Medicaid Penalty Period Applies to Assets Transferred as Part of Court-Approved Estate Plan

An appeals court in Massachusetts ruled that (1) a Medicaid applicant was subject to a penalty period for assets that were transferred to a trust as part of a court-approved estate plan, and (2) the penalty period would not begin until after she had spent down her excess assets.

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Lombardi v. Director of Office of Medicaid (Mass. App. Ct., No. 11–P–1208, April 17, 2012).

Facts.  Catherine Lombardi, who had a court-appointed guardian, transferred $17,400 to a realty trust to benefit her children as part of a court-approved estate plan.  Mrs. Lombardi then applied for Medicaid benefits and the state assessed a penalty period based on the uncompensated transfer to the realty trust.  The state also determined that the applicant would be required to spend down her excess assets before the penalty period would begin.

Procedural History.  Ms. Lombardi appealed the determination that she would be subject to a penalty period, arguing that the court cannot consider a court-approved transfer of assets when determining Medicaid eligibility and that, therefore, the state improperly imposed a double penalty.

Court’s Decision.  The Appeals Court of Massachusetts affirmed the decision, holding that the penalty period was properly applied to Mrs. Lombardi.  According to the Court, it did not matter that the transfer was “court-approved” because “a probate judge cannot insulate asset transfers from being considered in the determination of eligibility for [Medicaid].” The court also ruled that the penalty period properly began after Ms. Lombardi spent down her excess assets.