Recently, WealthCounsel published a blog regarding case law out of New Jersey regarding how the state Medicaid office imposed a penalty when a home was sold for less than fair market value. The Medicaid applicant had argued that the home was in disrepair and so the tax assessor’s value was incorrect. Now, a similar case has come out of Illinois.

In this case, an appellate court affirmed the Illinois Department of Human Services’ decision to subject the decedent, who had applied for Medicaid benefits, to a penalty for selling his home for less than fair market value in the five years before applying for benefits.

The plaintiff, administrator of the decedent’s estate, argued that the Department applied the incorrect section of the Administrative Code in determining the fair market value of the decedent’s residence and therefore incorrectly determined the fair market value of the property, imposing a penalty in error.

Arbitration agreements have been a hot topic in recent years. Last year, WealthCounsel posted a blog on the benefits and disadvantages of mandatory arbitration agreements. One of the major disadvantages is that mandatory arbitration provisions in contracts limits the choice to pursue other legal remedies should a legal dispute arise. Last year, CMS issued a new rule repealing the prohibition of the use of predispute arbitration agreements by long-term care facilities. But is there state law that could possibly protect residents in other types of care facilities? Let’s take a look at some recent case law that addressed this issue.

In Harris v. University Village Thousand Oaks (UTVO), a California Court of Appeals applied the state law that prohibits arbitration agreements in residential rental agreements to continuing care retirement community contracts. Any such agreement is void on the basis of public policy due to Cal. Civ. Code, § 1953, subd. (a)(4).

Generally, the transfer of a home for less than fair market value will leave a Medicaid applicant with a hefty penalty. However, if the transfer is to a devoted son or daughter that moves in and provides such care that it delays the applicant’s entry into long-term care, then a legal strategy called the child caretaker exception may apply.