In 1998 a law was passed that authorized a spouse living in the community to refuse to have his or her assets and/or income used in the computation of the nursing home spouse’s Medicaid eligibility. This is commonly known as “spousal refusal.” Spousal refusal was enacted after full congressional hearings determined that forcing healthy community spouses to impoverish themselves resulted in an increased drain on the public. Spousal refusal is a right that exists under federal law.
When spousal refusal is invoked by the healthy spouse (often referred to as the “community spouse”) in the context of a Medicaid application, planning often involves transferring the couple’s assets in excess of $13,800 into the well spouse’s name alone.
Once that is effectuated, Medicaid is obligated to cover the cost of care for the institutionalized spouse, but reserves the right to pursue the refusing spouse for the monies it lays out. Based on this scenario, attorneys will often advise the community spouse to engage in follow up planning once the ill spouse’s Medicaid coverage is in place, so that the community spouse’s assets are ultimately protected from Medicaid’s reach.
Unfortunately, a recent New York Appellate division case does not bode well for this type of follow up planning. In Matter of Steele (N.Y. Sup. Ct., App. Div., 3rd Dept., No. 511429, June 9, 2011), the Court held that the well spouse of a Medicaid recipient fraudulently transferred his car to his caregiver because at the time of the transfer his debts exceeded his assets. Based on this reasoning, the Court ruled that the state could recover from the spouse’s estate money paid for the sick spouse by Medicaid.
The facts of the estate are as follows. Jasper Steele’s wife entered a nursing home and applied for Medicaid. Steele filed a spousal refusal letter, refusing to make his income and assets available to pay for her care.
After Steele died, the state filed a claim against his estate, arguing certain assets that should have been available to pay for his wife’s care were fraudulently conveyed, including an annuity purchased before the Medicaid application, a lake house transferred to his children and a car transferred to his caregiver. Pursuant to state law, a fraudulent conveyance occurs when a transfer is made without consideration (i.e., without getting anything of value in return) that renders the transferor insolvent when there are known creditors. The trial court found that the transfers did not render Mr. Steele insolvent and therefore, Medicaid was not permitted to recover against Steele’s estate. The state appealed the trial court’s decision.
The New York Supreme Court, Appellate Division reversed the trial court’s decision in part, holding that the transfer of the car rendered Mr. Steele insolvent. The evidence showed that the annuity was purchased before there was existing debt and that Steele had sufficient resources to cover the cost of his wife’s medical care at the time the lake house was transferred to his children. However, Steele’s debts did in fact exceed his assets at the time the car was transferred. The court ruled that the state may recover Mr. Steele’s available resources, “which is an amount consisting of his excess resources calculated at the time of the application and his excess income for the 39 months between his wife’s entry into the nursing home and [his] death.”
Medicaid eligibility, transfer and recovery rules are highly complex. This case underlines the importance of having competent elder law counsel plan, prepare and file the Medicaid application.
It is clearly not enough to render one’s spouse eligible for Medicaid. There are recovery issues that often crops up unbeknownst to the well spouse. Follow up planning must be done in order to preserve the assets of the well spouse.
Ronald A. Fatoullah, Esq. is the principal of Ronald Fatoullah & Associates, a law firm that concentrates in elder law, estate planning, Medicaid planning, guardianships, estate administration, trusts and wills. The firm has offices in Forest Hills, Great Neck, Manhattan, Brooklyn, and Cedarhurst, NY. Mr. Fatoullah has been named a “fellow” of the National Academy of Elder Law Attorneys and is a former member of its Board of Directors. He also served on the Executive Committee of the Elder Law Section of the New York State Bar Association for over 15 years. Mr. Fatoullah has been Certified as an Elder Law Attorney by the National Elder Law Foundation. Mr. Fatoullah is a co-founder of Senior Umbrella Network of Queens. This article was written with Debby Rosenfeld, Esq., a senior staff attorney at the firm. Ronald Fatoullah & Associates can be reached by calling (718) 261-1700, 516-466-4422, or toll free at 1-877-ELDER-LAW or 1-877-ESTATES.
