Regular readers of this column will remember a favorite saying of my grandfather: “Pigs get fed and hogs get slaughtered.” I was reminded of this after reading a recent case concerning Medicaid eligibility in the state of New York. A penalty was imposed after a couple made transfers to their son.
Mrs. Wellner had a progressive neurological disorder with home health aides for years and entered a nursing home in October 2014. In 2010, her husband gave money to their son in exchange for a promissory note requiring five annual payments for the son to purchase a home in New York. After two annual payments, their son defaulted on the loan and stopped making payments. In February 2013, and prior to Mrs. Wellner entering a nursing home, Mr. Wellner gave more money to their son in exchange for a 30-year mortgage on the son’s residence in New Jersey. Apparently, son sold the home in New York without repaying his father.
Mrs. Wellner applied for Medicaid shortly after her admission to the nursing home. Both of these loans were disclosed as transfers made within 60-months of the application for Medicaid benefits. The Department of Social Services denied her benefits and imposed a 45-month penalty period of ineligibility due to the transfers. Mr. Wellner appealed and lost.
When a transfer for less than fair market value occurs, the law presumes that the transfer was made to qualify for Medicaid. An applicant can overcome the presumption by demonstrating that he or she intended to receive fair market consideration for the transfers, or that the transfers were made exclusively for purposes other than qualifying for Medicaid. Mr. Wellner testified that he expected the loans to be repaid and that he did not expect that his wife would apply for Medicaid at the time the loans were made.
The court disagreed relying on testimony that Mrs. Wellner was using a walker and had home health aides for her neurological condition at the time of the first loan, that her health condition was progressive, that the son defaulted on the first loan and Mr. Wellner made no effort to collect payment, and that the loans were not actuarially sound.
An actuarially sound loan has a term no greater than the life expectancy of the lender, requires that equal payments are made, and contains a clause that the loan is not cancelled on the death of the lender. Mr. Wellner was 76 years old at the time of mortgage and a 30-year term was not actuarially sound.
Lori Cerato is a Stroudsburg attorney concentrating her practice in the area of elder law. If you would like to see a particular question covered in this column, email firstname.lastname@example.org. Cerato cannot guarantee a reply to every individual’s query.