To answer in a specific case the question of whether the guardian should be permitted “to make the gifts proposed,” Trott requires the guardian to establish five criteria:
(1) the mental and physical condition of the incompetent are such that the possibility of her restoration to competency is virtually nonexistent; (2) the assets of the estate of the incompetent remaining after the consummation of the proposed gifts are such that, in the light of her life expectancy and her present condition of health, they are more than adequate to meet all of her needs in the style and comfort in which she now is (and since the onset of her incompetency has been) maintained, giving due consideration to all normal contingencies; (3) the donees constitute the natural objects of the bounty of the incompetent by any standard . . . ; (4) the transfer will benefit and advantage the estate of the incompetent by a reduction of death taxes; (5) there is no substantial evidence that the incompetent, as a reasonably prudent person, would, if competent, not make the gifts proposed in order to effectuate a saving of death taxes. 118 N.J. Super. at 442-43.
The Trott criteria, which the Court adopts, have been applied by our courts in exercising their statutory authority to determine whether estate-planning proposals offered by guardians are in the wards’ best interests and give effect to the wards’ wishes had they been able to express them. See In re Labis, 314 N.J. Super. 140, 147 (App. Div. 1998), (observing that relevant provisions of Title 3B “incorporated the concepts of Trott“); see also In re Conroy, 98 N.J. 321, 360 (1985) (“[T]he goal of decision-making for incompetent patients should be to determine and effectuate, insofar as possible, the decision that the patient would have made if competent.”).
In effect, Trott provides a framework consisting of a set of objective tests (criteria (1), (3) and (4)) for the application of substituted judgment, taking into account the ward’s best interests (criterion (2)). Criterion (5), however, introduces a subjective test with a high evidentiary burden to rebut substituted judgment: that “there is no substantial evidence” the ward, “if competent,” would not approve a Medicaid spend-down plan.
Held: In re Labis and In re Conroy support the petitioner’s claim that when a Medicaid spend-down plan does not interrupt or diminish a ward’s care, involves transfers to the natural objects of a ward’s bounty, and does not contravene an expressed prior intent or interest, the plan, a fortiori, provides for the best interests of the ward and satisfies the law’s goal to effectuate decisions an incompetent would make if he or she were able to act. That approach accords with decisions of the New York courts addressing the same issues.
The Trott criteria impliedly establish a presumption in favor of spend-down proposals by recognizing the benefit to the ward’s estate of increasing the amounts available to beneficiaries by reducing payments to the government out of the estate. Also significant, Trott requires “substantial evidence that the incompetent, as a reasonably prudent person, would, if competent, not make the gifts proposed.” Id. at 443-44. Thus, under Trott the presumption can be overcome only with “substantial evidence,” a high threshold that is consonant with the approach in New York.
III. Petitioner’s proposed Medicaid spend-down plan meets the Trott criteria and should be approved. It is undisputed that the first criterion of Trott is satisfied because Keri suffers from irreversible dementia. Richard’s spend-down plan is designed to provide adequate funding for his mother’s nursing home care during the triggered period of Medicaid ineligibility and therefore meets the second criterion of Trott.
The third criterion of Trott, that the donees of petitioner’s spend-down plan “constitute the natural objects of the bounty of the incompetent,” unquestionably is met. Richard and Charles are Keri’s sons, and her will leaves her estate in equal parts to them. And the proposed transfer of assets “will benefit and advantage the estate of the incompetent,” as required by the fourth Trott criterion. Assuming Keri nets $170,000 from the sale of her house, the plan proposes to preserve $92,000 of those proceeds for her sons to share. If Keri spends the remainder of her life in a nursing home without selling her house, the state would be authorized to impose a lien for Medicaid cost reimbursement and Richard and Charles likely would get nothing. 42 U.S.C.A. � 1396p(a)(1)(B). If Keri sold the house without transferring her assets, then her entire financial investment would be paid out in less than three years for nursing home costs, and, again, Richard and Charles likely would get nothing. Under petitioner’s plan, Keri could preserve approximately $46,000 from the proceeds of the sale of her home for each of her sons, the beneficiaries of her will.
Finally, the fifth Trott criterion is satisfied because there is no evidence in the record indicating that Keri would have disapproved petitioner’s proposed spend-down plan. The Appellate Division focused on Keri’s preference to stay in her house, a preference that conflicted with petitioner’s proposed plan. But, if Keri could not live in her house without 24-hour care, as the trial court found, then she would have to pay for around-the-clock nursing. The result is a veritable “Catch-22″ — without selling her house, Keri does not have the funds to maintain in-home care for more than a short period. Moreover, because of her dementia Keri had become difficult at best, suggesting that in-home care would not be feasible. The question, then, is whether substantial evidence indicates that Keri would have disapproved petitioner’s Medicaid planning proposal in those unfortunate circumstances. There simply is nothing in the record to suggest that disapproval.
Therefore, petitioner’s spend-down plan represents a decision that his mother “might have been expected to make,” N.J.S.A. 3B:12-58, and satisfies both the applicable statutes and the Trott criteria.
IV. The public guardian for the elderly takes the position that a child beneficiary who serves as a guardian should not be permitted to propose a Medicaid spend-down plan for his or her ward because to do so would be a clear conflict of interest. He claims that here petitioner “is violating his fiduciary duty to his mother by self-dealing through [M]edicaid planning.” The Appellate Division accepted that position, stating:
Unlike the situation involving spouses, there is a greater likelihood of conflict of interest when the gift-beneficiaries are children. As [a] Florida court observed: “Courts must make room for the possibility that some children may try to pressure vulnerable parents into divesting themselves of assets so that the estate is not depleted by the costs of nursing home care.” Keri, 356 N.J. Super. at 179 (quoting Rainey v. Guardianship of Mackey, 773 So.2d 118, 122 (Fla. Dist. Ct. App. 2000)).
