A Family Theft – Part 4

In this week’s post I give you the conclusion to Joe’s saga involving his sister Sophie’s Medicaid application.  As I explained in last week’s post, things didn’t go according to our expectation.  When we filed a civil lawsuit seeking to collect the amounts Mary took from Sophie I expected that she would ignore the lawsuit since she lived out of state and was ill herself.  Instead, Mary hired an attorney.  She claimed that some of the funds she took were actually spent for Sophie’s benefit.  I told Mary’s attorney we needed bills to prove this to Medicaid.   It turns out that this did not amount to much – only about $5000.

But, then Mary really surprised us.  She felt guilty about what she had done and she was willing to offer an amount of money in settlement of the claim.  Her attorney suggested she could come up with about $75,000, although she would need to pay it over time.  She also made clear that this needed to be in full satisfaction of the claim so that we would not be able to collect the rest of the money.

I thought this would work.  In my view, a negotiated settlement in the context of a lawsuit is not a transfer for less than fair value, however, I don’t make the final determination.  The State of New Jersey does and when I checked with the Medicaid caseworker, I found that the State did not agree with my analysis.   It would rather that I get a judgment and attempt to collect the entire amount, even at the risk of getting nothing.

When I explained to Mary’s attorney that we could not settle for anything less than 100%, Mary still wanted to make restitution of some part of what she took.  We continued negotiating and reached a resolution.  Because we could not in any way settle for less than the amount we claimed Mary took from Sophie, Mary agreed to let us enter a default judgment.  We did reduce the judgment by the $5000 she proved she had spent for Sophie’s benefit.

The Medicaid caseworker completed her review. Just before she approved our application, she asked for an update on the status of our lawsuit which we provided.   Sophie was then approved without any Medicaid penalty.  This was a relief to Joe as well as to the nursing facility which will receive the Medicaid payments.  Moving forward, any amount Mary pays will be a partial satisfaction of the judgment we obtained against her and we will need to turn over that money to the State so we don’t lose the Medicaid benefits.  It wasn’t easy but nothing with Medicaid ever.  In the end, however, we achieved a very good result for a very relieved brother Joe.