. The social worker’s plan was for mom to transfer $550,000 to the daughters, which would incur a Medicaid penalty of about 4 years of ineligibility. Then, according to the social worker, mom would use the rest of her money to pay the nursing home during the 4-year penalty period, at the end of which mom would become eligible for Medicaid, thereby saving $550,000.

The daughters were aware of Medicaid’s 5-year “look back,” so they knew it would be impossible to save all of mom’s money. The social worker’s plan, which appeared to save $550,000, sounded great to them. However, they were cautious enough that they wanted confirmation from an attorney that the plan would work.

Unfortunately, the plan was a total disaster. If it had been implemented, the family probably would have lost the entire amount of mom’s savings. Why? The problem here is that the social worker assumed that Medicaid’s “penalty period” started when mom transferred the $550,000 to the daughters. However, the penalty period arising from transfers of assets commences only when the Medicaid applicant is in the nursing home, has applied for Medicaid, and is eligible for benefits “but for” the transfer of assets. Here, mom would have retained assets far in excess of the Medicaid eligibility level (well below 30,000, even after a large increase scheduled for 2023) for several years. Her 4-year penalty would have started only after she spent down all her other assets. The result, under the social worker’s plan, would have rendered mom ineligible for Medicaid for 8 or 9 years, and would have caused her to lose all of her money.

The correct solution for this family would be to transfer all of mom’s assets now, to the daughters or to a trust that would be managed by the daughters. Then in 5 years, this transfer would be beyond Medicaid’s “look back” and the remaining assets would be preserved. Of course, during this 5-year period, mom would have to private pay at the nursing home, but the total cost would not exhaust her savings. This family would likely save several hundred thousand dollars.  (The amount or percentage saved in each case depends on the actual cost of the particular nursing home, and the applicant’s income from Social Security, pensions, retirement plans, or other sources.)

Another example concerned a family that wanted to implement a Medicaid plan to save their father’s assets. Dad was suffering from Alzheimer’s Disease, and he no longer had sufficient mental capacity to execute legal documents.  The family believed that they could act on dad’s behalf to implement a plan, because they had a durable power of attorney.

The problem in this case was that the power of attorney was useless. The family had downloaded a form on the Internet from the website of a prominent financial adviser. Unfortunately, the form was invalid under New York law, and, even if it had been valid, the powers granted to the agents were inadequate to allow them to perform the acts that would have been necessary to protect dad’s assets (e.g., the power to make gifts or transfers of assets).

Unfortunately, because dad now lacks mental capacity, there was no opportunity to re-do the power of attorney. The result was that the family had no option other than to seek a guardianship for dad. This involves court proceedings, substantial legal costs, and often lengthy delays. Further, the Court’s decisions will not necessarily be in line with the family’s wishes. At best, the Medicaid plan that might have been put into effect immediately must now be delayed for months, causing the family to incur significant long-term care costs while they wait for the Court’s permission to proceed.

In the above cases, and in many others, the decision not to obtain competent legal advice — in order to save money on legal fees —  in fact, produced dramatic losses. While legal fees may sometimes appear to be high, it is usually because there is a lot of legal work to be done, or complex issues to be resolved. Without a lawyer’s time, expertise, and judgment as part of the decision making process and the preparation of the legal documents involved, nobody should be surprised that the results will be less than optimal, and possibly disastrous. 

At Lamson & Cutner, we want our legal fees to be cost-effective for all of our clients, and we don’t propose legal solutions when the fees involved would be out of proportion to the anticipated benefits. In addition, we advise our clients in advance of the fees and costs involved, before any work is started, so that clients can decide for themselves whether going forward makes sense for them.  Every case has unique aspects, and there is no “one size fits all” solution for legal matters.

We also want to respect the rights and legitimate interests of nursing homes and home care agencies. We understand that they need to be paid for their services in a timely way. We believe that our undivided loyalty to our clients means that we should assist them in meeting, not evading, their legal obligations. When advising on Medicaid planning, we are very clear with clients regarding when and how much Medicaid is required to pay, and when and how much they are required to private pay. When private payment is due, we follow up with clients regarding their obligations.  In addition, our ability to prepare and process Medicaid applications in an efficient, accurate, and timely way is a great benefit to our clients — but nursing homes and other providers also benefit from the fact that it is extremely unlikely that a Medicaid application prepared by Lamson & Cutner would be denied or unduly delayed.

We believe that geriatric care managers, social workers, and others share our passion to protect the rights of the elderly and disabled.  However, we ask them to think twice about giving legal advice to clients, which advice should be provided by Elder Law attorneys who have the knowledge, experience, and legal judgment to obtain the best outcomes for clients.

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