Transfer of House From Trust to Husband Subjects Wife to Penalty Period

Transfer of House From Trust to Husband Subjects Wife to Penalty Period Williams v. Ohio Dept. of Job & Family Servs., 2012-Ohio-4659

In a recent decision, an Ohio appeals court ruled that the transfer of a house from a revocable trust benefiting the husband to the husband’s name subjects his wife to a Medicaid penalty period. Williams v. Ohio Dept. of Job & Family Servs. (Ohio App. 3d, No. 8-11-18, Oct. 9, 2012). Despite the fact that this was an Ohio case, it is instructive for Pennsylvania residents. Medicaid rules are based on federal law that is utilized by all of the individual states. There might be some variation on a state by state basis but for the most part the laws have significant commonality. Importantly, as we see in the Williams case, there are Medicaid ineligibility periods that result from transfers between spouses.

Helen and Bobby Williams transferred their home to a revocable living trust that benefited Mr. Williams (The Community Spouse). Mrs. Williams (The Institutionalized Spouse) applied for Medicaid benefits, and the state included the value of the home when calculating the community spouse resource allowance (CSRA). Mr. Williams then transferred the house from the trust into his name only. Mrs. Williams entered a nursing home, and the state approved Mrs. Williams’ application for Medicaid, but assessed a penalty period based on the transfer of the home from the revocable trust to Mr. Williams.

Mrs. Williams appealed the penalty period, arguing that under state law a house can be transferred between spouses without incurring a penalty. An administrative law judge determined that the transfer of the house was an improper transfer, but ruled that the penalty period should be calculated using the difference between the CSRA and the value of resources Mr. Williams received as a result of the improper transfer. The trial court affirmed, and Mrs. Williams appealed.

The Ohio Court of Appeals affirms, holding that the transfer of the house from the trust to the community spouse is subject to a penalty period. According to the court, there is no authority permitting one spouse to indirectly transfer a house to another spouse through the use of a trust. The court also rules that only the amount of the couple’s resources transferred to Mr. Williams in excess of the CSRA should be assessed in calculating the penalty period

There is a common assumption that husbands and wives can transfer assets between them freely without incurring any Medicaid penalty period. Unfortunately, this is not true. Gifts between spouses will cause a Medicaid ineligibility period. You must be very careful when considering the timing of changes in title to marital assets because a change in title will likely be considered to be a “gift” for Medicaid purposes and therefore carry the Medicaid penalty.

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