Fleming & Curti, P.L.C. - Purchase of Life Estate Does Not Gain Medicaid Eligibility

MARCH 3, 2003 VOLUME 10, NUMBER 35

Purchase of Life Estate Does Not Gain Medicaid Eligibility

Stella Thompson was living alone in Virginia when she developed a serious leg infection requiring that she be admitted to a nursing home. Her sister Josephine Greene moved her to Florida, into a nursing home near Ms. Greene’s home, and applied for Medicaid assistance with the cost of the nursing home. As part of that move, Ms. Greene sold an interest in her own home to her sister.

Medicaid, of course, provides medical care for the disabled and elderly poor. If Ms. Thompson’s available resources exceeded $2,000 she would not qualify for nursing home assistance from the Florida version of the Medicaid program. Ms. Thompson had over $20,000 in cash reserves, and so she was ineligible upon her arrival in Florida and admission to the facility.

On behalf of her sister Ms. Greene could have simply paid for nursing home care until the remaining $20,000 was reduced to $2,000, and then applied for Medicaid eligibility. She chose instead to buy her sister a home. More precisely, she decided to sell her sister a life estate in her own condominium.

A "life estate" gives the owner the right to occupy, rent out or otherwise control a property for life. On the death of the life estate holder, however, the property automatically becomes the property of the person named as the holder of the "remainder" interest. In Ms. Thompson’s case, Ms. Greene used a power of attorney to buy a life estate in Ms. Greene’s condominium for Ms. Thompson—giving her the right to live there, and even to charge Ms. Greene rent to stay in what had been her condominium.

Why would Ms. Greene take such a step? Because Medicaid recipients are permitted to retain their homes, Ms. Greene reasoned that Ms. Thompson could qualify for Medicaid without having to dispose of her new interest in the condominium, and that Ms. Greene would be permitted to keep the $18,500 purchase price.

The Florida Medicaid agency did not agree. The hearing officer considering Ms. Thompson’s application discredited the appraiser hired by Ms. Greene to value her sister’s life estate, and continued to treat the $18,500.00 as an available resource. Ms. Thompson appealed to the Florida Court of Appeals.

The appellate court agreed with the Medicaid agency. Even though no evidence was introduced by the agency, said the judges, the transaction "was a sham to gain eligibility … in the absence of any competent evidence to support a reasonable purpose and a market value for the transfer." Thompson v. Dep’t. of Children and Families, January 24, 2003.

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