Gifts By Medicaid Applicant To Her Children Before She Became Ill Not Subject to Penalty Period

A New York appeals court held that transfers made by a Medicaid applicant before she was diagnosed with Parkinson’s disease were not transfers for less than market value subject to penalty because the transfers were made as part of a history of gifting to her children done exclusively for a purpose other than to qualify for Medicaid, but that she failed to rebut the presumption that transfers made after the diagnosis were made in order to qualify for Medicaid. Underwood v. Zucker (N.Y. Sup. Ct., App. Div., 4th Dept., No. 749 TP 20-00184, Feb. 12, 2021).

Petitioner was in good health and had no serious medical issues for many years. However, in 2016, petitioner was diagnosed with Parkinson’s disease. In December 2017, petitioner, who was then suffering from delirium, was taken to a hospital emergency room. Initially transferred to a short-term care facility, petitioner was transferred to a long-term care facility in February 2018. She applied for Medicaid benefits on February 27, 2018.

The Medicaid agency examined all transfers for less than fair market value made by petitioner during the 5-year Medicaid “look-back period” beginning on February 27, 2013 through February 27, 2018, the Medicaid application date.

Petitioner had a history of providing financial assistance to her daughter which came to light during the examination of financial records by the Medicaid agency. The records revealed that her assistance to her daughter increased after 2016. Also in 2014, Ms. Underwood had loaned her son $10,000 to buy a vehicle. The son made inconsistent payments on the loan and didn’t make any payments after 2016. Ms. Underwood had also loaned another son $150,000 to start a business in 2014. The business went bankrupt and Ms. Underwood received only partial repayment of the loan. Ms. Underwood also made another loan to both her sons after being diagnosed with Parkinson’s in 2016

The Medicaid agency assessed a penalty period, or period of ineligibility for Medicaid, of 22 months based on the transfers made by petitioner to her children. Ms. Underwood appealed, arguing that the transfers were not made in anticipation of applying for Medicaid. After a hearing, the state agreed with the penalty, and Ms. Underwood appealed to court.

The New York Supreme Court, Appellate Division, Fourth Department, modified the penalty period. In explaining the governing law, the Appellate Division held, in pertinent part, as follows:

In determining the medical assistance eligibility of an institutionalized individual, any transfer of an asset by the individual or the individual’s spouse for less than fair market value made within or after the look-back period shall render the individual ineligible for nursing facility services for a certain penalty period. The look-back period is the 60-month period immediately preceding the date that an institutionalized individual is both institutionalized and has applied for medical assistance.

Where a Medicaid applicant has transferred assets during the relevant look-back period for less than fair market value, he or she must prove that the transfers were made exclusively for a purpose other than to qualify for medical assistance.

According to the court, the transfers to Ms. Underwood’s daughter that were made before 2016 were part of the petitioner’s habit of gifting to her children, so they were not subject to a penalty period, but the transfers after 2016 were made in order to qualify for Medicaid. In addition, the court found that the loan to the son to start a business was also not subject to a penalty period because the loan documents complied with federal law and the loan was made while Ms. Underwood was healthy. On the other hand, the court ruled that the unpaid balance of the loan for the car became a transfer for less than market value after the son stopped repaying the loan. Finally, the court held that the loan made after Ms. Underwood was diagnosed with Parkinson’s was an uncompensated transfer.

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