Ohio High Court Rules That Transfer of Home Between Spouses Prior to Medicaid Eligibility Is Improper

A narrowly divided Ohio Supreme Court has ruled that the transfer of a home between spouses prior to Medicaid eligibility is an improper transfer and is subject to the community spouse resource allowance (CSRA) cap.  Estate of Atkinson v. Ohio Department of Job and Family Services (Ohio, No. 2013–1773, Aug. 26, 2015).  One year and six days after hearing oral argument in the case, the majority ruled that "federal and state Medicaid law do not permit unlimited transfers of assets from an institutional spouse to a community spouse after the CSRA (Community Spouse Resource Allowance) has been set."  The court distinguished, and did not overturn,  the 2013 federal appellate court ruling in Hughes v. McCarthy, that permitted use of spousal transfers using "annuities."

In 2000 Marcella Atkinson and her husband transferred their home into a revocable living trust. In April 2011, Mrs. Atkinson entered a nursing home and soon applied for Medicaid benefits. In August 2011, following Medicaid’s “snapshot” of the couple’s assets, the home was removed from the trust and placed in Mrs. Atkinson's name. The next day, Mrs. Atkinson transferred the house to her husband. The state determined an improper transfer had occurred and imposed a penalty period.  Mrs. Atkinson passed away, and her estate appealed to court, arguing that under federal and state statutes a spouse is not ineligible for Medicaid for transferring a home to the other spouse and that an institutionalized spouse may transfer unlimited assets to the community spouse between the date the spouse is institutionalized and the date that the spouse's Medicaid eligibility is determined. The estate lost at both the trial court and the Ohio Court of Appeals, and the estate appealed.  

In a 4-3 decision, the Supreme Court of Ohio rules that transfers between spouses are not unlimited after the snapshot date and before Medicaid eligibility and that such transfers are proper only up to the amount that fully funds the CSRA. The court rejected the estate’s reliance on the Sixth Circuit Court of Appeals’ holding in Hughes v. McCarthy (6th Cir., No. 12-3765, Oct. 25, 2013) that an annuity purchased by a community spouse before a Medicaid eligibility determination is not an improper transfer, finding that the purchase of annuities are subject to special rules and “not applicable under these facts.”  The court, however, remands the case for review of the penalty imposed because the Medicaid agency may have applied the wrong statute.  “Neither federal nor state law,” the court wrote, “supports the agency's confiscation, after the CSRA has been set, of the entire amount of transferred assets, some or all of which may have already been allocated to the community spouse on the snapshot date.”

A dissent joined by three justices states that “[w]hat this family did is and was permitted by state and federal law. . .  the home is explicitly excluded from the definition of 'resources' for purposes of establishing the CSRA.” (emphasis in original).  But, the majority rejected various "exempt asset" and "timing" arguments, in effect, interpreting state and federal law in the manner that would permit  sheltering the minimum possible assets after the ill spouse's admission to the nursing home.

For the full text of this decision, click here.