Daily Development for Tuesday, January 24, 2006
by: Patrick A. Randolph, Jr.
Elmer F. Pierson Professor of Law
UMKC School of Law
Of Counsel: Blackwell Sanders Peper Martin Kansas City, Missouri dirt@umkc.edu

ELDERLAW; MEDICAID QUALIFICATION: Although property transfers within three years of a person’s applying for medicaid may be viewed as suspected efforts to reduce one’s estate in order to qualify for public aid, transfers outside that period may be made freely with this intention as a matter of state policy in New Jersey, and the court will look to the time of execution [delivery?] of a deed, not the recording date, if later, to establish whether the three year requirement has been satisfied.

H.K. v. State of New Jersey, Department of Human Services, 184 N.J. 367, 877 A.2d 1218 (2005)

A woman obtained property through her father's will.  She moved into the home on the property and a couple of months later, she was diagnosed with Alzheimer's disease.  At that time, the estate had not yet formally deeded the property to her. 

Due to the woman's deteriorating condition, she decided to convey the property to her three children.  Shortly thereafter, advised by a lawyer, she carried out an extensive estate plan, including the execution of a deed conveying the property as a gift to her children.  Although the lawyer delivered the executed deed to the daughter a few days later, at that time the estate had not yet delivered an executed deed to the mother.  Thereafter, there were additional problems satisfying recorder’s office formalities for the recording of a probate deed.  In addition, the deed was lost within the leaves of a cookbook for some time.  As a consequence, the daughter  recorded the deed two years after it was executed.  

Almost two years later, the woman applied for Medicaid nursing home assistance.  The county department of human services rejected her application based on the "look-back" doctrine which is codified in the New Jersey Administrative Code.  This doctrine provides that a person may not be eligible for Medicaid if he or she has disposed of any assets at less than fair market value during the thirty-six month period immediately preceding the individual's application.  Deeds executed during that time are presumptive attempts to avoid personal responsibility for medical expenses.

 The department of human services determined that the woman was ineligible for Medicaid because she conveyed her home less than thirty-six months before submitting her application.  The woman appealed to the New Jersey Division of Medical Assistance and Health Services (DMAHS), who referred the matter to the New Jersey Office of Administrative Law.  An administrative law judge (ALJ) issued a decision recommending that the woman's application be approved.  DMAHS rejected this recommendation and remanded the matter back to the ALJ.  While the matter was pending, the parties entered into a settlement agreement that permitted the woman to become eligible for Medicaid.  The ALJ approved the settlement and recommended to DMAHS that the agreement be approved.  The acting director of DMAHS once again rejected the ALJ's recommendation and declared the woman ineligible for Medicaid assistance. [Wow!!  Ed.]

The woman appealed and the Appellate Division affirmed.  The woman then filed a petition for certification which was granted.

The New Jersey Supreme Court reversed DMAHS's determination ruling that the agency had misapplied the law that governs the conveyance of real property.  The Court held that case law establishes that the transfer of an interest in property by deed is complete when the deed is executed and delivered by the grantor and accepted by the grantee, and not when the deed is recorded.  The Court held that the agency erred in concluding that the woman did not effectively convey the property until the deed was recorded.  It determined that the property was conveyed when the deed was executed, which was more than thirty-six months before the woman applied for Medicaid, rendering the woman eligible for assistance. 

The Court emphasized its prior ruling in In re Keri, 181 N.J. 50 (2004), where it approved the practice of conveying property within family units in preparation of a family member's application for Medicaid assistance.  The Court concluded that the agency erred in finding the woman ineligible for Medicaid on the basis of the "look back" doctrine.

Comment 1: Significantly, the case includes extensive discussion of the appropriateness of divesting oneself of assets in order to qualify for Medicaid benefits in the event of a future illness.  The court’s view is that, in New Jersey at least, this is a perfectly respectable and honorable undertaking, and in fact it is what the state legislature anticipates that clients will do, so long as they get it done more than three years prior to applying for Medicaid.  Three years of penury (with reliance upon one’s newly enriched relatives) is the price to pay for government supplied medical support for the balance of one’s critical illness.

Comment 2: It should be noted that in these cases the party divesting assets rarely expects ever to get them back.  The future is one of medical treatment preceding actual departure from this life.  If the divesting party actually attempted to make arrangements to reaquire the divested property if the anticipated illness did not occur, or after it had run its course, then the editor suspects that the law and the court would take a different view of the circumstances. In short, most likely you can’t take it with you, and you can’t get it back. 

Readers are encouraged to respond to or criticize this posting.

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