Noting that the retention of a life estate and limited power of appointment are common Medicaid planning devices, a New York court rules that a decedent's inter vivos gift of property to her daughter with these restrictions is valid. Matter of Mozer (N.Y. Surr. Ct., No. 335603, March 30, 2007).
In 1998, Margaret Mozer conveyed property to Catherine, one of her five children. The deed retained a life estate with a limited power of appointment of the remainder in Mrs. Mozer in favor of her children. Following Mrs. Mozer's death in July 2004, her son, Robert, who was also her executor, sought to vacate the deed, arguing that since the transfer was revocable by virtue of the limited power of appointment, it did not constitute a valid gift. Catherine countered that the property had been gifted to her to compensate her for losses she suffered as a result of her brothers' failed business venture.
In an affidavit, Peter Vollmer, an estate planning attorney who had drafted the deed, stated that he had met privately with Mrs. Mozer and that she had expressed concern about protecting her assets and had knowingly opted to gift the property to Catherine while retaining a life estate and limited power of appointment to avoid a gift tax.
The New York Surrogate's court rules that Mrs. Mozer's gift was valid, noting that retention of a life estate and a limited power appointment are commonly used Medicaid planning devices to make an incomplete gift while maintaining Medicaid eligibility. "Petitioner," the court writes, "confuses the issue of whether a transfer is a valid gift under state law (i.e. whether the elements of a gift are established) with the issue of whether a transfer is a complete gift for federal gift tax purposes."
To download the full text of this decision in PDF format, go to: https://decisions.courts.state.ny.us/fcas/fcas_docs/2007mar/290335603200768surr.pdf.
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