Before Judges Landau, Newman and Collester.
The opinion of the court was delivered by: The opinion of the court was delivered by Collester, J.A.D. (temporarily assigned)
IN THE MATTER OF MANUEL L. LABIS, an Alleged Mental Incompetent.
On appeal from Superior Court of New Jersey, Law Division, Morris County.
Myrna R. Labis, hereinafter "Myrna," appeals from an order of the Law Division denying her the authorization as guardian for her incompetent husband, Manuel, for an inter-spousal transfer of his interest in the marital home held as tenants by the entirety.
On October 3, 1996 Manuel suffered a subarachnoid hemorrhage, a devastating stroke which resulted in permanent brain damage. Now age sixty-five, his condition is grievous. He is bedridden, permanently paralyzed on the right side and unable to swallow on his own. He cannot communicate, follow directions, or answer questions, and is mentally incompetent.
Until recently, at a cost of $10,000 per month, he was treated at the Morris Hills Multicare Center where Myrna visited him every day. She has currently taken leave of her employment so that Manuel could temporarily return to their East Hanover home. Manuel requires constant care. There is no question that, barring death, he will soon require long-term care at a nursing home or institutional facility and that a Medicaid application will at some point be filed to pay for the cost of care.
Before his stroke, Manuel and Myrna lived in the marital home and raised and educated two sons. Both are now emancipated: one, age twenty-seven, is an architect, and the other, age twenty-five, is an engineer. Both Manuel and Myrna are certified public accountants and worked full time. They pooled their earnings, for purchase in 1977 of their home, and they have jointly maintained their home as well as paid for the private college and graduate school education of their children. Myrna's current salary is about $40,000 when she works full-time. Manuel receives social security disability of $1,010 per month in addition to a small early retirement pension. Their joint annual income has been reduced significantly since Manuel's stroke. Myrna is fifty-seven and plans to continue working full time as long as she is able.
The joint and individual assets of the marital estate exclusive of the home total about $100,000. The East Hanover property has an estimated value of $224,000 less a $46,000 mortgage and has carrying costs of $16,000 per year inclusive of taxes, insurance, maintenance and utilities. Manuel and Myrna have reciprocal wills, leaving his or her assets to the other spouse and thereafter equally to their children.
On March 27, 1997 Myrna filed a complaint seeking appointment as guardian for Manuel and in addition, the authority to undertake Medicaid estate planning measures on behalf of Manuel including the inter-spousal transfer of the marital home. The Law Division Judge entered an order declaring Manuel mentally incompetent and appointing Myrna as his guardian, but he denied the request authorizing the inter-spousal transfer, setting forth the following reasons:
[t]he incompetent is likely to require long term maintenance in a nursing home facility. His resources are limited and he will likely be supported at public expense for a long time. An effort should be made, in the public interest, to preserve some of his assets, in some way to make it possible to repay a portion of the public expense in supporting the incompetent. His wife may continue to live in the home which they own as tenants by the entirety. If the incompetent dies before his wife, she will obtain the entire interest in the house and may keep it. If the wife wishes during the joint lives of the parties to sell the home so that she can obtain her fair share of the equity, I will allow that, but I will require that some part of the equity be retained to meet the incompetent's obligation to the public. It is not fair to the public to transfer the home to her sole name during the joint lives of the parties free of any interest of the incompetent (and the public). Such a transfer might result in a situation in which she predeceases the incompetent and leaves the house to the parties' adult children free of the claims of the public. This would be unjust.
Myrna contends that both Federal and State Medicaid laws as well as public policy authorize inter-spousal transfers, that the transfer is both appropriate and permissible under the substituted judgment doctrine applicable to guardians and that the trial Judge's refusal to permit such a transfer discriminates against Manuel as an incompetent in violation of the equal protection clause.
Counsel appointed to represent the interest of Manuel does not dispute that inter-spousal transfers are permitted but argues that, as Manuel's fiduciary, Myrna should not be permitted to transfer his interest in the marital home to herself because such a transfer could benefit the couple's children at the potential cost of the quality of Manuel's care.
We reverse. The Law Division Judge denied the relief sought on an erroneous view that the proposed inter-spousal transfer was contrary to public policy, and thereby failed to consider that the inter-spousal transfer would benefit Manuel in carrying forth ...