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Elder Law Prof Blog
Katherine C. Pearson, Editor, and a Member of the Law Professor Blogs Network on LexBlog.com

Two Courts Take Differing Views on Transferring Property With Intent to Gain Medicaid Eligibility

By Elder Law Prof Blog

From our friends at www.elderlawanswers.com.

A Massachusetts appeals court finds that a contract in which parents transferred property to their daughter so that they might avoid a Medicaid lien does not fail for lack of consideration because the daughter’s promise to sell the property after her parents’ death and distribute the proceeds to her sisters constituted valid consideration. Cascio v. D’Arcangelo (Mass. Ct. App., No. 09-P-1039, March 30, 2010).

Guiseppe and Donata D’Arcangelo had four daughters. In an attempt to protect their home from a Medicaid lien if either of them needed nursing home care, the D’Arcangelos transferred their home to their daughter, Bianca, retaining a life estate for themselves. The D’Arcangelos entered into an agreement with Bianca in which Bianca agreed to sell the property on their deaths and distribute the proceeds equally among the four daughters. After Mrs. D’Arcangelo died, Mr. D’Arcangelo changed his will and amended the agreement to change the distribution, giving only Bianca and another daughter the proceeds from the property.

After Mr. D’Arcangelo died, two of his daughters sought to enforce the original agreement. The trial court found that the original contract was valid, and Bianca appealed.

The Massachusetts Appeals Court affirms, holding that the contract does not fail for lack of consideration. The court finds that while none of the daughters paid any money or incurred any debt, Bianca’s promise to take title to the property and sell it after her parents’ death benefited the parents sufficiently to constitute consideration. According to the court, the “agreement reflected that it was the parents’ goal to be eligible for Medicaid funding for nursing home care should the need arise, and transferring their property to Bianca played a critical role in achieving that goal.”

A California Appeals Court rules that a mother’s contract to sell property to her son is illegal and void because it was entered into with the purpose of obtaining Medicaid benefits. Lizaso v. Lizaso (Cal. Ct. App., 2nd Dist., Div. 4, No. B212749, March 25, 2010).

Before applying for Medicaid benefits, Epifania Lizaso transferred her property to her son, Manuel, under an agreement that stated that Manuel would pay an installment note and make monthly mortgage payments. The agreement also provided that Mrs. Lizaso had the right to declare forfeiture and get the property back. Manuel did not pay on the note or make mortgage payments for 15 years. Mrs. Lizaso eventually satisfied the mortgage.

Manuel attempted to take a loan out on the property, and Mrs. Lizaso declared forfeiture and filed a claim to get the property back. Mrs. Lizaso died while the claim was pending and the state filed a creditor’s claim against her estate in an attempt to recover Medicaid payments made on her behalf. Mrs. Lizaso’s executor pursued the claim to have the property returned to her estate. The trial court found that the sales agreement was illegal, and Manuel appealed.

The California Court of Appeals affirms, holding that the agreement to sell the property is illegal and void because it was entered into for the purpose of obtaining Medicaid benefits. The court notes that Manuel’s lack of maintenance, care, and financial investment in the property support the conclusion that the transfer was illegitimate.

For the full text of the Cascio decision, go to: http://www.elderlawanswers.com/Resources/ArticleAtty.asp?id=8183&Section=9&state=

For the full text of the Lizaso decision in PDF, go to: http://www.courtinfo.ca.gov/opinions/nonpub/B212749.PDF (If you do not have the free PDF reader installed on your computer, download it here.)