Dealing with Asset Transfers

By: Anthony J. Lamberti, Esq., Chairman, Elder Law Committee

The gravamen of this article is how to assess gifts made by an individual who must now apply Medicaid due to a nursing home admission.

               The usual scenario is that the applicant has transferred or gifted a significant sum of money to help a family, member purchase a home, start a business or pay for college tuition.

               This article will endeavor to provide counsel the opportunity to assess their available strategic choices.

               It is imperative to assess the impact of the prior transfers in view of applicable statute, case law and regulations.

               The enactment of The Deficit Reduction Act of 2006 created a five year look back period for transfers and the period begins to run from the time the Medicaid application is filed to determine ineligibility. The penalty period is calculated as follows:

                                                              Amount of assets transferred

                                                            __________________________= number of months

                                                           Regional rate for the cost of care

               Obviously, the amount transferred is case specific. The regional rate of care is geographic specific. The NYS Department of Health promulgates regulations each year setting the regional rates.

               One method to eradicate the prior transfer of assets is for the implementation of a DRA compliant promissory note. This gift and loan strategy enables retention of some funds as a gift while requiring private payment of the facility invoice for the ineligibility period as discussed herein.

               It may not be feasible to complete a DRA compliant promissory note for various reasons. The most common reason is that the funds are no longer available to privately pay during the period of ineligibility.

               The only avenue to pursue on behalf of this client is an undue hardship exemption. Section 360-4.4 of the regulations provides that denial of eligibility will result in undue hardship if:

1. the individual is otherwise eligible for Medicaid;
2. said person is unable to obtain appropriate medical care without the provision of Medicaid; and
3. despite his or her best efforts, said person or his or her spouse is unable to have the transferred asset returned or to receive fair market value for the asset. Best efforts include cooperating, as deemed appropriate by the commissioner of the social services district, in efforts to seek the return of the asset.

There are some reported cases on hardship claims and they offer guidance to individuals and practitioners in preparing a hardship exemption case.

In the Matter of M.C., Fair Hearing Number 5930719K, the applicant made a gift of $20,000.00 to her daughter to help defray educational expenses of the applicant’s grandchildren.

The appellant/applicant contended that this gift was not made for the sole purpose of qualifying for Medicaid. The appellant/supplicant provided credible evidence that at the time of the gifts the applicant was otherwise solvent, had history of gifting and was otherwise healthy and had no for seeable medical needs at the time of the gifts.

               The applicant applied for Medicaid a year and one-half after the transfers. She needed care after having suffered two car accidents which required surgeries to remedy injuries she sustained.

               The denial of benefits was reversed in this case.

               In  Corcoran v. Shah, No. 689, 12-02235 (4^th Dept., June 20, 2014), the Fourth Department ruled that the applicant failed to rebut the presumption that transfers she made to her family were to qualify for Medicaid because she didn’t demonstrate that she was in good health when the transfers were made or that the gifts were part of a pattern.

               In this case, the appellant/applicant submitted no medical records. The appellant/applicant failed to establish that the transfers were part of a pattern or history of gifting.

               The Court upheld the agency’s determination of a denial of benefits.

               In Safran v. Shah, 2013-04373 (2^nd Dept., July 2, 2014) the Second Department ruled that the applicant rebutted the presumption and that the transfers were made to qualify for Medicaid.

               In this case, the applicant transferred funds to her family as gifts. However, she retained resources to be available for her care costs.

               The applicant’s remaining assets were transferred from her accounts as a result of economic exploitation and theft a short time before her admission to a facility.

               Under these facts, the Second Department reversed the agency’s denial of benefits to the applicant.

               Although the hardship exception to a denial of Medicaid benefits is seldom successful, there have been instances, where under favorable factual circumstances and development of documentary evidence (i.e. medical records or financial records), a hardship exception can be sustained.