Reversing a lower court, the Tenth Circuit Court of Appeals rules that questions of fact remain as to whether multiple loans given by a Medicaid recipient to her daughter-in-law in exchange for promissory notes were bona fide. Rose v. Brown (10th Cir., No. 20-6132, Sept. 28, 2021).
In 2017, Nelta Rose loaned $304,015 to her daughter-in-law in exchange for two promissory notes. Ms. Rose applied for Medicaid benefits and was approved. In 2018, her daughter-in-law made an annual payment on the loan of $66,508, and Ms. Rose loaned the daughter-in-law an additional $37,700 in exchange for another promissory note. The state determined that the 2018 promissory note was an available resource because the payment to the daughter-in-law was not a bona fide loan and that the 2018 promissory note turned the 2017 promissory notes into resources. The state cancelled Ms. Rose’s Medicaid benefits.
Ms. Rose appealed. After an administrative law judge agreed with the state, Ms. Rose sued the state agency in federal court. The state argued that the repayment plan involved the constant creation of new loans, which would never reduce the amount the daughter-in-law owed Ms. Rose. The district court granted the state summary judgment, holding that the promissory note was a resource because Ms. Rose did not enter into it in good faith and the loan resembled a trust.
The U.S. Court of Appeals for the Tenth Circuit reverses, holding that questions of fact remain, so summary judgment in favor the state is not appropriate. The court holds that there is a question of fact over whether the loan was bona fide. According to the court, because the daughter-in-law had already made a loan payment that reduced the amount owed, a “factfinder could reasonably infer that continuation of this pattern would steadily reduce the total principal balance on the loans.” In addition, the court rules that if the daughter-in-law is able to use the funds for her own needs, then the loan is not a trust-like instrument.
For the full text of this decision, go to: https://www.ca10.uscourts.gov/sites/ca10/files/opinions/010110583079.pdf
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