Assets in an LLC Are Available Resource for Medicaid Eligibility Purposes

A U.S. district court refuses to grant an injunction requiring the state to provide Medicaid benefits to an applicant who transferred her assets to a limited liability company (LLC). Shackleford v. Lake (U.S. Dist. Ct., W.D. Okla., No. CIV-15-0218-HE, Nov. 29, 2016).

In March 2013, assisted living resident Leola Shackleford executed an operating agreement to create an LLC. She transferred all of her personal and real property into the LLC in exchange for a 100 percent interest. The terms of the LLC provided that Ms. Shackleford could not transfer her interest in the LLC to a third party without unanimous consent of the members. Ms. Shackleford also established a trust and transferred 99 percent of her interest in the LLC to the trust while transferring the other one percent interest to her children. Her son became manager of the LLC. The articles of incorporation of the LLC were filed in April 2013.

Ms. Shackleford applied for Medicaid benefits, but the state determined that the LLC was a countable resource and denied her benefits. She sued the state in federal court, seeking an injunction ordering the state to grant her Medicaid benefits. She argued that the LLC is a non-liquid resource that cannot be converted to cash, so it is not a countable resource.  

The U.S. District Court for the Western District of Oklahoma denies the injunction. According to the court, because the LLC was not incorporated until April 2013, it wasn't legally capable of taking title to property before that date, so the assets effectively remained in Ms. Shackleford's control. The court also rules that the LLC is an available resource because it is a "trust-like device" due to the fact that the assets in the LLC were managed by Ms. Shackleford's son and used for her benefit.

For the full text of this decision, go to: https://cases.justia.com/federal/district-courts/oklahoma/okwdce/5:2015cv00218/93112/59/0.pdf?ts=1480522827

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