A New Jersey appeals court recently held that a life care contract between a nursing home resident and her daughter, in which the resident paid her daughter a lump sum for the future provision of personal care services, is not a transfer for fair market value for the purposes of Medicaid eligibility. E.S. v. Division of Medical Assistance and Health Services (N.J. Super. Ct., App. Div., No. A-2564-08T2, March 26, 2010).

E.S., age 97, was admitted to a nursing home. Her daughter, E.K., who held a durable power of attorney for her, entered into a life care contract on her behalf. Under the contract, E.S. would pay E.K. the lump sum of $56,550 for caregiving services to be rendered to E.S. The contract provided that E.K. would work on an as-needed basis over E.S.’s lifetime.

E.S. applied for Medicaid, but the state imposed a transfer penalty, finding that the life care contract was not a transfer for fair market value. The administrative law judge affirmed the state’s decision, and E.S. appealed.

The New Jersey Superior Court, Appellate Division affirmed, holding that the life care contract was not a transfer for fair market value. The court found that because the contract was not assignable, it has no market value. The court also noted that because contract terms benefited only the caregiver, the contract exposed E.S. to unwarranted risks and is worthless on the open market.

The E.S. case is annexed here: E.S. v. Division of Medical Assistance and Health Services

(I previously blogged about the prior decisions in the E.S. case decided by the  administrative law judge and Director of the Division of Medical Assistance and Health Services here.)