Monday, May 14, 2012

Signing a Nursing Home Admissions Agreement may be Hazardous to Your Wealth

Admitting a parent into a nursing home is a traumatic experience on many levels. Not only do children often deal with guilty feelings when making at such a decision, the nursing home admissions process is replete with paperwork and bureaucratic jargon that only adds to the stress.
Sometimes nursing homes will “require” the child to guarantee payment for the cost of a parent’s care in the nursing home.  Under the Federal Nursing Home Reform Act, however, a nursing home is prohibited from requiring a third party to guarantee payment to the facility as a condition of admission of another party.  Any child who signs such a guarantee can later disavow the guarantee without consequence.  

But even though a child cannot be required to guarantee payment for a parent’s nursing home care with the backing of the child’s assets, a recent New York appellate court case makes clear that a child can be held responsible for reneging on a written promise to a nursing home to apply the parent’s own assets towards the cost of the parent’s nursing home care.

In Troy Nursing & Rehabilitation Ctr., LLC v. Naylor, (N.Y. App. Div., 3d Dept., No. 512311, March 20, 2012) Diana Gaetano signed an agreement with Troy Nursing & Rehabilitation Center in which Ms. Gaetano promised, as agent under her father’s power of attorney, to use her father’s assets to pay for her father’s care in the facility.  After Ms. Gaetano reneged on that promise, the nursing home filed suit against her, seeking damages of over $80,500 plus interest.

In March 2011, Judge Hummel of Rensselaer County Supreme Court granted summary judgment in favor of the nursing home.  Ms. Gaetano appealed.  In its opinion, the Third Judicial Department of the Appellate Division of the New York Supreme Court agreed with Judge Hummel that Ms. Gaetano was in fact liable for the cost of her father’s nursing home care. Specifically, the Court distinguished between a child’s guarantee to use her own assets to pay for care, which as noted above is prohibited under federal law, and a promise to use the nursing home resident’s own assets to pay for care, which the court held is an enforceable obligation.  The Appellate Court noted that federal law expressly authorizes a person “who has legal access to a resident’s income or resources available to pay for care in the facility, to sign a contract (without incurring personal financial liability) to provide payment from the resident’s income or resources for such care.” Ms. Gaetano’s agreement with the nursing home, said the Court, clearly met that definition. 

What’s the lesson to be learned from this case?  A child signing admission papers for a parent entering a nursing facility that participates in the Medicaid program (which the vast majority of nursing homes do) should avoid signing an agreement promising to use the resident’s assets to pay for the cost of care.  While a nursing home may refuse to accept a resident for failing to disclose assets, no facility that accepts Medicaid can prohibit a family from engaging in legitimate asset preservation techniques after the resident is admitted to the facility.  If the child signs an agreement like the one signed by Ms. Gaetano, however, the facility may subsequently assert a claim against the child that will be enforced by the courts, rendering ineffective any asset preservation planning that has been instituted.

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