On appeal from the Division of Medical Assistance and Health Services, Department of Health and Human Services.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued January 10, 2012 -
Before Judges Baxter and Nugent.
J.L. and S.L. appeal from a June 8, 2010 final agency decision of the Department of Human Services, Division of Medical Assistance and Health Services (Division or DMAHS) that suspended their eligibility for Medicaid as a result of a $20,000 inheritance they received from J.L.'s grandfather. The agency's decision set aside the March 19, 2010 decision of Administrative Law Judge (ALJ) Ronald W. Reba in which the ALJ concluded that the $20,000 inheritance was "earmarked" for the purchase of a family home by J.L. and S.L. in Lakewood, and was therefore an exempt resource for purposes of calculating Medicaid eligibility. We agree with appellants' contention that because the Director of DMAHS failed to establish either an "emergency" or "other unforeseeable circumstances" justifying the Division's untimely rejection of the ALJ's decision in appellants' favor, the Division's decision must be set aside and the decision of the ALJ deemed adopted. We accordingly reverse the final agency decision of June 8, 2010.
J.L. and S.L., a married couple, received Medicaid benefits for themselves and their children.*fn1 In their September 2008 application for the continuation of their Medicaid benefits, the couple disclosed that on July 2, 2008, J.L. had received a $45,000 gift from his brother, T.L.,*fn2 which was to be utilized for the purchase of a home in Lakewood for J.L., S.L. and their children. Indeed, T.L. provided a Gift Letter to appellants' mortgage lender certifying that he had given a "gift" in the amount of $45,000 to his brother J.L. on July 1, 2008 "to be applied towards the purchase of the above property" in Lakewood. J.L.'s brother further certified that "this is a bona fide gift and . . . there is no obligation, express or implied, to repay the sum in cash or other services . . . now or in the future."
On June 25, 2008, appellants received an inheritance in the amount of $20,000 from the estate of C.R., J.L.'s maternal grandfather. C.R. died on August 8, 2007, and because J.L.'s mother predeceased C.R., J.L. succeeded to his mother's share of C.R.'s estate. As is evident from the fact that the bequest was originally intended for J.L.'s mother, and not for J.L., no documents in the estate of C.R. made reference to J.L. purchasing a residence in Lakewood. Nonetheless, the executor of C.R.'s estate agreed to make an advance distribution in the amount of $20,000 to J.L., and issued a check in that amount. The executor understood from J.L. that J.L. intended to apply the $20,000 estate proceeds toward the purchase of a home in Lakewood.
On July 15, 2009, the Ocean County Board of Social Services (Board), which administers the Medicaid program, notified appellants that "due to receipt of lump sum income from inheritance and gifts from [their] family," appellants had been found ineligible for Medicaid effective August 1, 2008 and would remain ineligible for a total of nineteen months. The Board agreed to continue appellants' Medicaid benefits pending the outcome of a hearing before the Office of Administrative Law (OAL).
On March 19, 2010, at the conclusion of the hearing, the ALJ rendered a decision finding that because the $45,000 gift and the $20,000 inheritance "were earmarked for the specific purpose of a down-payment on a marital home," and because appellants had applied the money for that purpose, the proceeds of the gift and inheritance were exempt assets for purposes of calculating Medicaid eligibility. In reaching that conclusion, the ALJ specifically relied upon the provisions of N.J.A.C. 10:69-10.23(a), which provides:
When a [Medicaid recipient] receives nonrecurring earned or unearned lump sum income . . . [or] payments in the nature of a windfall, such as inheritances and lottery winnings, personal injury and worker compensation awards, to the extent it is not earmarked and used for the purpose for which it was paid, . . . that income will be added together with all other income received that month[.] [(Emphasis added).]
The ALJ held that because both the $45,000 gift and the $20,000 inheritance were specifically "earmarked" for the purchase of the Lakewood home, the amounts in question were exempt income for purposes of calculating Medicaid eligibility.*fn3
The ALJ's March 19, 2010 decision was mailed to the parties and to the Division on March 24, 2010. Pursuant to the provisions of N.J.S.A. 52:14B-10(c), the decision became final forty-five days later, on May 7, 2010, because it had not been modified or rejected by ...