Sister’s Testimony Alone Sufficient to Prove Transfers to Her from Medicaid Applicant Were for Applicant’s Living Expenses

In this case, the New Jersey Superior Court, Appellate Division, reversed a final decision of the state Medicaid agency imposing a 203-day period of disqualification for Medicaid benefits based upon the applicant’s alleged transfer of assets for less than fair market value within the five-year look-back period before the applicant entered a nursing home. J.F. v. Division of Medical Assistance and Health Services (N.J. Super. Ct., App. Div., No. A-3856-19, June 15, 2022).

The Medicaid applicant, J.F., went to live with his sister, M.Q.L., in 2012 because he could not live independently. Until 2020 when he was admitted to a nursing facility, J.F. paid his sister $1,000 a month for rent. Each month, M.Q.L. wrote checks payable to “cash” from J.F.’s account. M.Q.L. kept $1,000 of the funds for monthly rent, and J.F. kept the remainder. During those years, J.F. ultimately transferred $69,800 to M.Q.L. over a five-year period.

J.F. applied for Medicaid, but the Medicaid agency imposed a 203-day disqualification penalty on J.F. for transferring assets to M.Q.L. for less than market value within five years of applying for Medicaid. J.F. appealed.

On appeal, the administrative law judge (ALJ) vacated the disqualification penalty. The ALJ ruled that, based upon M.Q.L.’s testimony, all the funds paid to M.Q.L. were for J.F.’s costs of living, including the $1,000 per month paid for rent. As a result, the ALJ concluded that no transfer of assets for less than fair market value had occurred during the look-back period.

The state Medicaid agency, the Division of Medical Assistance and Health Services (DMAHS), rejected the ALJ’s decision, and re-imposed the 203-day period of disqualification for Medicaid benefits. DMAHS held that M.Q.L.’s testimony did not rebut the statutory presumption that assets were transferred for the purpose of establishing Medicaid eligibility. DMAHS noted that M.Q.L. failed to provide income tax returns declaring the rental income, or documents reflecting expenses incurred on J.F.’s behalf. J.F. appealed to court.

On appeal, the New Jersey Superior Court, Appellate Division, reversed. The Court ruled that it was within the ALJ’s purview to resolve the conflicting evidence regarding plaintiff’s checking withdrawals as well as to decide M.Q.L.’s credibility. The Court held “that M.Q.L.’s credible statements amply and sufficiently rebutted the statutory presumption. M.Q.L. presented convincing evidence ‘that the assets were transferred exclusively (that is, solely) for some other purpose’ than establishing Medicaid eligibility.”  According to the court, “M.Q.L. provided shelter, food, some personal care, and transportation for her brother,” and the fact that M.Q.L. and J.F. had an oral lease “did not make it invalid, particularly given the familial relationship between the parties.”

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