NAELA Foundation Litigation

The NAELA Foundation promotes the goals of NAELA and the Elder and Special Needs Law profession through scholarships, advocacy, research, and education. Its initial focus was on awarding the Cohn Sisters' Scholarship for Patient Advocacy to NAELA members in financial need so that they can attend the NAELA Annual Conference. The Foundation is now creating a litigation advocacy fund with the objective of establishing good legal precedent in matters of critical importance to older Americans and people with special needs. By providing financial support to members, NAELA Chapters, and other non profit organizations, NAELA will have a larger role in facilitating litigation that ensures seniors and people with special needs benefit from the services they need and deserve.

We are at a time in history where the benefits our clients have earned are facing significant pressures at the federal and state level. NAELA needs to be a voice in that discussion and the Foundation is a way to project that voice through litigation and advocacy across the country. NAELA is making a commitment to ensure that NAELA Foundation has the resources to accomplish one of its primary mission of facilitating Elder and Special Needs Law litigation. The voice also needs to be shared in the political circles of Washington, D.C., and on the state level.

This year the NAELA Board of Directors approved the following:

-  100% support of the Foundation through Board members in contributions from each Board member
-  Foundation contribution option with suggested donation amount of $25 on member renewal notices
-  Allocating $25,000 from NAELA's net revenue from 2012 and $25,000 from 2013 if NAELA exceeds its required reserve minimum

Third Circuit Upholds Use of Medicaid Annuities Citing NAELA Brief
In Zahner v. Secretary, Pa. Dept. Of Human Services, the Third Circuit upheld the use of very short-term Medicaid qualified annuities as a permissible Medicaid eligibility strategy. In both cases, the annuities were used as part of a strategy to cover the cost of care during a period of ineligibility while getting “otherwise eligible” to start the penalty on gifts to adult children. This use of short term annuities is an alternative to “gift and return,” which is not available in Pennsylvania. Read more.

Update on First NAELA Foundation Grant, Harrington v. Dougherty
In April 2014, the NAELA Foundation awarded its first litigation grant of $5,000 to Neighborhood Legal Services, a provider of free civil services to low-income and elderly residents of Essex County, Mass. The grant was intended to assist NAELA members John Ford and Judith M. Flynn in their efforts to obligate MassHealth to follow Centers for Medicare & Medicaid Services (CMS) guidance in Harrington v. Dougherty. The Appeals Court held that the imposition of a double penalty was lawful. This month, Ford and Flynn filed an Application for Further Appellate Review, per Appellate Rule 27.1. NAELA will provide further updates on the case as they become available.

NAELA Foundation Will Fund Regulatory Advocacy

Effective May 2015, the NAELA Foundation will consider both litigation and regulatory advocacy requests for funding. The Foundation has already distributed several grants to support litigation that could set legal precedent in key areas of the law important to NAELA members and their clients. Providing grants to support regulatory advocacy will allow the Foundation to have an even larger impact, as many issues, especially for some NAELA Chapters, require members to focus their attention on state agencies as well.
Criteria for reviewing NAELA Foundation grant requests include involvement of a NAELA Chapter or allied organization; matters concerning issues of national significance or having potential precedential effects in many states; and matters affecting the Elder Law Bar as well as Elder Law and Special Needs Law clients. Grants may be used for attorney fees and costs, including attorney hourly work; out-of-pocket expenses; travel expenses to meeting with agency lawyers or agents; and several other categories. Read the full grant policy and funding request form.

Update on Saccone v. Board of Trustees of the Police and Firemen’s Retirement System
In October 2014, NAELA prepared an amicus brief that helped support the New Jersey Supreme Court’s decision to allow children with disabilities of retired police and firefighters to receive their parent’s survivor benefits without the risk of losing public assistance. That brief and court decision continues to have a positive effect in the state. NAELA recently received news that the New Jersey Law Revision Commission, which reviewed the amicus brief for background information on the matter, has prepared a draft tentative report to codify the Saccone holding.

Current Issues

With a focus on litigation, the Foundation, working with NAELA's Litigation Committee, has become involved in possible precedent-setting cases touching on:
-  Annuities as "planning tools"
-  Pooled trust deposit for someone over age 65 is not an uncompensated transfer under federal law;
-  Preventing the limitation of use of special needs trusts;
-  Purchase of immediate annuities is permissible and should not be considered a countable asset;
-  Medicaid estate recovery and divestment provisions.

Update on Draper v. Colvin (March 10, 2015)
NAELA joined the Special Needs Alliance (SNA) in filing an amicus curiae brief in the U.S. Court of Appeals for the Eighth Circuit in support of appellant Stephany Draper. The amicus brief, written by Ron Landsman, CAP, focused on the Social Security Administration’s (SSA) misinterpretation of South Dakota law as it relates to power of attorney and trusts; it also made a brief additional argument that funding and creation are not the same.

The court decision, filed on March 3, 2015, affirmed the lower court decision affirming the agency’s decision, relying heavily on the Skidmore doctrine, from Skidmore v. Swift & Co., 323 U.S. 134 (1944), which counsels courts to defer to agency interpretation of the statutes they administer depending on a variety of factors. The court adopted the agency’s view that absent state authority for so-called “empty” or “dry trusts,” a trust funded by the disabled beneficiary is “established” by the beneficiary since the trust did not exist until it was funded. And since federal law does not exclude self-settled trusts under 42 U.S.C. § 1396p(d)(4)(A), a trust that came into existence with funding by the disabled beneficiary did not meet the requirements for exclusion.

The NAELA-SNA brief led with what we thought to be the strong point, that SSA had been wrong throughout on state law, that South Dakota law would permit unfunded trusts, so that it fell within the exception that SSA itself recognized. Indeed, at oral argument, Judge Raymond Gruender, who ultimately wrote the Court’s decision, pressed counsel for SSA why, if they found that the trust satisfied state law, that wouldn’t satisfy the agency. (SSA’s other theory – that once acting as agents for their daughter, the trust they established was ipso facto her act as well – was also flatly contrary to well-established state law about reading powers of attorney narrowly.)

The decision rejected that theory not by disagreeing with it, but by finding that even if South Dakota law did recognize dry trusts, the Drapers had not intended to create a dry trust because it recited – quoting the Court here – “that ‘[t]his trust is funded with the proceeds of the settlement of a liability claim’ (emphasis added),” so that the Drapers did not intend to create a dry trust.

The problem with that approach is that it proves too much – since the dry trusts in states that have authorized them for supplemental security income purposes are all intended to be funded with the child’s resources. That should not make a difference.

It is difficult to overcome the deference that SSA gets in federal court, especially when dealing with an issue that is not, itself, like trust law, one that federal judges have likely spent a lot of time studying.

Here is an example of some of NAELA Litigation:


Morris v. Oklahoma. In December 2010 the Board approved NAELA signing on to an amicus curiae brief to the Tenth Circuit Court of Appeals to advocate to overturn the District Court decision in Morris v. Oklahoma as that decision relates to statutory provisions allowing annuities as planning tools to “spend down” for Medicaid. However, the requesting party filed the amicus before the Amicus Committee could review. The appeal was successful.

Center for Special Needs Trust Administration v. Olson
. In June 2011, the Board approved NAELA preparing an amicus curiae brief to the Eighth Circuit Court of Appeals in the case of Center for Special Needs Trust Administration v. Olson. The core issue involves the district court’s agreement with North Dakota Medicaid that a deposit into a pooled special needs trust for a man who was over age 65 was an uncompensated and penalizing transfer. The NAELA amicus, written by Craig Reaves, supported the Center and argued that the pooled trust deposit is not an uncompensated transfer under federal law. 

Lewis v. Alexander
In December 2011, the Board approved the request that NAELA join the Special Needs Alliance and the Pennsylvania Association of Elder Law Attorneys in filing an amicus curiae brief in support of appellees Zackery D. Lewis, et al., against the Pennsylvania Department of Public Welfare in Lewis v. Alexander, involving pooled special needs trusts.

In Lewis v. Alexander, Pennsylvania tried to limit the use of pooled special needs trusts in 2005 legislation. It would have prohibited anyone age 65 or older from having a pooled special needs trust account, as well as limited pooled special needs trusts to retaining 50 percent of the balance of any deceased beneficiary’s account. This legislation also would have limited expenditures from trust accounts for treatment of the person’s disabling condition, and nothing else.

The Third Circuit Court held that all of the limitations that were more restrictive than Congress’ rules for pooled special needs trusts were improper. The federal statute enacted by Congress permits pooled special needs trusts to retain any amount, does not limit how money is spent so long as it is for the welfare of the beneficiary, and allows people over age 65 to have such accounts.

Hughes v. Colbert
. In August 2012, the Board approved a recommendation from the Litigation Committee that NAELA prepare or sign on to an amicus curiae brief to the Sixth Circuit Court of Appeals to advocate that the purchase of immediate annuities is permissible and should not be considered a countable asset in Hughes v. Colbert. The brief, prepared by Litigation Committee Chair Rene Reixach and NAELA member Molly Wood, has been submitted jointly with the Ohio State Bar Association.

In October 2013, the Sixth Circuit Court's decision on Hughes v. McCarthy (formerly Hughes v. Colbert) adopted the arguments made in the amicus brief that a transfer of assets from an institutionalized spouse to the community spouse prior to the date for which Medicaid coverage is sought may be made in any amount without penalty.

This is important for planning to protect the financial well-being of the community spouse who may subsequently be able to use any excess resources for his or her own financial needs, as was done in this case to provide income for the community spouse through an immediate annuity. The decision also recognized, as the amicus brief argued, that informal guidance letters from the Centers for Medicare and Medicaid Services should be given deference by the courts.

Draper v. Colvin – In November 2013, the Board approved a request that NAELA join the Special Needs Alliance in preparing an amicus curiae brief to the Eighth Circuit Court in support of appellant Stephany Draper and reversal. The amicus curiae brief, written by Ron Landsman, CAP, focuses on the Social Security Administration, South Dakota law as it relates to power of attorney and trusts, how POMS plays a role in the case, and the need for Congress to create a simple, nationwide rule for establishing special needs trusts.
Claypoole, et al. v. Mackereth – In February 2014, the Board approved a request that NAELA prepare an amicus curiae brief to the Third Circuit to help them understand the context in which Elder Law attorneys are using annuities and educate the panel about the reality facing most Americans who need to pay for long-term nursing care in the matter of Claypoole, et al. v. Mackereth. The brief was written by John Callinan, CELA, CAP; Ron Landsman, CAP; and Stanley M. Vasiliadis, CELA. The goal of the litigation is Third Circuit recognition that under current federal law:
  • the purchase of an annuity that meets the four express requirements of 42 U.S.C. §1396p(c)(1)(F) and §1396p(c)(1)(G)(ii) cannot be treated as the disposal of an asset for less than fair market value;
  • there is no minimum annuity payment term for the purpose of determining its “actuarial soundness”; and
  • until the Secretary of HHS so specifies, annuities cannot be treated as trusts for purposes of determining Medicaid eligibility.
The Litigation Committee has been working with the NAELA Foundation to establish a national Litigation Advocacy Fund, developing the process for entering into litigation and bringing the importance of said litigation to the attention of the membership to solicit financial support for the Foundation’s efforts.

The Committee plans to establish a central forum for sharing pending cases, pleadings, and briefs. To accomplish this, the Committee will reach out to related organizations (ex. Stetson Law School, National Health Law Program, National Senior Citizens Law Center, AARP Litigation Foundation, etc.) to form partnerships to assist with this project.

Mailing Address
NAELA Foundation
1577 Spring Hill Rd., Suite 310
Vienna, VA 22182
General Contact Information
Phone: 703-942-5711*
Fax: 703-563-9504
*Please note NAELA's office staff cannot assist the public with their legal needs. Please seek the advice of a professional and go to NAELA's member directory for advice.
For specific questions about the NAELA Foundation, email NAELA or call 703-942-5711.

NAELA Litigation Fund

Thank You To Our 2015-2016 Major Donors

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