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Transfers to Children of Medicaid Applicant in Exchange for Promissory Notes Not Actuarially Sound

The Massachusetts Court of Appeals in Jackson v. Director of Office of Medicaid (Mass. App. Ct., No. 10P706, July 19, 2011) holds that transfers made by the wife of a MassHealth applicant to her three children in exchange for promissory notes were disqualifying transfers because the promissory notes were not actuarially sound.

After Raymond Duclos entered a nursing home, his wife made three transfers: $176,000 to their daughter, Susan, in return for a promissory note that immediately was converted into a private annuity; $11,787.83 to their son, Raymond, Jr., in return for a promissory note; and $3,000 to their other son, Michael, in return for a promissory note.

The state denied Mr. Duclos's subsequent application for MassHealth benefits, because the transfers took place within the look-back period. On appeal, the trial court found that the each of the transfers was a disqualifying transfer, and Mr. Duclos appealed.

The Massachusetts Court of Appeals affirms that the promissory notes were disqualifying transfers. According to the court, the promissory notes were not actuarially sound because there was no proof of Mrs. Duclos's life expectancy at the time she transferred the assets. The court also observes that the notes given to Raymond Jr. and Michael did not prohibit cancellation on the death of the lender, and the note given to Susan that Mr. Duclos converted into an annuity did not name the state as a remainder beneficiary.

For the full text of this decision, click here.