Marinaro secures Court reversal of Medicaid denial where the proof required by DMAHS just didn’t exist

The burden to prove eligibility for Medicaid rests with the applicant, but sometimes, the agency just refuses to accept the evidence they are given. This is demonstrated in a recent New Jersey case in which a denial of benefits was reversed by the Appellate court. The decision is “not approved for publication ,” which means it doesn’t establish a precedent that’s binding on other courts, but it does provide an interesting view of what can happen in a case. L.A. vs DMAHS decision

L.A and her husband established a revocable living trust for their own benefit, and transferred their house into it. Their Social Security numbers were associated with this trust. An attorney wrote the trust. The Asset Schedule  at the back of the Trust document wasn’t filled out, so nothing was shown as to the assets that were placed into the trust. Some years later, in 2012, the trustees transferred the property out of the trust into the names of L.A. and her husband. In 2017, the couple terminated the Trust — which held no assets and apparently no longer had any purpose —  and transferred the house into L.A.’s sole name. Later, a Medicaid application was filed for L.A. They didn’t disclose the Trust when they provided the 60-month look-back documents. For the look-back, one must submit records of all assets held within the prior 60 months. As noted, the Trust had not held any assets during the look-back period. The agency reviewed the Deed and asked for the Trust records. The applicant submitted the trust document, the trust termination document, and a letter from their attorney which stated that the only asset that was ever in the Trust was the house. As noted above, Schedule A to the trust was blank, so no assets were listed on the Trust. The application was denied for “failure to submit required verifications” of the assets in the trust. L.A. requested a fair hearing appeal before the Office of Administrative Law (OAL).

At the hearing before the Administrative Law Judge (ALJ), the attorney who wrote the trust testified in accordance with the letter he had written for the application, and explained that the annexed Schedule was left blank because it called for information not applicable to the situation. Both he and L.A.’s husband testified that the house was the only asset that was ever in the Trust. Tax return evidence was submitted which did not show income from any trust assets.  The ALJ concluded that they were credible, but that the explanation about the blank schedules was inadequate and that plaintiff had indeed failed to submit the “required verifications” to establish Medicaid eligibility, and upheld the denial of benefits. The DMAHS adopted that decision, and L.A. appealed, represented by our Firm. Essentially, the Final Agency Decision stood for the proposition that even when there is no proof of assets, the agency may presume that they exist, and may deny eligibility for failure to prove otherwise.

On appeal, the court reversed, ruling that the final agency decision was not supported by the record. An administrative agency must base its decision on the “substantial credible evidence” in the case record, and the appellate court can overrule an agency decision if it is based on “findings that are contrary to the record.”  The court noted that the agency “reviewed the application with skepticism” despite the explanations,  and despite that information, “speculated” that additional assets were in the trust, leading to a situation in which “L.A. was required to produce information that simply did not exist” The Court reversed the denial, and held that “L.A. supplied all the necessary information for review of her application, and that her benefits should not have been denied because of the omission” of evidence that simply does not exist.

The Medicaid application process is a minefield with many traps for the unwary. As individuals grow older they need to always be looking to the future when they set up their financial arrangements, maintain their paperwork and handle their accounts and trusts, because things can turn on a dime and it just might become necessary to prove one’s eligibility for Medicaid. We’re here to help at every step of the way.


Call for advice and representation concerning Medicaid planning, applications and appeals ……. 732-382-6070

A disinherited spouse could have a medicaid problem

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