A New Jersey appeals court rules that $1.7 million in customer contracts held by a disabled man's family business should be counted as a resource when determining his Medicaid eligibility. G.T. v. Division of Medical Assistance and Health Services (N.J. Super. Ct., App. Div., No. A-1252-06T3, April 10, 2008).
Prior to suffering a catastrophic brain injury in 1995, G.T. owned and operated a burglar alarm installation business with his wife. After his injury, G.T. was unable to continue working but maintained a 50 percent ownership interest in the business, which had customer contracts valued at more than $1.7 million. In 2003, G.T. was admitted to a skilled nursing facility and applied for Medicaid benefits. His application was denied because his interest in the business was considered a countable resource. This decision was upheld by an administrative law judge and by the director of the New Jersey Division of Medical Assistance.
G.T. appealed, arguing that the customer contracts were property used in a trade or business that qualified for the business property exemption found in 42 U.S.C. Sec 1382b(a)(3). The state countered that contracts are not the type of business property contemplated by the law, which specifically cites "land, buildings, equipment or supplies, motor vehicles, and tools" as exempt business property.
The Superior Court of New Jersey, Appellate Division, agrees with the state's argument and rules that G.T.'s business contracts are countable resources for Medicaid purposes. The court finds that "there is a fundamental qualitative difference between . . . a business's contracts with its customers and . . . the assets (such as cows and tools) that it uses to fulfill those contracts. The customer contracts provide for a stream of revenue. They are not 'used' in [G.T.'s] business in the same sense that a farmer uses a plow or a cow. . ."
For the full text of this decision, go to: https://lawlibrary.rutgers.edu/courts/appellate/a1252-06.opn.html
Tinton Falls, New Jersey, ElderLawAnswers member Susan L. Goldring argued the case for G.T.
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