ALJ Must Determine Whether Mortgage Debt Exceeds Value of Transferred Interest

Last Updated: 10/31/2009 1:55:48 PM

A New Jersey appellate court holds that before setting a transfer penalty for a Medicaid applicant, an ALJ must determine whether mortgage debt exceeded the value of the transferred interest, thereby precluding a transfer penalty. A.P. v. Division of Medical Assistance and Health Services (N.J. Super. Ct., App. Div., No. A-6116-07T16116-07T1, Oct. 19, 2009).

M.P., A.P., and A.B. were siblings. After their parents' deaths, A.P. became the caregiver for M.P. who was born developmentally disabled. The parents' will gave a life estate in the family home to A.P. and M.P., with the remainder to A.B. When A.P. became ill and could no longer care for M.P., A.B. became caregiver for both siblings. A.B. took out a mortgage on the home, built an addition and moved into it. Eventually, M.P. and A.P. both entered nursing homes and applied for Medicaid. A.B. then transferred the family home to herself. When the state discovered the transfer, it imposed a transfer penalty and sought repayment of benefits paid to A.P. and M.P.

A.B. argued a penalty should not be applied because she is a sibling who resides in the home and has an equity interest in it. The administrative law judge (ALJ) found that A.B. lived separate from her siblings and that the mortgage interest was not an equity interest. A.P. appealed.

The New Jersey Superior Court, Appellate Division, reverses and remands, holding that the factual finding that the siblings resided in separate dwellings was unsubstantiated and that the ALJ failed to recognize the impact of the mortgage debt when determining the applicability of a transfer penalty. According to the court, it appears the mortgage debt exceeded the fair market value of the transferred interests, making the uncompensated value zero and precluding the imposition of a transfer penalty.

For the full text of this decision, go to: http://lawlibrary.rutgers.edu/courts/appellate/a6116-07.opn.html

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