Arm’s Length Sale Trumps Assessed value of Medicaid Applicant’s Home

When a house is sold in a transaction to an unrelated party, the sale price is a better indicator of the property’s fair market value than the property’s assessed value.  Such is the holding under a recent case out of New York’s Supreme Court, Appellate Division, Third Department.  

In fact, the Third Department ruled that the state should not impose a penalty period on a Medicaid applicant who sold her house for less than one-fifth of its tax assessed value because the price was fair market value based on the property’s condition. Matter of Whittier Health Services, Inc. v. Pospesel (N.Y. App. Div., 3rd Dept., No. 520890, Nov. 25, 2015).

A nursing home applied for Medicaid on behalf of a resident. The state determined that the applicant sold her home for less than market value within the look-back period and assessed a penalty period. Tax assessment records showed the property was valued at $143,511, but the applicant sold the home for $23,122.

The nursing home appealed, arguing that the house was sold for fair market value because it needed significant repairs and was sold to someone who was not related to the applicant. After a hearing, the state affirmed the penalty, and the nursing home appealed to court.

That’s where the Third Department comes in.  The Court annulled the penalty period based on the sale of the house, reasoning that the evidence surrounding the sale price proved that the sale was an arms-length transaction and “a recent arm’s length sale is a more accurate indicator of actual market value of the [applicant’s] property than the tax assessment records relied upon by” the state.  

Score another one for common sense!  Unfortunately, it took way too long and way to much “red tape” to get there; in true New York fashion.

If you or a loved one needs legal assistance to navigate the perilous waters of nursing home Medicaid, transfer penalties, look-back periods, penalty periods, and disqualifications, Contact Us today; (315) 422-6666.