Medicaid Recipient’s Transfer of House to Husband Is Set Aside to Allow State to Recover Benefits

Holding that state law does not conflict with federal Medicaid law, an Oregon appeals court rules that a court may set aside a Medicaid recipient’s transfer of her house to her husband for no consideration in order to allow the state to recover Medicaid benefits from the property. Dept. of Human Services v. Hobart (Or. Ct. App., No. A170712, March 2, 2022).

Alexandra Hobart owned a house jointly with her husband. Three years after Ms. Hobart moved into a nursing home and began receiving Medicaid benefits, her husband was diagnosed with cancer and given one year to live. Ms. Hobart transferred her interest in the house to her husband for no consideration and passed away a few months later. Her husband conveyed the property to a trust with their adult children as successor trustees. After Ms. Hobart’s husband died, their children transferred the house from the trust to themselves.

The state filed a claim against the children to recover Medicaid benefits paid on behalf of Ms. Hobart. Under Oregon Medicaid law, the state can recover from any property and assets that the decedent had a legal title to or interest in at the time of death. State law also permits the court to set aside a transfer by a Medicaid recipient that lacks consideration or was done to hinder estate recovery. The trial court set aside Ms. Hobart’s transfer and ruled in favor of the state. The children appealed, arguing that the state law conflicts with federal law allowing spouses to transfer assets to each other without affecting Medicaid eligibility.

The Oregon Court of Appeals affirms, holding that the court properly set aside the transfer and the state is entitled to recover Medicaid benefits from the property. The court rules that the fact that transfers between spouses “does not render one ineligible to receive Medicaid benefits has little or nothing to do with whether states may provide for the set aside of certain asset transfers after the deaths of the Medicaid recipient and their spouse in connection with Medicaid estate recovery.” According to the court, it is not true that “when a Medicaid recipient dies, federal Medicaid law requires any and all pre-death transfers to be treated as valid, even if a transfer lacked consideration or was specifically intended to hinder or prevent estate recovery.”

ElderLawAnswers member attorney Tim Nay of Law Offices of Nay & Friedenberg in Portland argued the case for the children.

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