But I Did Spend Last Night At A Holiday Inn Express

Years ago, there were a series of commercials in which ordinary folks would go into operating rooms to perform surgeries, fly helicopters and ride bulls.  Of course, they would have no training or qualifications.  Yet when asked if they were a doctor or a pilot, etc, they would also respond, “No, but I did spend last night at a Holiday Inn Express!”  It was catchy and I’m sure good marketing.  However, living in the do it yourself age can come with many risks.

In 2007, C.W. began residing in a nursing home in Union County.  On or before March 1, 2008, she transferred virtually her entire estate worth $863,935.11 to her children.  On March 11, 2008, she applied for Medicaid before the Union County Board of Social Services.  Her application was denied, and she was assessed a penalty of ineligibility for Medicaid benefits of ten year, four months and thirteen days.

Her children transferred back $234,600 in cash as well as the home back to C.W.  Both sources of assets were used to pay for her care.  On January 29, 2013, C.W. reapplied for Medicaid benefits and sought to have the original penalty of ineligibility reduced by the amount of assets returned.  However, the Appellate Division of the New Jersey Superior Court said this plan of action was insufficient and upheld the denial of the new application of C.W.

In a stirring decision, C.W. v. Div. of Medical Assistance and Health Servs. (Aug. 31, 2015 #22-2-7790), the Court held that once a penalty period is set it cannot be reduced unless and only if the entire amount of assets were transferred back to the gifting party.

This case highlights the need to avoid what is now being commonly referred to as “do it yourself” Medicaid planning.  With the amount of assets which were available to be transferred, the maximum period of ineligibility should not have exceeded the five year lookback.  This case emphasizes the need to hold off on applying for Medicaid until the look-back period has expired.

What is not reported but which may have also occurred is the tax ramifications upon the family.  When assets are transferred, income taxes may be unnecessarily imposed if there are tax deferred income products such as IRAs and annuities.  If capital assets such as real estate and stock are transferred, a carry over basis may result which will lead to often avoidable payments of capital gains tax by the recipients.  In all, the case reinforces the need to undertake Medicaid planning underneath an interdisciplinary backdrop which interweaves public benefits law, income tax regulations and capital gains principles.  As the State of New Jersey becomes ever more aggressive in its interpretation of Medicaid law, gifting and planning must be done within competent guidelines.

 

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