By Burke J. Harr, Nebraska State Senator
In the last couple of years, the Nebraska Legislature passed two bills to limit the power of individuals to qualify for government nursing care assistance. The purpose of the bills is to limit the government’s responsibility to pay for nursing home care and moved it back to the individual.
LB 72 and LB268 are of little personal consequence unless and until an “application” for old age assistance (also called Medicaid assistance or medical assistance) is filed by a person.
LB72 did 2 major things: (1) it essentially limited the trustee of a revocable trust’s authority to distribute trust assets to heirs without first satisfying any claims of the State for reimbursement of old age assistance; and (2) it provided that claims for reimbursement “may be recovered from the estate of the recipient of medical assistance, including any real property, personal property, or other asset in which the recipient had any legal title or interest at the time of the recipient’s death, to the extent of such interests”.
The purpose of LB 72 is that all of one’s assets first be used to pay nursing care expenses before being enjoyed by the heirs. The LB72 language expands the definition of estate to the fullest extent permitted under federal law. Before LB72, the State could only seek reimbursement from assets in the probate estate.
The bill does not apply to absolute, irrevocable lifetime gifts to heirs where the donor retains no interest, income, or control and does nothing to change the federal 5 year “look back” period whereby Department of Health and Human Services (DHHS) can deny an application if the applicant gifted away property within 5 years of the application.
LB72 failed to address the operational procedures of expanded definition of estate. This left the administration of LB72 to be developed by adjudication with DHHS. Generally, legislation and regulation are preferable to adjudication as a mechanism to develop procedures and definitions.
While LB 72 is largely substantive in nature, LB 268 is more operational and procedural in nature.
LB 268 defines an estate and requires full and continuing disclosure of “all of his or her interests in any assets, including, but not limited to, any security, bank account, intellectual property right, contractual or lease right, real estate, trust, corporation, limited liability company, or other entity, whether such interest is direct or indirect, vested or contingent, or otherwise” together with disclosure of any lease, income sharing, or similar agreements with heirs or controlled entities whereby value was being transferred to the heirs for less than fair market value. Failure to make proper disclosure is considered unlawful and triggers immediate recovery of the assistance advanced.
LB 268 defines the rights of DHHS. An application and filing triggers the law to have effect. Completion of the application and filing creates a “dormant lien” on an interest in real estate that was irrevocably transferred to a related transferee for less than full consideration and where such real estate was subject to rights, actual or constructive possession, or powers retained by the transferor.
The lien does not apply to real estate transfers where the transferor attests on the deed that the transfer is not to an heir. If the attestation is false and the heir knowingly enjoys the benefits of the transfer, the heir incurs personal liability for the assistance advanced.
LB268 states, with few exceptions, payments by DHHS “ be collected by the department before any portion of the estate of a recipient of medical assistance is enjoyed by or transferred to” an heir. The Act in no uncertain terms states that DHHS shall recover for assistance advanced from:
assets conveyed or otherwise transferred to a survivor, an heir, an assignee, a beneficiary, or a devisee of the recipient of medical assistance through joint tenancy, tenancy in common, transfer on death deed, survivorship, conveyance of a remainder interest, retention of a life estate or of an estate for a period of time, living trust, or other arrangement by which value or possession is transferred to or realized by the beneficiary of the conveyance or transfer at or as a result of the recipient’s death … Such other arrangements include insurance policies or annuities in which the recipient of medical assistance had at the time of death any incidents of ownership of the policy or annuity or the power to designate beneficiaries and any pension rights or completed retirement plans or accounts of the recipient.
However, the LB268 specifies certain insurance policies or proceeds are not included in the definition of estate, nor are remainder interests created in deeds with reserved life estates created and vested before August 24, 2017. Other transfers in real estate, i.e. joint tenancy deeds, to heirs made after the effective date of LB72 remain included in the definition of estate. Irrevocable transfers with no retained interest made prior to LB72 are not included in the definition, unless require disclosures were not made at the time of application or subsequent review by DHHS.
As to any interest in property created after August 23, 2017, and for as long as any portion of the debt to DHHS remains unpaid, the death of donor no longer triggers a change in the rights to possession, enjoyment, access, income, or otherwise that the recipient had at the time of death and those assets remain liable for the debt to DHHS. In those cases where DHHS has a claim for reimbursement of assistance it advanced, DHHS is required to file a Demand for Notice in the county court of the decedent’s residence notifying heirs of the pending claim.
As a matter of equity, if DHHS pursues the assets in the hands of some heirs but not others, the Act allows an heir to seek contribution from the other heirs. LB 268 places an obligation on a Personal Representative to exercise and enjoy the rights to possession, enjoyment, access, income, or otherwise that the decedent had at the time of death for the purpose of paying such debt, including, but not limited to, renting such property held as a life estate, severing joint tenancies, bringing partition actions, claiming equitable rights of contribution, or taking other actions to use such assets to reimburse DHHS.
In summary LB 72 and 268 are of little consequence where an application for old age assistance is never filed. Where an application is filed and government assistance is given by the taxpayers, LB 72 and 268 become powerful tools maximizing the probability that reimbursement of the taxpayers has precedence over enjoyment by heirs.