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

Transfer of House From Trust to Husband Subjects Wife to Penalty Period 11/5/12

This case is an example of how the Medicaid program continually changes the rules in the middle of the game. Regulatory changes without public comment and court cases such as this harm the middle class. The outcome in this case is unbelievable and we believe it is incorrect.

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. A penalty period is imposed on a gift of an asset to someone besides your spouse, according to the regulations! Williams v. Ohio Dept. of Job & Family Servs. (Ohio App. 3d, No. 8-11-18, Oct. 9, 2012).

Helen and Bobby Williams transferred their home to a revocable living trust that benefited Mr. Williams. Mrs. Williams applied for Medicaid benefits, and the state included the value of the home when calculating the community spouse resource allowance (CSRA). Normally, the rules say that the spouse at home is allowed to keep the home PLUS the 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. This is even though the regulations say transfers between spouses do not count as gifts causing a penalty period.

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 affirmed, 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. This ruling doesn't follow the regulations and we don't understand how the court determined this outcome. The court also ruled 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.

This case may end up being appealed to the Supreme Court of Ohio, and if it is, we will follow up with that decision. If you want to read the entire decision, the link is: http://supremecourtofohio.gov/rod/docs/pdf/3/2012/2012-ohio-4659.pdf.