Medicaid planning technique

Medicaid Planning Technique Didn’t Work Exactly as Intended

When a family member faces the high cost of long-term care, it may seem important to do whatever it takes to preserve their resources. Sometimes, though, a given Medicaid planning technique may cause problems. That can be true even if the approach is legal — and sometimes even if it is effective.

Take Missouri resident D. Lynn Duvall, for example. When his aunt Mildred became ill in 2002, he consulted a local elder law attorney about how to protect her assets from nursing home expenses. He and his wife Connie consulted with Columbia, Missouri, elder law attorney Joseph Yungwirth. The advice they got was a little edgy. The full effect of that advice has just come to its apparent conclusion, almost twenty years later.

Attorney Yungwirth proposes a plan

How did the Duvalls find Mr. Yungwirth? It’s not clear from the court record, but perhaps they learned about him because he gave regular public seminars on estate planning at the public library in Columbia, Missouri. He seemed to have a thriving practice, partly devoted to Medicaid planning.

Mr. Yungwirth’s suggestion was very clever — perhaps too clever, in fact. He calculated that aunt Mildred’s assets were worth almost exactly the value of Lynn and Connie’s home. His suggestion: “sell” a 98% interest in their home to aunt Mildred, and put the house in her trust so that they could get it back automatically on her death.

Mildred immediately qualified for Medicaid benefits, as planned. In early 2003, it looked like Mr. Yungwirth’s clever Medicaid plan had worked perfectly. But then the state received a “hotline” report that Lynn and Connie were financially exploiting Mildred, and the plan began to come apart.

The state filed a guardianship petition, asking that the Randolph County Public Administrator (what we in Arizona would call the Public Fiduciary) be appointed to manage Mildred’s estate. It took a year, but the Missouri probate court ultimately appointed the Public Administrator as Mildred’s guardian and conservator.

The probate judge’s observation and the aftermath

In fact, the probate judge based his guardianship decision partly on Yungwirth’s Medicaid planning technique. At the hearing, the judge said:

“An attorney-client relationship was established on the same day that this client deeded away her entire life’s savings and assets, and this was done with the person that stood to gain the most being in the same room while this is happening, without any independent legal advice…. The Court feels like, if not Medicaid fraud, not any of that, not bad estate planning, at least it’s an extreme gross negligence….”

In fact, the Judge wondered out loud why no one had reported Mr. Yungwirth to the Missouri State Bar Association for possible discipline. Apparently he — or someone — did exactly that: Mr. Yungwirth quit his practice and was suspended from the practice of law, though not for another five years.

In the meantime, Lynn and Connie appealed the appointment of the Public Administrator (they lost). The Missouri Lawyer’s Weekly published an article titled “Nephew Exploits Aunt’s Assets, Loses Chance to Administer Estate,” identifying Lynn Duvall by name. And Lynn Duvall’s insurance and real estate business began to suffer noticeably; he reasonably believed that was based on him having been tagged as a financial exploiter. By that time, Ruth Duvall had already died — still receiving Medicaid benefits.

What happened after Ruth Duvall’s death?

A year after Ruth Duvall died, the State of Missouri filed a claim seeking to recover $75,000 in Medicaid expenses paid during the last two years of her life. They demanded an accounting from Lynn and Connie. The State also filed a lien against the Duvall’s home (remember that 98% of the value of the house was in Aunt Mildred’s trust).

That litigation took seven years to resolve. In 2013, the Duvalls agreed to pay the Mildred’s estate $10,300. They immediately sued Yungwirth for legal malpractice. They sought recovery of everything they had paid back to Mildred’s estate, the reduction of value on their home, and the value of Lynn’s lost insurance business.

Mr. Yungwirth’s malpractice insurance carrier objected that their claim was too late. The statue of limitations for legal malpractice claims is usually five years. The defendants insisted that the five-year period began to run at least by the time the Duvalls’ new lawyer had begun demanding payment from Mr. Yungwirth, back in early 2008. The trial judge agreed, and dismissed their claim against (the now former) attorney Youngwirth.

Last week the Missouri Court of Appeals agreed, and upheld the trial court’s dismissal. The appellate court did not decide that Mr. Yungwirth’s actions were fine, or that Ms. Duvall’s Medicaid planning technique was fine. They just agreed that Lynn and Connie Duvall’s complaint was filed too late. Duvall v. Yungwirth, November 10, 2020.

What are the takeaway messages?

But what can Mildred Duvall’s complicated story teach us? We have a number of observations to suggest:

  1. Be careful about selecting your lawyer. Do you want someone who really knows estate planning and/or Medicaid planning? Check out their reputation, their online information, and recommendations from friends and colleagues. Did you meet the lawyer at a promotional seminar at the public library or a local restaurant? Make sure you’re not being sold something you don’t really want or need.
  2. Does a particular Medicaid planning technique sound almost too good to be true? Be suspicious and ask for input from others.
  3. When a lawyer agrees to meet with you and your family member together, that suggests something troublesome. We are supposed to represent just one person, not a whole family. Recognize that your interests and those of your family member might differ, and respect the lawyer’s efforts to maintain that separation.
  4. Recognize that even though an idea — and particularly a Medicaid planning technique — might work, it might also have unintended secondary effects. Like, for instance, triggering a referral to the local adult exploitation hotline.

 

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