No Medicaid Transfer Penalty on Sale of House to Granddaughter

Reversing a lower court, an Indiana appeals court rules that the state should not have imposed a transfer penalty on a Medicaid applicant who sold her house to her granddaughter because the evidence shows the house sold for fair market value. Brown v. Indiana Family and Social Services Administration (Ind. Ct. App., No. 87A01-1501-PL-38, Nov. 18, 2015).

Ada Brown and her husband transferred their house to a trust and made the trust irrevocable. Mrs. Brown moved into a nursing home and the trust sold the house to her granddaughter for $75,000. Two years later, Mrs. Brown applied for Medicaid benefits. Based on information from the county assessor that showed the value of the house as $91,900, the state determined that the house was sold for less than fair market value and assessed a transfer penalty.

Mrs. Brown appealed, arguing that the value of the house was reduced due to the need to replace the sewer system. A hearing officer and the trial court affirmed the penalty period, and Mrs. Brown appealed.

The Indiana Court of Appeals reverses, holding that the evidence shows the house was not transferred for less than market value. The court notes that there was no evidence that the tax assessment used by the state reflected the price of the house at the time of the sale. According to the court, "the evidence reveals a willing buyer and seller, albeit with a family relationship, and no evidence that either was under any compulsion to consummate the sale."

For the full text of this decision, go to: http://www.in.gov/judiciary/opinions/pdf/11181501nhv.pdf

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