Medicaid Applicant’s Transfers to Her Children Before She Became Ill Not Subject to Penalty Period

A New York appeals court holds that transfers made by a Medicaid applicant before she was diagnosed with Parkinson’s disease were not transfers for less than market value, but that she failed to rebut the presumption that transfers made after the diagnosis were made in order to qualify for Medicaid. Underwood v. Zucker (N.Y. Sup. Ct., App. Div., 4th Dept., No. 749 TP 20-00184, Feb. 12, 2021).

Victoria Underwood had a habit of providing financial assistance to her daughter. In 2016, Ms. Underwood was diagnosed with Parkinson’s disease and her assistance to her daughter increased. In 2014, Ms. Underwood had loaned her son $10,000 to buy a vehicle. The son made inconsistent payments on the loan and didn’t make any payments after 2016. Ms. Underwood had also loaned another son $150,000 to start a business in 2014. The business went bankrupt and Ms. Underwood received only partial repayment of the loan. Ms. Underwood also made another loan to both her sons after being diagnosed with Parkinson’s in 2016. In 2018, Ms. Underwood entered a nursing home and applied for Medicaid. The Medicaid agency assessed a penalty period based on the transfers to her children. 

Ms. Underwood appealed, arguing that the transfers were not made in anticipation of applying for Medicaid. After a hearing, the state agreed with the penalty, and Ms. Underwood appealed to court. 

The New York Supreme Court, Appellate Division, Fourth Department, modifies the penalty period. According to the court, the transfers to Ms. Underwood’s daughter that were made before 2016 were part of a habit of gifting, so they were not subject to a penalty period, but Ms. Underwood did not rebut the presumption that the transfers after 2016 were made in order to qualify for Medicaid. In addition, the court finds that the loan to the son to start a business was also not subject to a penalty period because the loan documents complied with federal law and the loan was made while Ms. Underwood was healthy. On the other hand, the court rules that the unpaid balance of the loan for the car became a transfer for less than market value after the son stopped repaying the loan. Finally, the court holds that the loan made after Ms. Underwood was diagnosed with Parkinson’s is an uncompensated transfer. 

For the full text of this decision, go to: https://www.nycourts.gov/courts/ad4/Clerk/Decisions/2021/0211T1500/PDF/0749.pdf.
 
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