Appeals Court Vacates Decision Allowing N.J. to Analyze Promissory Notes As Trust-Like Devices

The U.S. Court of Appeals for the Third Circuit vacates a district court decision allowing New Jersey's Medicaid agency to analyze promissory notes as trust-like devices, holding the state must first determine whether the notes would be counted as resources under regular resource-counting rules. Sable v. Velez (U.S. Ct. App., 3d Cir., No. 10-1148, July 28, 2010).

A group of New Jersey residents lent money to close relatives in return for promissory notes. However, after the individuals applied for Medicaid, the state denied their applications, claiming that the promissory notes were trust-like instruments that qualified as available resources.

The residents filed suit in federal district court seeking to enjoin the state from counting the promissory notes as available resources, arguing it was not permissible for the state to treat the promissory notes as trust-like devices. The district court denied the request for preliminary injunction, holding that there was nothing in the Medicaid Act or the POMS that prevented the state from analyzing promissory notes as a trust-like device if the situation warranted it. The residents appealed.

The U.S. Court of Appeals for the Third Circuit vacates and remands, holding the district court did not use the proper analysis to determine if the facts of the case warranted trust-like device analysis. According to the court, the district court "committed legal error when it analyzed the notes as trust-like devices without first determining whether they would be counted as resources under the regular resource-counting rules." The court notes that if the promissory notes are resources, the analysis would never reach the trust-like device provision.

For the full text of this decision in PDF, go to: https://www.ca3.uscourts.gov/opinarch/101148np.pdf
(If you do not have the free PDF reader installed on your computer, download it here.)

Did you know that the ElderLawAnswers database now contains summaries of more than 1,600 fully searchable elder law decisions dating back to 1993? To search the database, click here