A U.S. court of appeals rules that a transfer to a special needs pooled trust by a Medicaid recipient who is age 65 or older triggers a Medicaid penalty period. Richardson v. Hamilton (1st Cir., No. 18-1223, June 20, 2019).

Eighty-seven-year-old Yvonne Richardson resided in a nursing home and received Medicaid benefits. Ms. Richardson’s conservator deposited money from the sale of her house into a pooled special needs trust. The Maine Department of Health and Human Services notified her that it would suspend her Medicaid benefits as a result of the asset transfer because it considered the transfer to be for less than fair market value.

Ms. Richardson filed a lawsuit against the state, arguing that the transfer to the pooled trust should not cause a penalty period. The district court dismissed the lawsuit, concluding that 42 U.S.C. § 1396p(c)(2)(B)(iv) expressly protects the transfer of assets to an SNT only by individuals under 65 years of age with disabilities. The pooled trust appealed.

The United States Court of Appeals, First Circuit, affirms, holding that under the plain language of federal law, “when a beneficiary who is age sixty-five or older gives up her assets for less than fair market value to a pooled special needs trust, there has been a transfer that triggers a temporary period of ineligibility.” The court noted that “if the disposition of assets is indeed for fair market value, the Transfer Provision — by its plain terms — does not apply” and one judge concurred, suggesting that the trust should have argued that the settlor received fair market value.

For the full text of this decision, go to: http://media.ca1.uscourts.gov/pdf.opinions/18-1223P-01A.pdf