New York Law Review

Tag: asset transfer

  • Matter of Shah, 95 N.Y.2d 148 (2000): Medicaid Eligibility & Asset Transfers by Guardians

    Matter of Shah, 95 N.Y.2d 148 (2000)

    A guardian can transfer all assets from an incapacitated spouse to a community spouse for Medicaid planning purposes, and the community spouse can then execute a spousal refusal, preventing those assets from being considered when determining the incapacitated spouse’s Medicaid eligibility.

    Summary

    This case addresses novel questions regarding Medicaid planning, specifically concerning residency requirements and asset transfers. Bipin Shah became incapacitated and required extensive medical care in New York. His wife, Kashmira, sought to qualify him for Medicaid by transferring his assets to herself and then executing a spousal refusal. The Rockland County Department of Social Services (DSS) denied Medicaid, arguing Mr. Shah was not a New York resident and contesting the asset transfer. The Court of Appeals held that Mr. Shah was a New York resident based on his physical presence in a New York institution, and that the asset transfer was permissible under Mental Hygiene Law Article 81.

    Facts

    Bipin Shah, a New Jersey resident working in Suffolk County, New York, suffered a severe injury in New York, rendering him comatose. He was initially hospitalized in Suffolk County and later transferred to Helen Hayes Hospital in Rockland County. His wife, Kashmira Shah, was informed that his private insurance benefits were expiring. She executed a spousal refusal, aiming to protect her own assets and facilitate her husband’s Medicaid eligibility in New York.

    Procedural History

    Mrs. Shah initiated a guardianship proceeding in Rockland County to transfer Mr. Shah’s assets to herself. Rockland County DSS denied Mr. Shah’s Medicaid application, claiming non-residency, and transferred the application to Suffolk County, which also denied it. Supreme Court authorized the guardianship and asset transfer. The Appellate Division annulled the residency determination, finding Mr. Shah to be a New York resident. It also affirmed the Supreme Court’s decision authorizing the asset transfer. The New York Court of Appeals granted leave to appeal.

    Issue(s)

    1. Whether Mr. Shah is a resident of New York for Medicaid eligibility purposes, considering his physical presence in a New York institution after becoming incapacitated.

    2. Whether a guardian spouse can transfer all of an incapacitated spouse’s assets to herself for Medicaid planning, and then execute a spousal refusal.

    Holding

    1. Yes, because, under 42 CFR 435.403(i)(3), an institutionalized individual who became incapable of indicating intent after age 21 is a resident of the state in which they are physically present.

    2. Yes, because Mental Hygiene Law Article 81 allows a guardian to manage an incapacitated person’s property and financial affairs, including transferring assets for their benefit, and the spousal refusal allows the community spouse to prevent those assets from being considered in the Medicaid eligibility determination.

    Court’s Reasoning

    The court reasoned that Federal regulations (42 CFR 435.403) clearly define residency for Medicaid eligibility. Specifically, 42 CFR 435.403(i)(3) states that for an institutionalized individual who became incapable of indicating intent at or after age 21, the state of residence is where the individual is physically present. Since Mr. Shah was institutionalized in New York and became incapacitated after age 21, he was deemed a New York resident. The court rejected the argument that a letter from New Jersey constituted an interstate agreement altering this determination. Regarding the asset transfer, the court held that Mental Hygiene Law § 81.21 empowers guardians to manage an incapacitated person’s assets, including making gifts and applying for government benefits. The court emphasized that a competent person in Mr. Shah’s position would prefer that the state pay for his care rather than depleting his family’s resources. The court also upheld the validity of the spousal refusal, which allows the community spouse to protect assets without disqualifying the institutionalized spouse from Medicaid. The court quoted the Appellate Division stating that no agency of the government has any right to complain about the fact that middle class people confronted with desperate circumstances choose voluntarily to inflict poverty upon themselves when it is the government itself which has established the rule that poverty is a prerequisite to the receipt of government assistance in the defraying of the costs of ruinously expensive, but absolutely essential, medical treatment.

  • Marine Midland Bank v. Murkoff, 504 N.E.2d 841 (N.Y. 1986): No Cause of Action for Assisting Debtor Absent Transfer or Benefit

    Marine Midland Bank v. Murkoff, 504 N.E.2d 841 (N.Y. 1986)

    Under New York law, a creditor has no cause of action against a party who merely assists a debtor in transferring assets if the assisting party did not receive the assets or benefit from the transfer, and the creditor lacked a lien or judgment on the debt at the time of the transfer.

    Summary

    Marine Midland Bank, as a creditor, sought damages from two bank officials (defendants) who allegedly assisted a debtor in transferring assets to Switzerland to avoid a judgment. The bank had previously obtained a $6 million judgment against the debtor in federal court. The bank did not claim that the defendants received any of the transferred funds or otherwise benefitted from the transfer. The New York Court of Appeals held that the bank had no cause of action against the defendants because they were mere participants in the transfer, and the bank had no lien or judgment on the assets when the transfer occurred. The court clarified that Sections 278 and 279 of the Debtor and Creditor Law did not create a new remedy against non-transferees.

    Facts

    Marine Midland Bank obtained a $6 million judgment in federal court against a director of a bank’s parent corporation for losses suffered by the bank due to the director’s financial dealings.

    During the pendency of the federal suit, two officials of the bank (defendants) allegedly assisted the director in transferring funds to an account in Switzerland.

    The bank did not allege that the defendants received any of the funds or benefitted in any way from the transfer.

    Procedural History

    The bank brought an action against the two officials, alleging they fraudulently deprived the bank of funds by assisting the director’s transfer.

    The Supreme Court initially denied the defendants’ motion to dismiss.

    The Appellate Division reversed, holding that no cause of action existed under New York law for merely assisting a debtor in transferring assets without a lien or judgment.

    The New York Court of Appeals affirmed the Appellate Division’s decision.

    Issue(s)

    Whether, under New York law and the Debtor and Creditor Law, a creditor has a cause of action against a party who merely assists a debtor in transferring assets, when the assisting party does not receive the assets or benefit from the transfer, and the creditor did not have a lien or judgment on the assets at the time of the transfer.

    Holding

    No, because under longstanding New York law, a creditor has no cause of action against a party who merely assists a debtor in transferring assets where there was neither a lien on those assets nor a judgment on the debt, and Sections 278 and 279 of the Debtor and Creditor Law did not explicitly or implicitly create such a remedy.

    Court’s Reasoning

    The court reaffirmed the traditional New York rule that a creditor cannot sue a party for merely participating in the transfer of a debtor’s property before obtaining a judgment or lien. The court cited Braem v. Merchants’ Natl. Bank, 127 N.Y. 508, 515, stating that plaintiff conceded to this traditional rule. The court rejected the argument that Sections 278 and 279 of the Debtor and Creditor Law changed this rule. These sections allow a creditor to seek nullification of the conveyance or secure the assets to satisfy the debt, but do not create a remedy for money damages against non-transferees who did not benefit from the transfer.

    Regarding Section 273-a of the Debtor and Creditor Law, the court clarified that it defines a fraudulent conveyance but does not create a cause of action for conspiracy against non-transferees who assist in the conveyance. The court emphasized that it is not within its power to create a new remedy through judicial construction where the statute does not provide one. The court stated, “It is not for us to write such a remedy into the statute by judicial construction.”