Important court decision regarding the Medicaid transfer penalty

This edition of the Koldin Report E-Newsletter reviews an important court decision regarding the Medicaid transfer penalty.  In the past newsletter we discussed the risks of applying for Medicaid without being represented by an Attorney.  The court case discussed in this newsletter shows how important it is to have an attorney advocate for you when applying for Medicaid. 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 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 would typically penalize any gifts you made regardless of whether you had a good explanation for why you made the gift.

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.  At the time she made the gift, she suffered from various chronic health conditions, including osteoporosis.  She used a cane or walker to assist in mobility.  She was able to live at home, with some assistance from family members and a part-time care provider.  She suffered falls in 2009 and 2010 which did not result in serious injuries.  She suffered a major fall in 2011 which was after the $26,000 gift to help her grandson and it was this fall that led to her requiring nursing home placement.

The Medicaid Agency rejected the Medicaid applicant’s explanation that she made this gift solely for the purpose of helping her grandson and imposed a transfer penalty based on the fact that due to her poor health condition, nursing home care was foreseeable and therefore the gift was made to protect the $26,000 from having to be spent towards the cost of her care.

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"

As can be seen by this Court case, 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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