New Jersey's Medicaid agency validly asserted a lien against the assets of a testamentary trust that a wife had established for her institutionalized husband's benefit. Estate of DeMartino v. Division of Medicare Assistance and Health Services (N.J. Super. Ct. App. Div., No. A-2807-02T2, Nov. 10, 2004.
In April 2000, about six months before he entered a nursing home and began receiving Medicaid benefits, Michael DeMartino transferred to his wife, Anne, his interest in the couple's home. Mrs. DeMartino died in October 2000, leaving a will that placed Mr. DeMartino's elective share in a trust under which he had only a life estate in the trust's income and discretionary distribution of trust principal. The assets of the trust, which was never funded during his lifetime, passed to the DeMartino's children upon his death. Mrs. DeMartino's net estate, including the home, was $58,424. Following Mr. DeMartino's death in 2001, the Division of Medical Assistance and Health Services Division asserted a claim of $52,522 against his estate, and secured its claim with a lien against the assets in the trust.
The estate sought to set aside the Division's lien, arguing, inter alia, that at the time of his death Mr. DeMartino had no interest in the trust assets; and the lien contravened federal and state law by imposing a "payback" requirement on a testamentary trust. (New Jersey's expanded definition of "estate" excludes a discretionary testamentary trust established by a third party, including a spouse, for the benefit of a Medicaid recipient if the trust contains no assets in which the Medicaid recipient held any interest within either five years of applying for Medicaid benefits or five years prior to the Medicaid recipient's death.) The trial judge determined that the lien was valid because the trust assets were part of Mr. DeMartino's "estate" and were subject to Medicaid estate recovery pursuant to state and federal law. The judge held that the Division was entitled to recover the monies "that were used to fund the testamentary trust." The estate appealed.
The Appellate Division of the Superior Court of New Jersey affirms and remands the case to determine the amount of the lien. The court rules that the testamentary trust "was merely a vehicle for the transfer of [Mr. DeMartino's] assets to his heirs" and thus is an "other arrangement" under the broad definition of "estate," which New Jersey has adopted. 42 U.S.C.A. § 1396p(b)(4)(B). "When assets of a Medicaid recipient are conveyed to a survivor, heir or assign by such an 'arrangement,' the assets remain part of the recipient's 'estate' pursuant to 42 U.S.C.A. § 1396p (b)(4)(B)," the court writes.
The decision will be appealed to the New Jersey Supreme Court thanks to pro bono assistance from members of the New Jersey Bar Association's Elder Law Section.
To download the full text of this decision, go to: https://lawlibrary.rutgers.edu/courts/appellate/a2807-02.opn.html .
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