Federal district court in New Jersey denied a Medicaid applicant’s request for an injunction directing the state to disregard his wife’s purchase of a life estate in their daughter’s home when determining his eligibility for nursing home Medicaid benefits.  The Court ruled that issues of fact were in dispute, preventing an injunction from being issued. Traister v. Velez (U.S. Dist. Ct., D.N.J., No. 11–3851, Oct. 13, 2011).

From 2002 through August 2009, James Traister and his wife lived in a carriage house located on a lot owned by the Traisters’ daughter and her husband, who lived in the main house on the lot. In August 2009, Mr. Transfer was admitted to a nursing home on a permanent basis. Later in August, Mrs. Traister bought a life estate in the lot by paying $498,500 to the Traisters’ daughter. According to Mr. Traister, the value of the life estate was determined by multiplying the life estate factor listed in the life estate interest table contained in a publication of the United States Department of Health and Human Services that corresponded with Mrs. Traister’s age in August 2009 with the market value of the lot as determined by an appraisal prepared by a certified real estate appraiser. Based upon the described calculation, Mr. Traister claimed that the life estate was purchased for fair market value. The life estate transfer deed was not recorded until November 8, 2010, over one year after the alleged purchase.

In September 2009, Mr. Traister applied for nursing home Medicare benefits. Several months later, the Medicaid agency denied Mr. Traister’s application based upon the transfer of assets to the daughter in payment for the life estate. Instead of filing an administrative appeal, Mr. Traister filed a complaint in federal court against the Medicaid agency, claiming that the agency violated the Federal Medicaid Act by denying Mr. Traister long term care Medicaid benefits. Mr. Traister then filed a motion for a preliminary injunction, seeking to enjoin the Medicaid agency from treating the August 2009 life estate deed as an uncompensated asset transfer. Medicaid opposed the application. The agency claimed that Mrs. Traister failed to reside in the property for a period of at least one year, as required by the Federal Medicaid Act. According to the agency, the one-year residency requirement must be met immediately before an applicant applies for Medicaid.  Mr. Traister countered, claiming that the one-year requirement can be met at any time.

The U.S. District Court for the District of New Jersey noted that there is “not much guidance” in the case law on the issue of the one-year requirement, although the Court observed that regardless of the requirement, “the purchase of a life estate will trigger neither ineligibility nor a penalty period if the life estate was purchased for fair market value.”  Nevertheless, the Court declined to issue an injunction. To do so, the Court stated, there must be no disputed issues of fact in the case, but the Court found at least three disputed issues of fact: the value of the residence when the transfer deed was recorded, not simply at the time of the life estate purchase; the fact that the Traisters had lived on their daughter’s property for nearly seven years, which “gives rise to a credibility issue as to the Traister’s intention for making the payment seven years later”; and Medicaid agency’s “claim that the appraisal may be a sham because it allowed the Traisters to retain the maximum amount [a Medicaid] applicant may hold and qualify under the regulations.” As a result, plaintiffs’ motion for preliminary injunction was denied.

The case can be found here – Traister v. Velez , (U.S. Dist. Ct., D.N.J., No. 11–3851, Oct. 13, 2011).

(Case Provided Courtesy of the ElderLaw Answers website)