Daily Development for Tuesday, November 22, 2005
by: Patrick A. Randolph, Jr.
Elmer F. Pierson Professor of Law
UMKC School of Law
Of Counsel: Blackwell Sanders Peper Martin
Kansas City, Missouri

PROPERTY TRANSFER; MEDICAID:  A person may not be deemed ineligible for Medicaid assistance based on the "look back" doctrine if the person conveyed property by a deed that was executed more than thirty-six months before the person applied for the assistance even if the deed is not recorded until later.  

H.K. v. State of New Jersey, Department of Human Services, 184 N.J. 367, 877 A.2d 1218 (2005); July 21, 2005.

A woman was conveyed property by 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.  Due to the woman's deteriorating condition, she decided to convey the property to her three children.  Shortly thereafter, she executed a deed conveying the property as a gift to her children.  The deed was not recorded, however,  until two years later.  Almost two years after that, 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.  The department 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 permitte

d 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.  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 i

neligible for Medicaid on the basis of the "look back" doctrine.

Comment: Of course, deeds that are delivered to relatives and unrecorded can easily be “undelivered” and rendered void.  It’s not desirable to encourage this practice.  But to hold that an unrecorded deed is not a valid delivery of title is similarly undesirable.  The law is too well established in this country to the contrary, and there is no reason to have a special rule for these circumstances. 

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