American law contains a principle that runs like a thread through very fabric of our jurisprudence – one is “innocent until proven guilty.” In other words, the law begins with the premise that one accused of wrongful conduct or motives, whether in a civil or a criminal context, is first given the benefit of the doubt until established otherwise by competent evidence to the contrary.
Nonetheless, sometimes the tax courts, in their zeal to root out cheats, end up reversing that principle and end up turning on those vulnerable people who act only in the best of intentions. As well, sometimes the elderly are “guilty until proven innocent” when it comes to the courts and Medicaid disqualification.
Here’s the deal: Paula Mallery wanted to be sure she had safely left her estate to her friend, Ron Stanton, and a moderate estate at that, without her family interceding and dragging the matter into the probate court following her death. Her reasons are her own (but you can appreciate anyone wanting to avoid a public bloodbath). It was something she thought about, even sought counsel for, and ultimately she added Mr. Stanton as joint-tenant on her home and bank accounts. Mr. Stanton withdrew $141,410.12 between 2007 and 2008. Then, in 2009, Ms. Mallery fell, required nursing home care, and ended up applying to Medicaid to pay for it.
No, no, no.
That was Medicaid’s response. Why? Medicaid maintained that Ms. Mallery had effectively made “uncompensated transfers” with the purpose of qualifying for Medicaid and was therefore subject to a 19 month penalty period (and more than a year and a half of such care is expensive in Oregon, let alone in New York!).
To assume the absolute best of Ms. Mallory and her motivations – because it wouldn’t change the decision either way – she simply intended to pass her property quietly to Mr. Stanton, but ended up getting dragged into court. She appealed the decision and was ultimately rejected on the grounds that she never disproved the allegation her planning moves were motivated with an eye toward Medicaid qualification. Does that seem backward to you? Does that sound like “guilty until proven innocent”? The law is clear that any transfer of assets within the 60 month look-back period need to be with the intent of qualifying for Medicaid in order to warrant a penalty period. What seems wrong in this case is that the burden was placed on Ms. Mallory to prove that those transfers were not made with the intent to qualify for Medicaid, rather than the New York Medicaid program proving that they were.
Reference: ElderLawAnswers.com (March 5, 2012) “Estate Planning Move to Avoid Probate Earns Medicaid Applicant Penalty Period”
Schultz & Associates Law Center, P.C. is an Oregon law firm with offices in Eugene, Salem, and Roseburg, Oregon.