When Joint Tenancy Transfers Foil Medicaid Eligibility

A New York appeals court rules that a woman who, two years before applying for Medicaid, transferred money to a friend through joint tenancies in a claimed effort to avoid probate did not rebut the presumption that the transfers were made in order to qualify for Medicaid.

American law contains a principle that runs like a thread through very fabric of our jurisprudence – one is “innocent until proven guilty.” In other words, the law begins with the premise that one accused of wrongful conduct or motives, whether in a civil or a criminal context, is first given the benefit of the doubt until established otherwise by competent evidence to the contrary.

Nonetheless, sometimes the tax courts, in their zeal to root out cheats, end up reversing that principle and end up turning on those vulnerable people who act only in the best of intentions: sometimes the elderly are “guilty until proven innocent” when it comes to the courts and Medicare disqualification.

Consider the case of Mallery v. Shah (N.Y. Sup. Ct., App. Div., 3rd Dept., No. 513277, Mar. 1, 2012), as written about here in a recent post over at ElderLawAnswers.

Here’s the deal: Paula Mallery wanted to be sure she had safely left her estate to her friend, Ron Stanton, and a moderate estate at that, without her family interceding and dragging the matter into the probate court following her death. Her reasons are her own (but you can appreciate anyone wanting to avoid a public bloodbath). It was something she thought about, even sought counsel for, and ultimately effected by adding Mr. Stanton as joint-tenant on her home and bank accounts. Mr. Stanton withdrew $141,410.12 between 2007 and 2008. Then, in 2009, when Ms. Mallery fell, required nursing home care, and ended up applying to Medicaid to pay for it.

No, no, no.

That was Medicaid’s response. Why? Medicaid maintained that Ms. Mallery had effectively made “uncompensated transfers” and was therefore subject to a 19 month penalty period (and more than a year and a half of such care is expensive!).

To assume the absolute best of Ms. Mallory and her motivations – because it wouldn’t change the decision either way – she simply intended to pass her property quietly to Mr. Stanton, but ended up getting dragged into court. She appealed the decision and was ultimately rejected on the grounds that she never disproved the allegation her planning moves were motivated with an eye toward Medicaid qualification.

It’s yet another harsh lesson in unintended consequences and the trials of qualifying for Medicare.

In the end, planning for your assets after death must always also be about planning for those assets, and your medical care, throughout the remainder of your life.

You can learn more about elder law planning in the Elder Law Planning Practice Center on our website. Be sure to sign up for our free e-newsletter to stay abreast of issues like these that could affect you, your loved ones and your estate planning.

Reference: ElderLawAnswers.com (March 5, 2012) “Estate Planning Move to Avoid Probate Earns Medicaid Applicant Penalty Period

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