IN RE: the Petition of SANDRA (2006)

In this petition, Sandra, as Article 81 guardian of her uncle, Rolland, requests authorization to make gifts from his property to his two living sisters.   The original petition was filed on or about September 13, 2005, and an amended petition was filed on March 28, 2006.   A hearing was held April 25, 2006.

The original petition requested authority to make gifts of $40,000.00 apiece to three sisters.   The amended petition requests $60,000.00 apiece to two sisters, the third having died in the meantime.   The amended petition also requests that the order authorizing the transfers be made nunc pro tunc to September 13, 2005.   The reason for this request is the amendment to the Medicaid laws effective February 8, 2006, which changed the look back period for gifts by Medicaid applicants from 36 to 60 months.  42 U.S.C. § 1396p(c)(1)(B)(i) as amended by Public Law 109-171 § 6011(a).   This change was adopted in New York by adding a new paragraph (e) to Social Services Law § 366(5).   Laws 2006 Ch. 57. Pt. A, § 50-a, effective July 1, 2006.

 It is clear that a court can authorize a guardian to make gifts on behalf of the incapacitated person.  MHL § 81.21(a)(1).   The authority is rooted in the doctrine of substituted judgment whereby a court can substitute its judgment for that of the incapacitated person in making a decision the incapacitated person might have made, if competent.  Matter of Pflueger, 181 Misc.2d 294, 693 N.Y.S.2d 419 (Surr. Ct. New York Co.1999).   The factors to be considered by the court in exercising substituted judgment are set forth in MHL § 81.21(d).

The Courts have regularly authorized such gifts and transfers for Medicaid planning purposes.  Matter of Shah, 95 N.Y.2d 148, 711 N.Y.S.2d 824, 733 N.E.2d 1093 (2000);  Matter of John XX, 226 A.D.2d 79, 652 N.Y.S.2d 329 (3d Dept.1996) lv. denied 89 N.Y.2d 814, 659 N.Y.S.2d 854, 681 N.E.2d 1301 (1997).  “An underlying rationale in these cases is that since such transfers could be done by competent persons, incapacitated persons should also be able to do so (albeit by a guardian), and not be penalized for their incapacity.”   Matter of Lauda, N.Y.L.J., 7/2/96 P.31, col.2 (Sup.Ct. Nassau Co.).

 It is equally clear that a guardian can only make such gifts or transfers when given specific authority by the Court to do so.  MHL § 81.21(a) (1);   Matter of Burns, 287 A.D.2d 862, 731 N.Y.S.2d 537 (3d Dept.2001).   In the present case the Order appointing Sandra as guardian did not include the power to make gifts from the incapacitated person's property thus necessitating the petition now before the Court.

Considering the factors in MHL § 81.21(d) Rolland does not have the capacity to make the proposed disposition nor is he ever likely to regain such capacity.   The proposed donees, his sisters, are the natural objects of his bounty since he has no spouse living, or children.   Received in evidence was a copy of the latest will of Rolland in which his two surviving sisters are the only beneficiaries, all of the other beneficiaries named in the will having died.   However, the testimony established there was no pattern of giving to the sisters, but rather that Rolland was a hard worker who saved for retirement and considered it important to pay his own way.

The final factor to consider is whether or not the “needs of the incapacitated person for support can be met from the remainder of the assets.”  MHL § 81.21(d)(3).   Rolland is 91 years old.   The testimony and affidavits establish that Rolland's nursing home costs are about $6,500.00 per month, plus medications and incidental expenses.   He receives $558.00 per month Social Security and about $850.00 per month in interest income.   As of March 25, 2006, he had total assets of $352,023.59 in bank deposits.   As can readily be seen his expenses exceed income and his assets will be depleted at a rate of about $5,000.00 per month or $60,000.00 per year.   It is quite doubtful therefore if his needs can be met over the long term with his assets remaining, after the proposed gifts totaling $120,000.00.

Additionally, the recent change in the Medicaid laws will cause a 60 month period of ineligibility, which does not start to run until a Medicaid application for Rolland is made at some point in the future.  Public Law 109-171 § 6011(a) and (b).  An application cannot be filed until Rolland has exhausted his resources and is thus financially eligible for Medicaid.   Social Services Law § 366.   At present he has too many assets to be eligible.   The result is significant doubt as to his ability to pay his bills with his remaining assets due to the unavailability of Medicaid during the period of ineligibility.   To be absolutely certain of Medicaid eligibility Rolland must retain sufficient assets to pay his bills for 5 years.   Krooks “Lookback Period Extended to 5 years”, New Regime in Medicaid, N.Y. State Bar Association (2006), at p.A-32.

On the other hand if the Order were dated September 13, 2005 nunc pro tunc the former Medicaid rules might apply.   Under those rules the period of ineligibility would have started to run immediately upon the transfer.  42 U.S.C. § 1396 p.(c)(1)(B)(i).   A transfer of $120,000.00 would cause about 20 months of ineligibility from September 5, 2005.   Rolland would then have $230,000.00 left and be eligible for Medicaid when that was exhausted.

The problem with such back dating is two fold.   First, the new law applies to any “disposal of assets made on or after the date of enactment.”  Public Law 109-171 § 6011(a).   The Federal law was effective February 8, 2006.   No assets were transferred or disposed of in September, rather the actual disposal will only take place at the present time after the effective date of the Federal statute and after the court signs an order to allow it.   The New York amendment is effective July 1, 2006, but as previously noted Rolland has too many assets to be Medicaid eligible on that date.   Laws 2006, Ch. 57, § 50-a, supra.

 Second, the court can only sign an order nunc pro tunc to correct ministerial errors.  Siegel, New York Practice § 420.  “․ A court may correct an order to record an existing fact, it cannot record a fact as of a prior date when it did not exist.”  Matter of Carrick, 103 Misc.2d 645, 426 N.Y.S.2d 939 (Surr. Ct. Nassau Co.1980);  Accord, Matter of Gillette, 195 Misc.2d 89, 756 N.Y.S.2d 835 (Surr. Ct. Broome Co.2003);  Mohrmann v. Kob, 291 N.Y. 181, 51 N.E.2d 921 (1943).   The actual disposal of assets did not exist as a fact on September 13, 2005, and the court cannot make it a fact nunc pro tunc.   Rather the transfer can only become a fact now, which is after the February 8, 2006 effective date of the new legislation.

 The court is aware of the three cases relied upon by petitioner which allowed back dating a gift authorization to the date of application.   Matter of Watson, 9 Misc.3d 560, 800 N.Y.S.2d 338 (Sup.Ct. Monroe Co.2005);  Matter of Heller, N.Y.L.J., 7/28/95 (Sup.Ct. Kings Co.1995);  Matter of Lauda, supra.   However, all these cases were not contested by the actual parties in interest, but only the Department of Social Services.   In this case the attorney appointed by the court to represent Rolland has appeared and filed a brief in opposition to the requested relief.   Further, none of the three cases involved a nunc pro tunc order to attempt to avoid the ill effects of a change in the law.   For all the foregoing reasons, the Court declines to make its order effective nunc pro tunc.

 As discussed above, Rolland's assets will be depleted at a rate of about $60,000.00 per year, which would be a total of $300,000.00 for 5 years.   He presently has about $352,000.00 of assets.   Considering Rolland's age, income and assets, it seems to the Court there would be only a slight risk in authorizing the guardian to transfer as a gift $30,000.00 apiece to his two sisters, Olive and Ruth This also takes into account the lack of a pattern of giving and Rolland's desire to pay his own way.   The balance remaining of approximately $300,000.00 should be sufficient to last through the 5 year look back period.

Sandra, as guardian of Rolland, is hereby authorized to transfer to Olive and Ruth the sum of Thirty Thousand ($30,000.00) each from the funds of Rolland.

This decision constitutes the Order of the Court.

EUGENE E. PECKHAM, J.