When a person applies for Medicaid benefits, a five-year look back is done by the county board of social services to see if the applicant had given away any assets that they owned or to which they were entitled. If that occurred, it’s referred to as a “transfer of assets” or “uncompensated transfer of assets,” and the result will be a penalty period in which the person cannot receive Medicaid payments. This causes substantial problems for people in nursing homes or assisted living facilities, because the application isn’t filed until they are out of assets.
What happens if the Medicaid Recipient is married and their community spouse dies? Or the applicant was widowed within the past five years? The question will still be whether the person had given away any assets that they owned or to which they were entitled. What happens if the community spouse signed a Will that left nothing for the Medicaid recipient, or put all their assets in joint names so that the Medicaid recipient inherits nothing from them?
In the Medicaid transfer of assets regulations at N.J.A.C. 10:71-4.10.b.3, a “transfer” is defined as including “failure to take action” to obtain assets, such as ” waiving the right to receive an inheritance, including spousal Elective shares pursuant to N.J.S.A. 3B:8-10.” The Appellate Division decision in the case of I.G. v. Dep’t of Human Services (2006), held that the widower’s failure to make a claim for the elective share was an uncompensated transfer of assets that caused a transfer penalty.
So if the deceased leaves nothing to the spouse who’s on Medicaid, the Medicaid recipient will be expected to assert a “claim” for the elective share or risk losing benefits for a period of time. Under the law, the claim is asserted by filing a court action in the Chancery Division, Probate Part. The applicant would need an attorney. Assuming the surviving spouse is actually legally entitled to a share, the method to calculate the elective share and the formula to calculate the amount due to the individual to satisfy the share is complicated. See N.J.S.A. 3B:8-1 to 8-19. For example, the calculations take into account assets that the survivor receives as a result of the death (such as a pension) and assets that are passing to someone else by way of joint ownership. The elective share starts with one-third of the augmented estate, but the calculation doesn’t stop there.
In some situations, our clients were told by Medicaid agencies that there would be a transfer penalty because the applicant/recipient didn’t receive “one third of the estate.” In other situations, the executor of the estate came to us, trying to figure out whether the estate was obligated to even pay an elective share. The issues aren’t simple, but you need to consider them. Many community spouses have “heard” that they should make a new Will disinheriting the spouse who has to move to the nursing home. The reality is, though, that disinheriting the spouse will likely cause legal problems for the person who is applying for or receiving Medicaid.
Call us about any aspect of Medicaid eligibility planning, applications and appeals… 732-382-6070
A post by Linda Ershow-Levenberg, Esq. for Fink Rosner Ershow-Levenberg Blog.
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