New Jersey Medicaid Agency May Count Promissory Notes as Available Resources

On remand, a U.S. district court once again rules that New Jersey's Medicaid agency may analyze promissory notes as trust-like devices and count the promissory notes as available resources. Sable v. Velez (U.S. Dist. Ct., D. N.J., No. 09-2813, Dec. 9, 2010).

A group of New Jersey residents lent money to close relatives in return for promissory notes. 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. 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 vacated and remanded, holding 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 U.S. District Court for the District of New Jersey again denies the preliminary injunction, holding that the notes are not cash loans or promissory notes, so the state may treat them as trust-like devices. The court finds that there is no evidence the repayment plans for the loans are feasible, so the notes are not cash loans. In addition, the relationship of the parties, the timing of the loans, and the amount of the loans indicate that the loans are not bona fide cash loans or promissory notes.

For the full text of this decision, go to: https://attorney.elderlawanswers.com/sable-v-velez-us-dist-ct-d-nj-no-09-2813-dec-9-2010-8828

Did you know that the ElderLawAnswers database now contains summaries of more than 1,800 fully searchable elder law decisions dating back to 1993? To search the database, click here.