Ruling on a guardian's application to extinguish a 95-year-old Medicaid recipient's life estate in order to sell his home, a New York trial court agrees with the county Medicaid agency that the life estate should be valued using a Department of Health and Human Services table, as opposed to the IRS valuation tables. The court's decision means that the Medicaid recipient will receive a much larger share of the sale proceeds than his guardian had requested. In the Matter of the Application of Giordano (N.Y. Sup., No. 28696-I-07, May 13, 2010).
Richard O.M., 95, transferred the remainder interest in his home to his daughter in 2004, but retained a life estate. Richard's daughter died several years later and the remainder interest passed to her estate. When Richard ran out of liquid assets, his grandchildren refused to let him place a reverse mortgage on his home and his guardians were forced to move him into a nursing home. Richard qualified for Medicaid shortly thereafter.
Richard's guardian and his daughter's estate entered into an agreement with a third party to extinguish Richard's life estate and sell his home for $520,000. Since Richard was a Medicaid beneficiary, any funds that he received from his share of the sale would disqualify him for benefits until the funds were spent on his care. When Richard's guardian petitioned the court for approval of the sale, the heirs asked the court to value Richard's life estate using either the New York Real Property Actions and Proceedings Law or the IRS life tables. Using either of these valuation methods would result in a lower value for the life estate than if the court valued the interest using the Department of Health and Human Services Health Care Financing Administration (HCFA) table, which is used by New York county Medicaid offices to calculate life estate values. The county Medicaid agency opposed both alternate valuation methods, and also asked the court to allocate all of the closing costs and fees to the heirs prior to valuing the life estate.
The Supreme Court of New York, Nassau County, values Richard's life estate using the HCFA table. The court reasons that "[i]t appears that counsel seek only to minimize the assets to be received by Richard O.M. as a Medicaid recipient - regardless of whether his future Medicaid eligibility would be jeopardized as a result." Since the county Medicaid agency only values life estates using the HCFA tables, and since the agency deems the use of any other method that results in a lower valuation to be an uncompensated transfer, the court finds that it "must first and foremost guard against any transactions that may negatively impact the eligibility of Richard O.M. to receive Medicaid benefits and to remain at an appropriate skilled nursing facility." However, the court does agree with the heirs that the closing costs, taxes and brokers fee should be pro-rated between Richard and the heirs.
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