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Personal Services Agreement Upheld As Payment for Value

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APRIL 2, 2007  VOLUME 14, NUMBER 40

When Mary Brewton entered a Louisiana nursing home in January, 2003, her husband Marvin stayed in their family home. The value of the home was not considered in calculating her eligibility for Medicaid assistance with the nursing home costs, and so she qualified immediately. When her husband moved into the nursing home with her three months later, however, their home went on the market—and ultimately was sold late in the same year.

While the home was listed for sale, the Brewtons entered into a personal services agreement with three relatives. They agreed to pay a lump sum of $150,000 once the home was sold, and the relatives agreed to provide services for as long as either Mr. or Mrs. Brewton should live. A few months after the sale of the home, $118,805.22 was transferred to the relatives, and Mr. Brewton applied for Medicaid assistance with his own nursing home costs soon thereafter.

When the state Medicaid agency considered Mr. Brewton’s application, it realized that the payment could affect Mrs. Brewton’s application for benefits. After deciding that the transfer of her one-half interest in the sale proceeds had been a gift to the relatives, the agency withdrew her Medicaid assistance; she appealed, but an Administrative Law Judge agreed with the agency.

A state judge reversed the agency’s denial of Medicaid. In the judge’s view the promise to perform work for Mr. and Mrs. Brewton for the rest of their lives had some value, and he ruled that the Medicaid agency had not shown that the transfer exceeded that value.

The Louisiana Court of Appeal agreed with the trial judge, over the Medicaid agency’s objections that there could be no valuable services to perform since Mrs. Brewton’s care was being provided by Medicaid Far from taking care of all of her needs, said the appellate judges, Medicaid left a number of tasks to the relatives, including handling the couple’s financial dealings; cleaning up, listing and ultimately selling the house; replacing clothing lost in the nursing home’s laundry; and obtaining replacement hearing aids for Mr. Brewton (who, like many long-term care patients, persistently lost or mislaid his hearing aids).

In addition, the relatives visited the Brewtons regularly and helped ensure that Mr. Brewton cooperated with the nursing home staff despite his growing confusion. On one occasion Mr. Brewton left a hospital and had to be physically returned by the relatives. In short, the personal services contract provided value for the $150,000 payment, and it should not have been treated as a gift. Brewton v. State of Louisiana Department of Health and Hospitals, March 13, 2007.

Compare the Brewton holding, however, to the similar case involving Marion Andrews of Swampscott, Massachusetts. Mrs. Andrews owned her home, a lovely but deteriorating Victorian, which she could not afford to keep after she moved into a nursing home. Her daughter and son-in-law considered offers in the range of $150,000 to $175,000, and obtained the estimate of a real estate agent that they might get as much as $225,000 for the home. Instead, they took leaves of absence from their own work, invested a small amount (about $2,600) in paint and other supplies, and spent the next year working on fixing up the house.

When Mrs. Andrews’ daughter finally completed the work and sold the house, it fetched $429,000. Even as the sale of Mrs. Andrews’ home was closing, her daughter discovered for the first time that her mother could qualify for Medicaid assistance if the net sale proceeds were below a certain level, and so she created a $100,000 “invoice” for her and her husband’s work in fixing up the home. After payment of that invoice amount to themselves, they applied on Mrs. Andrews’ behalf for Medicaid assistance.

The state Medicaid agency denied eligibility, finding that the payment was actually a gift by Mrs. Andrews because there had not been any agreement that her daughter and son-in-law would be compensated for their work. The Massachusetts Superior Court agreed. While Mrs. Andrews’ daughter and her husband clearly “put a great deal of time and effort into the renovations,” there was no indication that Mrs. Andrews intended to pay them for their work from the outset, or even as the work progressed. In fact, ruled the judge, it appeared that the primary motivation for the invoice may have been to secure Medicaid eligibility rather than to compensate Mrs. Andrews’ daughter for any agreed-upon work arrangement. Andrews v. Division of Medical Assistance, February 14, 2007.

What are the combined lessons of the Brewton and Andrews cases? Two points, at least, can be extracted:

  • An agreement for legitimate services, even services to be performed prospectively, can be an appropriate payment from a prospective Medicaid applicant’s funds, and
  • Any such agreement should be prospective (entered into before the work is undertaken), in writing, and for a fair amount considering the work which will actually be undertaken.

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Robert B. Fleming


Robert Fleming is a Fellow of both the American College of Trust and Estate Counsel and the National Academy of Elder Law Attorneys. He has been certified as a Specialist in Estate and Trust Law by the State Bar of Arizona‘s Board of Legal Specialization, and he is also a Certified Elder Law Attorney by the National Elder Law Foundation. Robert has a long history of involvement in local, state and national organizations. He is most proud of his instrumental involvement in the Special Needs Alliance, the premier national organization for lawyers dealing with special needs trusts and planning.

Robert has two adult children, two young grandchildren and a wife of over fifty years. He is devoted to all of them. He is also very fond of Rosalind Franklin (his office companion corgi), and his homebound cat Muninn. He just likes people, their pets and their stories.

Elizabeth N.R. Friman


Elizabeth Noble Rollings Friman is a principal and licensed fiduciary at Fleming & Curti, PLC. Elizabeth enjoys estate planning and helping families navigate trust and probate administrations. She is passionate about the fiduciary work that she performs as a trustee, personal representative, guardian, and conservator. Elizabeth works with CPAs, financial professionals, case managers, and medical providers to tailor solutions to complex family challenges. Elizabeth is often called upon to serve as a neutral party so that families can avoid protracted legal conflict. Elizabeth relies on the expertise of her team at Fleming & Curti, and as the Firm approaches its third decade, she is proud of the culture of care and consideration that the Firm embodies. Finding workable solutions to sensitive and complex family challenges is something that Elizabeth and the Fleming & Curti team do well.

Amy F. Matheson


Amy Farrell Matheson has worked as an attorney at Fleming & Curti since 2006. A member of the Southern Arizona Estate Planning Council, she is primarily responsible for estate planning and probate matters.

Amy graduated from Wellesley College with a double major in political science and English. She is an honors graduate of Suffolk University Law School and has been admitted to practice in Arizona, Massachusetts, New York, and the District of Columbia.

Prior to joining Fleming & Curti, Amy worked for American Public Television in Boston, and with the international trade group at White & Case, LLP, in Washington, D.C.

Amy’s husband, Tom, is an astronomer at NOIRLab and the Head of Time Domain Services, whose main project is ANTARES. Sadly, this does not involve actual time travel. Amy’s twin daughters are high school students; Finn, her Irish Red and White Setter, remains a puppy at heart.

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Matthew M. Mansour


Matthew is a law clerk who recently earned his law degree from the University of Arizona James E. Rogers College of Law. His undergraduate degree is in psychology from the University of California, Santa Barbara. Matthew has had a passion for advocacy in the Tucson community since his time as a law student representative in the Workers’ Rights Clinic. He also has worked in both the Pima County Attorney’s Office and the Pima County Public Defender’s Office. He enjoys playing basketball, caring for his cat, and listening to audiobooks narrated by the authors.