U.S. 3rd Circuit Court Ruling Upholds Critical
Financial Planning Tool For Nursing Home Residents
Bethlehem, Pa. — The U.S. 3rd Circuit Court of Appeals this month issued a precedent-setting ruling to uphold a vital financial planning measure used by nursing home residents and their families, citing in part a 2001 case won by Bethlehem elder care attorney Stanley. M. Vasiliadis.
The majority decision in “Zahner vs. the Pennsylvania Department of Human Services (DHS)” overturns a District Court ruling and thwarts efforts by the department to prevent seniors from using a planning strategy, “gift & annuity,” as part of their financial planning process, despite existing federal law protecting those rights, Vasiliadis said.
Vasiliadis participated in writing and submitting a “friend of the court” brief on behalf of the National Academy of Elder Law Attorneys in support of Donna Claypool and Connie Saner. In finding in their favor, the Court cited a 2001 federal court ruling in Vasiliadis’s case, “Mertz vs. Houstoun,” considered a landmark case involving the use of annuities as a financial planning tool by nursing home residents.
This case involved the use of short-term annuities, coupled with gifting to help seniors and their family members protect financial assets that are exposed and remain at risk after having entered a nursing home. In the Zahner case, the Commonwealth argued that using annuities with pay-out terms substantially shorter than the purchaser’s actuarial life expectancy was prohibited under Medicaid law.
DHS attorneys argued that the annuities used in this case were “sham transactions” with no economic value other than to enable persons to qualify for Medicaid without first paying over all of their assets to a nursing home. The Circuit Court ruled that a Medicaid planning motive does not prohibit the use of short-term annuities provided all of the legal requirements for their use are met, as occurred in this case.
Citing Mertz and subsequent cases, Chief Judge Theodore McKee and Judge Dolores Sloviter reaffirmed that it is not the court’s role to rewrite federal legislation that has been addressed several times by Congress since the original passage of the law. Judge Marjorie Rendell dissented.
“It is not the role of the court to compensate for an apparent legislative oversight by effectively rewriting a law to comport with one of the perceived or presumed purposes motivating its enactment,” they quoted from Mertz. In addition, they added, “Although we are sympathetic to the concerns the dissent and DHS outline, Congress must resolve them. Absent legislative change, it is clear that “Congress has not revised the Medicaid statute to foreclose this option.”
Vasiliadis, president of the Pennsylvania Association of Elder Law Attorneys and a nationally recognized expert on elder law, agrees that the unusually short term of the annuities is not a factor. He also pointed out that the total amount of the annuity payments are applied toward the cost of the person’s care. They create a temporary revenue stream to cover the costs of nursing home care between the date of a person’s gift and when Medicaid takes over those payments.
“It is a planning measure that is appropriate for use by people who are already in a nursing home. It is not too late even then to protect your assets,” said Vasiliadis, a past chairman of the Pennsylvania Bar Association’s Elder Law Section. “This strategy particularly helps people of more modest means. Many families of nursing home residents believe it is too late to protect that person’s assets and nursing homes often falsely support that belief.”
“Essentially what they are saying is that ‘if you play by the rules we are not going to penalize you.’ The intent of the laws is what was written by Congress,” Vasiliadis added. “Congress has had plenty of opportunities to change this, but it hasn’t. It obviously intended to permit the use of annuities.
A frequent speaker on elder law and estate planning issues, Vasiliadis has lectured to lawyers on behalf of the National Academy of Elder Law Attorneys. He regularly presents programs and authors articles for Pennsylvania attorneys as a faculty member of the Pennsylvania Bar Institute, the education arm of the Pennsylvania Bar Association.
Vasiliadis currently serves as President of the Pennsylvania Association of Elder Law attorneys and recently served as chair of the Pennsylvania Bar Association’s Elder Law Section. He also maintains professional affiliations with the National Academy of Elder Law Attorneys, the Academy of Special Needs Planners, and with local Bar Associations and Estate Planning Councils.
Active in the community, Vasiliadis has served as president, director and member civic and charitable organizations, including the Chamber of Commerce, YMCA, Rotary and Visual Impairment and Blindness Services of Northampton County Inc.
Vasiliadis earned an undergraduate degree from Lehigh University and a law degree from Temple University. He is a Board-Certified Elder Law attorney as accredited by the Pennsylvania Supreme Court.
