In previous months, we’ve discussed Medicaid planning and the importance of planning ahead for the possibility of nursing home care. But you don’t want to take planning advice from just anyone. You need to make sure the person putting your plan together is someone who actually has the knowledge – and the authority – to come up with a plan that will achieve your objectives.
A determination of eligibility for Medicaid is, at its core, a financial determination. If the applicant’s resources and income are below specified levels, the applicant qualifies for Medicaid. However, qualifying for Medicaid will often require that assets be transferred or otherwise made “not countable” to get a person below the strict resource limits that Medicaid imposes. That kind of planning can often move from the realm of financial advice to the realm of legal advice. If a non-attorney advisor crosses the often murky line between the two and engages in the unauthorized practice of law, it can have disastrous consequences for everyone involved.
But what is the unauthorized practice of law? The criteria for the unauthorized practice of law varies from state to state. In the broad sense, it can include giving legal advice, representing someone in court, and selecting and preparing legal documents. In a recent advisory opinion, the Florida Supreme Court stated that it is the unauthorized practice of law for a non-lawyer to participate in preparation of personal service contracts between Medicaid applicants and caregivers, preparation and execution of qualified income trusts, and giving legal advice regarding how to qualify for Medicaid under Florida law.
So what would the unauthorized practice of law look like in real life? Uncle Cosmo, a former financial advisor, offers to help you with a few things to get Mom qualified for Medicaid. He’s seen a lot of documents, he’s worked with a lot of lawyers, and he knows a thing or two about Medicaid planning. You might want to rethink that. The penalties for unauthorized practice of law apply to a family member just like they would to any third party advisor, and they can be steep. For an individual in Louisiana, the unauthorized practice of law can carry a fine of up to $1,000, up to two years imprisonment, or both. In Louisiana, the unauthorized practice of law specifically includes preparing documents that purport to transfer title to immovable property, which is an issue that may come up frequently in Medicaid planning. Uncle Cosmo, offering to draw up the donation of Mom’s timberland in West Feliciana Parish for you, “for a lot less than a lawyer will charge”, may find himself facing fines and jail time for his troubles.
It is true that Uncle Cosmo may not run afoul of the penalties for unauthorized practice of law if no one reports him. But another very significant problem may arise when that document Uncle Cosmo drew up for you is called into question. His well-intentioned efforts may cost you more time and money to qualify for Medicaid in the long run, or may cost you the ability to qualify at all. Suppose you get the Medicaid application filled out and submitted, and Medicaid comes back and says, Mom has too many assets, application rejected. At this point, you go to your attorney and learn that Mom still owns that $500,000 piece of property in West Feliciana Parish because the donation Uncle Cosmo drafted is invalid. And now Mom has Alzheimer’s and lacks legal capacity to sign a new donation or a power of attorney letting you act on her behalf. At this point, you may be looking at a much more involved and costly process, such as interdiction, to obtain authority to act on Mom’s behalf. Further, once you qualify as Mom’s curator, Medicaid planning to preserve assets will not be possible.
Planning for the possibility of needing nursing home care can be a crucial factor in helping seniors meet the financial burden of long-term care. If you are looking into Medicaid for yourself or a loved one, be sure to seek advice from an attorney qualified to provide that advice. Not only may seeking advice from your financial advisor, CPA, or Uncle Cosmo constitute the unauthorized practice of law, it may well prevent you from being able to protect assets at all.
The information provided is not intended to be legal advice and does not constitute an attorney/client relationship. You should consult with an attorney for individual advice regarding your own situation. Ms. Melancon has engaged in the practice of law in Ascension Parish for the last eighteen years. The primary focus of her practice is estate planning, probate, special needs planning and elder law. For more information or to attend an upcoming estate planning seminar, call her office at (225) 744-0027.