Ronald Fatoullah & Associates - Elder Law

Case Illustrates the Importance of Carefully Documenting Transfers


As part of a Medicaid application, the applicant or his/her representative must submit and explain transactions (deposits and withdrawals) going back five years prior to the requested Medicaid "pick up date." As such, it is often necessary to explain any funds transferred to relatives, whether they are for repayment of a loan, reimbursement to relatives for expenses paid on the applicant's behalf, or payment to caregivers for personal services. The following cases illustrate the necessity of consulting with an experienced elder law attorney to properly draft agreements that validly memorialize the intended purpose of transferred funds.

A recent case, In the Matter of Komanoff Center for Geriatric and Rehabilitative Medicine v. Richard F. Daines, makes obtaining eligibility more difficult in the situation where a Medicaid applicant repays a relative for money expended on his/ her behalf.

The Medicaid applicant, Bernadette Jordan, transferred $144,814.70 from her revocable trust to her daughter, purportedly to repay her daughter for expenses that her daughter paid on her behalf. However, as a result of the transfer, Nassau County Department of Social Services denied Medicaid eligibility for the applicant. After a fair hearing upholding the denial, the petitioner commenced a CPLR Article 78 proceeding in the Supreme Court to review the determination.

The petitioner argued that the transfers to daughter were repayments for documented expenses that the applicant's daughter had made on behalf of her mother with the expectation of repayment. The Supreme Court denied the petition and dismissed the Article 78 proceeding.

The Appellate Division upheld the decision. It held that since "no contemporaneous written agreement existed providing for the repayment of the past financial assistance to the applicant, that financial assistance was presumably made without the expectation of repayment. Thus, a rational basis existed for determining that the applicant's monetary transfers to her daughter were not made for fair market value or for other valuable consideration."

The decision reflects the importance of having seniors and their children document their intent by signing a written loan agreement before paying for expenditures that are expected to be reimbursed in the future.

Similarly, if a child caregiver expects reimbursement for her services on behalf of a parent, a personal services agreement must be carefully drafted. In Matter of Barbato v. New York State, a New York appeals court deemed the five Medicaid applicants' personal service agreements that provided for lump -sum payments for future services, to be transfers of assets for less than fair market value. Transfers of assets that are deemed for "less than fair market value" will be penalized for Medicaid nursing home eligibility.

The five respective nursing home residents had personal service agreements with their caregivers. The caregivers agreed to provide services to the residents for the rest of their lives in exchange for a bulk transfer of assets. One of the agreements stated that services would be provided "at least" 15 hours a week while the remaining agreements stated that services would be provided "as needed."

According to the court, the agreements that contained "as needed" language were not transfers for fair market value "because there is no basis upon which to conclude that the transfer of a specific amount of assets for services that may or may not be rendered is for fair value." In addition, the absence of a refund provision in any of the agreements meant that the caregiver could receive a windfall if the applicant did not reach his/her life expectancy.

These cases demonstrate the need to involve an experienced elder law attorney very early in the planning process. The attorney will ensure, if appropriate, that all transfers are carefully and clearly documented in writing to avoid unintended outcomes as set forth above.

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