Court Decisions Regarding the Medicaid Transfer Penalty

February 3rd, 2017

This edition of the Koldin Report E-Newsletter reviews 2 more recent court decisions regarding the Medicaid transfer penalty. In the past newsletter we discussed an important court case where the Court held that no Medicaid transfer penalty should be imposed. In this newsletter we review 2 more recent New York court cases where the Court did impose transfer penalties. All of these cases show the importance of being represented by an Attorney when applying for Medicaid and during the estate planning process. All prior newsletters are saved on our website. You can read them by clicking here.

When you apply for Medicaid, the Medicaid Agency will review your finances for the 5 years immediately prior to the date of application. You will be required to provide 5 years of all of your financial statements and 5 years of any real estate transactions.

When the Medicaid Agency reviews these 5 years worth of statements, if the caseworker discovers any questionable deposits and/or withdrawals from your accounts, he/she will provide you with a letter asking for an explanation to prove that no disqualifying transfers or gifts were made. If the caseworker does not accept your explanation, then he/she will impose a transfer penalty period of ineligibility based on the amount of the transfer.

Under the Medicaid law, any gifts you make within 5 years prior to applying for Medicaid coverage for Nursing Home costs, are presumed to be for the purpose of depleting your life savings in order to qualify for Medicaid. In order to avoid the imposition of a transfer penalty period of ineligibility, you must prove that transfer (gift) was made exclusively for a purpose other than to qualify for Medicaid.

One test typically used by Medicaid Agencies to determine whether a gift was made exclusively for a purpose other than to qualify for Medicaid is whether nursing home care is foreseeable within 5 years from the date of the gift based on your health. So, if you are not in good health and nursing home care was a likely possibility in your future, the Medicaid Agency is much more likely to penalize gifts you made regardless of whether you had a good explanation for why you made the gift.

As discussed in the last newsletter, in an important recent court decision, Matter of Collins v. Zucker, dated November 23, 2016, a New York Appellate Court rejected the automatic imposition of a transfer penalty based on whether nursing home care was foreseeable. In that case, in 2009 and 2010, the Medicaid applicant gifted $26,000 to help her grandson purchase and make repairs to a new home. She had over $200,000 still in her name after making this gift. The Appellate Court reversed the Medicaid Agency's imposition of the transfer penalty. The Court held that

"the relevant standard is not whether decedent could or should have foreseen that nursing home placement might eventually become necessary, but whether she made the requisite showing that the transfers were made "exclusively" for a purpose other than to qualify for medical assistance"

In two other recent court cases, the imposition of transfer penalties by the Medicaid Agencies were upheld.

In Matter of Krajewski v. Zucker, the daughter moved in with and took care of her mother for 2 years before the mother entered a nursing home. The mother transferred some of her savings to her daughter as payment for the daughter's time taking care of the mother. The mother argued that these transfers to the daughter were not for the purpose of depleting her savings to qualify for Medicaid, but rather was to compensate her daughter for caring for her. The Medicaid Agency imposed a transfer penalty. The Court held that without a written caregiver agreement between the mother and daughter, there is no evidence that this was not merely a gift and therefore a transfer penalty was properly imposed.

When children are taking care of their parents and want to be compensated, the Koldin Law Center, P.C. is available to prepare a written caregiver agreement for our clients. We also encourage our clients to maintain accurate records such as time sheets to provide evidence of actual services provided.

In the case Estate of Burke v. Zucker, the mother transferred $150,000 to her children in 2010 and applied for Medicaid in 2014. The Medicaid Agency imposed a transfer penalty period of ineligibility. The Court held that there was no evidence of a past pattern of such substantial gifts and she had minimal savings left after the gift was made. Also, the mother was in an advanced age of 86 and was of questionable health.

As can be seen by these Court cases, when you make gifts, it is best to gather evidence to prove that the gift is being made for a reason other than to qualify for Medicaid. When the Koldin Law Center, P.C. represents clients in the estate planning process, if there is a possibility of needing nursing home care within the next 5 years, we discuss with clients the risk of making gifts and provide guidance to our clients on obtaining evidence to justify their gifts. As discussed above, documentation such as a caregiver agreement with companion time sheet logs can make the difference whether a transfer penalty will be imposed by a Medicaid Agency.

The best practice when preparing to apply for Medicaid is to carefully review 5 years of all financial statements and prepare explanations for all withdrawals and deposits that the Medicaid caseworker would be likely to question. When the Koldin Law Center, P.C. represents clients in the Medicaid application process, we carefully review the financial statements of our clients and discuss explanations and obtain proof and documentation to justify the purpose of the gifts to avoid transfer penalties.

At the Koldin Law Center, P.C. with offices in Syracuse , New York, we have over 50 years of experience helping individuals plan for immediate crisis and long term care. Our attorneys are available to discuss your estate planning options including reviewing your options to establish a Revocable Trust and/or an Irrevocable Trust. We are also available to discuss your asset protection options even if you are already in a Nursing Home. Our office can handle the entire Medicaid application process for the client.

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