A U.S. district court holds that a Medicaid recipient who transferred his house to his daughter in exchange for a promissory note does not incur a transfer penalty and that the promissory note is not an available asset. Peterson v. Lake (U.S. Dist. Ct., W.D. Okla., No. CIV-13-1235-W, June 30, 2014).
Oklahoma nursing home resident Ray Peterson deeded his property to his daughter, Susan Jones, in exchange for $5,000 and a promissory note in the amount of $57,500. The promissory note provided that neither Ms. Jones nor Mr. Peterson could assign or transfer the note or note payments. When Mr. Peterson applied for Medicaid, the state denied benefits, finding that Mr. Peterson had transferred the real estate in exchange for the promissory note without receipt of fair market value and that the note was an available resource.
Mr. Peterson sued the state in federal court under 42 U.S.C. § 1983, arguing that the promissory note was not an available asset. Both parties asked for summary judgment.
The U.S. District Court for the Western District of Oklahoma denies the state's motion for summary judgment and grants Mr. Peterson’s. The court holds that because the promissory note cannot be converted to cash, it is not an available resource. The court further rules that “no evidence has been presented from which a reasonable factfinder may infer that [Mr.] Peterson intended to dispose of his property for less than its fair market value or in the absence of valuable consideration or that [Ms.] Jones intended to pay less than the fair market value for the property.”
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