By Fredrick P. Niemann, Esq. of Hanlon Niemann & Wright, a Freehold, NJ Medicaid Attorney

The unpublished opinion from the Appellate Division, E.S. v. Div. of Med. Assistance & Health Services, discusses the issue of a daughter’s use of a joint bank account that was also owned by the mother/applicant, and whether the money taken from these accounts was a transfer for less than fair market value.  I have blogged recently about the importance of designating joint accounts with rights of survivorship, versus convenience accounts and talked about how putting a child on a bank account without specifying whether they are being listed for the convenience of writing checks and are not automatically entitled to funds within the account upon death, makes the child an equal owner of the account.  Withdrawals made by an account owner for his/her expenses can be transfers for less than fair market value subject to penalty even if made by a Medicaid applicant is there is not sufficient paperwork to demonstrate the money went to benefit the Medicaid applicant.

The applicant in this case lived in a house in Paramus with her husband before moving into a nursing home.  Her husband died and gave his estate to his daughter, leaving nothing for the wife/applicant.  The daughter received $500,000 in cash and deposited it into two bank accounts held in her name and her mother’s name as joint owners, so either could access the money.  During the five-year lookback period, the daughter withdrew $62,732.27 from both accounts, which she claimed was for day care expenses, to pay off a car loan, to pay for a nurse for her mother, and to pay her expenses when taking care of her mother.

The Board of Social Services held these withdrawals were made for the purpose of becoming eligible for Medicaid, and imposed a penalty on the applicant.  The administrative law judge held the applicant could not access the funds due to the applicant’s institutionalization and that the withdrawals were for the benefit of both mother and daughter and not for the applicant to become eligible for Medicaid.  The Board appealed, and the Division of Medical Assistance and Human Services reversed the judge and held that these withdrawals were made for less than fair market value.  The account was jointly owned, so either the applicant or the daughter could withdraw the funds.  The applicant argued that the withdrawn funds were the sole property of the daughter based on the husband’s will which gave the daughter the cash.  This evidence was established by the testimony of the daughter, but the applicant could provide no evidence to support her case.  Because of this, the Division of Medical Assistance and Human Services held, and the Appellate Division affirmed a finding that the property in the joint account was not solely for the daughter’s benefit, and concluded the withdrawals could be factored into the imposition of a transfer penalty for Medicaid eligibility purposes.

The case highlights the importance of convenience accounts.  Making a child a joint owner of a bank account gives him or her equal title to the funds, and so withdrawals made by the child without a paper trail are going to be considered gifts and transfers for the purpose of qualifying for Medicaid.  If you choose to put your child on a bank account, it is a good idea to ask your bank to list the child for convenience purposes only (to write out checks for you) and not as a joint owner of the account, because his or her actions with the account could affect your Medicaid eligibility in the long run.

To discuss your NJ Medicaid matter, please contact Fredrick P. Niemann, Esq. toll-free at (855) 376-5291 or email him at  Please ask us about our video conferencing consultations if you are unable to come to our office.