Troubling Court Decision on Return of Transferred Assets
October 31, 2014
This edition of the Koldin Report E-Newsletter reviews a troubling recent decision by an Appellate Court in New York State regarding what is considered a return of transferred assets. In New York State, to be eligible for Medicaid in 2014, a single person cannot have resources of more than $14,550. If there is a healthy spouse, he/she can keep one half of their total resources of not less than $74,820 up to a maximum of $117,240. If the single person or married couple transfers assets within the 5 year period prior to the date of the Medicaid Application for nursing home care, it is presumed that the transfer was a gift intended to try to deplete one’s life savings in order to reduce the total resources down to the Medicaid eligibility levels.
When the Medicaid Agency discovers that transfers have been made during this 5 year lookback period, the total transfer is entered into a formula and a transfer penalty period of ineligibility is imposed. However, if any or all of the transferred funds were subsequently returned to the Medicaid applicant and/or spouse, then the total transfer subject to the transfer penalty would be reduced by the amount returned. In the past, based on prior Fair Hearing Decisions by New York State, County Medicaid Agencies were directed to treat any transferred funds that were spent by the recipient of the funds on expenses of the Medicaid Applicant or Spouse, such as monthly Assisted living costs, as a return of transferred funds and no penalty would be imposed. Contrary to those prior decisions, a New York Appellate Court recently held that the payment of assisted living costs is not to be considered a return of transferred funds and the full transfer penalty should be imposed. The following 2 examples illustrate the illogical effect of this Court Decision: Example 1: Mother transferred $50,000 to her daughter in September, 2011. Mother went to an assisted living facility in September, 2013
Mother entered a Nursing home in September, 2014 and applied for Medicaid because her life savings was below $14,550. The cost of Assisted living was $2,000 per month and the bill was paid by Daughter. This means that Daughter paid for Assisted Living for 12 months X $2,000 per month for a total of $24,000. Daughter still has $26,000 of Mother’s transferred funds. Under the above Court Decision, Mother would still be treated as transferring $50,000 to Daughter. No credit would be given for Daughter having spent $24,000 on Mother’s assisted living expenses. Under the transfer penalty formula for Onondaga County, Mother would receive a transfer penalty period of ineligibility based on $50,000 for a total penalty of approximately 6 months. Example 2: Same facts as Example 1, but instead of paying the Assisted living facility directly, daughter deposited $2,000 per month back to Mother’s checking account and then Mother signed a check payable to the Assisted living facility. This means that Daughter returned a total of $24,000 to Mother’s checking account over a 12 month period and Mother wrote checks for total of $24,000 to the Assisted living facility.
Under the above Court Decision, since Daughter first returned the funds directly to Mother’s checking account before paying the Assisted living facility, she will receive credit for returning $24,000 and the total transfer subject to a penalty will now be $26,000 instead of the full $50,000. Under the transfer penalty formula for Onondaga County, Mother would receive a transfer penalty period of ineligibility based on $26,000 for a total penalty of approximately 3 months. Even though in both examples above, the Daughter returned $24,000 to pay the Assisted living facility, she will only receive credit for returning transferred funds if she takes the extra step of depositing the returned funds to Mother’s bank account first before paying the Assisted living facility.
Families who are not aware of this restrictive Court decision will suffer unnecessary additional transfer penalty periods of ineligibility. It is important for families to obtain legal advice prior to returning any transferred funds so that the transfer penalty will be reduced accordingly. Therefore, families should not wait until someone is already in a Nursing Home to obtain legal advice from an Elder Law Attorney. Estate planning and catastrophic illness planning is an important process to begin long before a Nursing Home becomes needed. Also, some Assisted living facilities accept Medicaid and there is no transfer penalty for Assisted living Medicaid coverage. However, if you subsequently enter a Nursing Home, the 5 year lookback period with transfer penalties applies at that time. The Koldin Law Center, P.C. handles Medicaid applications for Home Care, Assisted Living and Nursing Home Care Medicaid coverage. Applying for Medicaid is a very challenging time for both the applicant and the family. Substantial assets can be lost if you do not know your legal rights. The Koldin Law Center, P.C. closely monitors the Medicaid laws and court cases to make certain our clients are well-informed of their options. There is something you can do.