Gifts made during the Medicaid look-back period result in a penalty, or period of ineligibility, unless the applicant can prove that the gifts were made exclusively for some purpose other than to qualify for Medicaid. S.L. v. Division of Medical Assistance and Health Services, Docket No. A-3520-11T4 (App. Div., September 2, 2014)

In December 2009, S.L., then 95 years old, entered a nursing home after a fall. S.L. was able to pay for her stay in the facility until she depleted her personal funds and other assets in August 2010. She then applied for Medicaid.

The Essex County Board of Social Services (CWB) approved her Medicaid application, but imposed a 5.57 month ineligibility penalty because S.L. had made four monetary transfers or “gifts” to her children totaling $40,000 during a two-year period from December 2007 to March 2009, during the Medicaid five year look-back period.

The facts showed that S.L. was in good health at the time she made the $40,000 gifts to her children. S.L.’s gifts were reported to the Internal Revenue Service as permissible tax-free gifts. All gift checks written by S.L. were in her own handwriting. She was 93 years old when she wrote her first $10,000 check to her son in 2007, and 95 years old when she gave her daughter the final $10,000 gift in 2009. After making the gifts, S.L. retained approximately $60,000 in her savings account. Neither S.L., nor her son or daughter contemplated a nursing home as a probable place for S.L.’s care at the time she made the gifts. S.L., and her adult children, were all convinced S.L. would continue to live independently after making the gifts.

S.L. appealed the CWA’s decision imposing a gift penalty . On appeal, the Administrative Law Judge (ALJ) issued an initial decision affirming the CWA’s decision. Though he found it was not unreasonable that S.L. wanted to give her children money while she was alive, the ALJ, noting S.L.’s age and health, concluded that S.L. had not overcome the presumption that Medicaid eligibility was a factor in her decision to transfer assets to her children.

The Director of Medicaid adopted the ALJ’s decision. The Director found that S.L. was not in “excellent health” at the time she made the gifts to her children. As a result, the Director also determined S.L. had not met her burden rebutting the presumption that the gifts were intended to accelerate S.L.’s eligibility for Medicaid.

S.L. appealed the Director’s decision to the Superior Court of New Jersey, Appellate Division. The appeals court found that, under the Medicaid regulations, an applicant may not be eligible for Medicaid if he or she has disposed of assets at less than fair market value at any time during the 60-month look-back period. A transfer during the look-back period gives rise to a rebuttable presumption that the transfer was made to establish Medicaid eligibility. The presumption may be rebutted only by showing that a transfer was made exclusively for some purpose other than to qualify for Medicaid. Under the regulations, the presence of one or more of the following factors may indicate that the assets were transferred exclusively for some purpose other than establishing Medicaid eligibility: (1) Traumatic onset of disability; (2) Unexpected loss of other assets which would have precluded Medicaid eligibility; (3) Unexpected loss of income which would have precluded Medicaid eligibility; (4) Court-ordered transfer (when the court is not acting on behalf of, or at the direction of, the individual or the individual’s spouse); or (5) Evidence of good faith effort to transfer the asset at fair market value. The court found none of these factors present in S.L.’s case.

The appeals court affirmed the Director’s decision imposing a gift penalty, finding that S.L. had not rebutted the presumption that the gifts to her children were made to establish Medicaid eligibility. However, the appeals court also encouraged the legislature to consider changing the law:

Our Legislature should seriously consider whether it is truly in the best interests of a just society to penalize a parent for trying to give her children a small part of resources she and her husband accumulated over a lifetime of work. Unfortunately, that public policy decision is not for this branch of government to make.

The S.L. case is annexed hereto – S.L. v. Division of Medical Assistance and Health Services

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