Florida Supreme Court Bans Some Nonlawyer Medicaid Planning Activities

It has been common for nonlawyer companies or consultants (sometimes known as “elder counselors”) to be involved in Medicaid planning to help elderly people qualify for government-subsidized long-term healthcare. Some nonlawyers have drafted personal service contracts, prepared and executed qualified income trusts, or given advice about implementing Florida law to obtain Medicaid benefits. On January 15, 2015, the Florida Supreme Court issued an order that effectively bans nonlawyers from doing those things because they are classified as the practice of law, which can be done only by licensed attorneys. See The Florida Bar Re: Advisory Opinion—Medicaid Planning Activities by Nonlawyers, 40 Fla. L. Weekly S 14 (Fla. Jan. 15, 2015) (not final until resolution of a motion for rehearing, if any is timely filed).

The January 15 order of the Florida Supreme Court approved an advisory opinion of The Florida Bar’s Standing Committee on the Unlicensed Practice of Law. The Supreme Court’s approval gave the advisory opinion the force and effect of an order of the Court and it was formally published as an order of the Court. Although the Court order is 23 pages, the main points can be summarized as follows:

Personal Service Contracts.– Medicaid planners have often used personal service contracts (contracts for personal care between the Medicaid applicant and a caregiver) as a strategy to spend down assets so that the applicant’s countable assets are within the allowable asset limit. There are legal and tax ramifications if a personal service contract is not done properly. The preparation of a contract is the practice of law. When a nonlawyer Medicaid planner drafts a personal service contract, the nonlawyer is practicing law without a license.

Qualified Income Trusts.– Another common strategy is preparation of a Qualified Income Trusts in cases where a Medicaid applicant’s gross monthly income exceeds a certain amount. A Qualified Income Trust is a legal document affecting an individual’s important legal rights. If a Qualified Income Trust is not properly established or properly funded each month, the Medicaid applicant will not be eligible for Medicaid. A nonlawyer’s determination of whether a trust is necessary, as well as the preparation, assembly, execution, or funding of the trust, constitutes the unlicensed practice of law, as does the gathering of information for the Qualified Income Trust.

Advice about Florida Law Concerning Medicaid Benefits.– Medicaid planning includes making sure the applicant will meet the asset and income test for Medicaid eligibility. Assessing the facts relevant to a client’s situation, applying those facts to the laws governing Medicaid, advising an individual on which legal strategies are appropriate for the individual’s circumstances, developing a plan to structure or spend the client’s assets in compliance with those laws, or drafting legal documents to execute the plan, all constitute the practice of law. When a nonlawyer engages in these activities or renders advice regarding the implementation of Florida law to obtain Medicaid benefits, the nonlawyer is engaged in the unlicensed practice of law.

The Court order was limited to those three areas because those were the activities on which a petitioner requested an opinion. It is important to note, however, that a Florida Bar committee had already advised in 2008 that various other forms of Medicaid planning activities are also unlicensed practice of law if done by nonlawyers, such as establishing irrevocable trusts or hiring an attorney to review, prepare, or modify documents for customers (when payment to the attorney was made through the company instead of having a direct relationship between the attorney and the client). The committee had also advised that the following activities would have to be determined on a case-by-case basis and could constitute the unlicensed practice of law: restructuring assets, counseling customers on the best way to get Medicaid approval, and advertising as an “elder counselor.”

Additionally, the January 15 Court order precludes Medicaid planning companies from circumventing the unlicensed-practice ruling by claiming to have relationships with lawyers who draft the legal documents or using a team of professionals, including an attorney, to assist the client. Unless the client establishes an independent attorney-client relationship with the attorney and pays the attorney directly (and the attorney is the one who determines that the particular legal document or Medicaid planning strategy is appropriate for the client), the company would still be engaged in the unlicensed practice of law.

The activities discussed in the order are common steps leading up to the preparation of an application for Medicaid benefits. The order did not preclude nonlawyers from actually preparing the Medicaid application itself, because federal law authorizes nonlawyer assistance in the application process. The Court also clarified that its opinion is not intended to limit the duties of employees of the Florida Department of Children and Families who are responsible for assisting in the application process and providing information about Medicaid eligibility.

Bresky Law is available to discuss these matters.