In almost everything I write, I stress my mission statement: THINK AHEAD. PLAN AHEAD. ACT NOW! A recent experience in a case underscores the importance of this.
At issue were the proceeds of the sale of a condominium owned in another state. The property was purchased in 1992 by the applicant and her son. A portion of the purchase price was financed by a mortgage. Only the mother resided in the condo. It was agreed she would pay the mortgage and other charges. In 1996 she was no longer to meet her obligations. From that time until June 2011, the son, who was liable on the mortgage, made most of the mortgage payments, with the understanding that his mother would reimburse him when the condo was sold. Their agreement was not in writing.
A few years later, the son and his mother discussed the fact that he was paying exclusively for the condo, and that there should be a plan for reimbursement. The mother changed her will and left the condo to the son with a provision that if he predeceased her, his share would pass to his children. There was nothing else in writing. This was not a binding contract.
In 2010, the mother could no longer live on her own and moved in with the son, his wife and children. The condo was listed for sale, but FHA regulations made it impossible for potential buyers to obtain mortgage financing. The property remained vacant and unsold until 2014. In the meantime, the son hired a company to make sure the condo was not vandalized. He paid them about $5000. The company also assisted in staging the property for sale when the FHA restrictions were lifted. Repairs of $27,000 were required - - and paid for by the son.
When the condo was sold, the net proceeds to the son and mother were approximately $50,000. Ordinarily, the parties would each have received $25,000. However, the son had spent $39,000 more than his mother. Because he reimbursed himself with the mother’s entire share of the closing proceeds, she received nothing. By that time, the mother had entered a nursing home and was paying privately with her savings. When her resources were reduced to $2,000, we filed a Medicaid application for her.
The Medicaid caseworker’s determination was that there had been a $13,000 transfer from the mother to the son, resulting to a penalty period of ineligibility of 41days. We believed this was wrong and made an application for a Fair Hearing. This is an administrative proceeding presided over by an administrative law judge who takes testimony and receives evidence to determine whether the decision of the County Board of Social Services (the Medicaid agency) was justified.
The attorney for the Board of Social Services previously said he had no authority to discuss settlement. His position was that because there was no written agreement between the son and his mother, he was not entitled to reimbursement. He refused to accept the provision in the mother’s will as being valid. He also said that even if there had been a written agreement, it would have been unenforceable. He authority was a type of transaction that is admittedly no longer acceptable in New Jersey, but that, on the facts of this case was clearly inapplicable.
His tune changed after informal opening statements before an administrative law judge (ALJ). She offered to mediate the case. When we agreed, she almost immediately opined that the money paid for surveillance of the condo and for repairs were proper. Suddenly, there was an offer to reduce the penalty to $5,300.00, which the son grudgingly accepted.
Had we not accepted the offer, we would have had to return on another day and go through a full hearing. Although we believed we would have won, the decision of the ALJ would not have been final. It would be only advisory, subject to review, and possible rejection, by the Director of the Division of Medical Assistance and Health Services (DMAHS) of the New Jersey Department of Human Services. The irony is that the initial decision by the caseworker had been approved by, and therefore made by, the office of the Director of DMAHS. In other words, DMAHS made the initial determination and would have the right to overrule a judge who made a contrary decision. If this sounds bizarre, it is. But that is the way things are in the Medicaid world. It is why we sometimes refer to Fair Hearings as "Unfair Hearings." The son decided it was better to settle then and there than to incur additional legal fees to win, but ultimately possibly to lose.
There is a moral to this story. The late Samuel Goldwyn is sometimes attributed to having said "A verbal contract is not worth the paper it is written on." Whether Goldwyn actually said it or not, Medicaid often hangs its hat on what is, or is not, in writing. Not only that, in most situations, Medicaid will not accept a written contract to be retroactive to an earlier date. A person who agrees to advance money to another should have a written agreement in place before any money is advanced. The agreement should be in as much detail as possible and should conform to what Medicaid will insist on if an application for benefits is made. That requires input from an attorney who understands Medicaid law and practices. This is where THINK AHEAD. PLAN AHEAD. ACT NOW! is critical.