Medicaid Applicant Who Transferred Money To Daughter Months Before Receiving Life Estate In Daughter’s Home Made A Gift And Is Ineligible for Medicaid

A New Jersey appeals court held that a Medicaid applicant who transferred money to her daughter and then a few months later received a life estate in her daughter’s home made a gift to the daughter rather than engage in a bona fide transaction involving the purchase of a life estate, resulting in the imposition of a gift penalty and ineligibility for Medicaid. J.M. v. Division of Medical Assistance and Health Services (N.J. Sup. Ct., App. Div., A-2329-09T3, Aug. 30, 2011).

In March 2008, J.M. wrote a check for $150,000 to her daughter. She wrote the word “gift” in the memo section of the check. Her daughter used that money to make a down payment on a house. In May 2008, J.M. became sick and entered a nursing home. Eight months later, in November 2008, J.M.’s daughter executed a deed and transferred a life estate to J.M. The deed stated the life estate was granted in exchange for the $150,000 previously transferred.

J.M. applied for Medicaid benefits. The state denied benefits due to the $150,000 transfer. J.M. appealed, and the administrative law judge determined that the transfer was in exchange for the life estate, but concluded that J.M. was still ineligible for benefits because she had not lived in the home for at least a year after the purchase, a period of residency required under the Medicaid law. The Director of the New Jersey Medicaid agency affirmed, finding that J.M. had not received fair market value for the transfer of funds. J.M. appealed.

The New Jersey Superior Court, Appellate Division, affirmed, holding J.M. was not entitled to Medicaid benefits. The court ruled that the word “gift” on the check and the eight month time gap between the transfer and the grant of the life estate undermined J.M.’s claim that the transfer and life estate were part of the same agreement. In addition, the court concluded that J.M. had not met the residency requirement under federal law which mandates that a Medicaid applicant who purchases a life estate in another’s home must actually live in the home for at least one year after the purchase in order for the purchase to be exempt from the imposition of a penalty under the Medicaid transfer of assets rules.

The J.M. case can be found here – J.M. v. Division of Medical Assistance and Health Services