An administrative law judge in New Jersey concludes that the state cannot impose a penalty period based on distributions made from a trust when the trust was created before the five-year look-back period. A.M. v. Division of Medical Assistance and Health Services (N.J. Office of Administrative Law, No. HMA 9252-17, March 2, 2018).
In 2005, A.M. created an irrevocable trust that named her four children as beneficiaries and transferred a remainder interest in her property into the trust while retaining a life estate. In 2010, she transferred the life estate into the trust. In 2013 and 2014, the trustees made distributions to the beneficiaries and then terminated the trust.
A.M. applied for Medicaid, and the state imposed a penalty period because of the transfers from the trust. A.M. requested a hearing. The state argued that because income was distributed from the trust, the entire trust was an available asset.
The Administrative Law Judge (ALJ) concludes that the trust was irrevocable and the transfer to the trust occurred outside the five-year look-back period, so the transfers to the beneficiaries could not be used to calculate a penalty period. The ALJ rules that the state should be looking at the loss of income caused by the termination of the trust and "a penalty based on the transfer of the stream of income caused by the termination of the Trust shall be assessed on the total projected amount of income that was transferred."
For New Jersey ElderLawAnswers member Donald D. Vanarelli's summary of the case, click here.
For the full text of this decision, go to: https://vanarellilaw.com/wp-content/uploads/2018/03/A.M.-v.-Monmouth-Cty-Bd-of-Soc-Svs-Docket-No.-HMA-9252-17-Initial-Decision.pdf
Did you know that the ElderLawAnswers database now contains summaries of more than 2,000 fully searchable elder law decisions dating back to 1993? To search the database, click here.
Subscribe to the Knowledge Bank.
