In re Estate of Smith, 2006 Tenn. App. LEXIS 715 (2006)

A Tennessee case decided November 1, 2006, addresses estate recovery for married individuals. In In re Estate of Smith, Mr. and Mrs. Smith had been married for more than 60 years. Mrs. Smith suffered a series of strokes in 2001. She was then admitted to a nursing home in Madison, Tennessee. She predeceased her husband. After Mr. Smith died, the State attempted to recover funds it paid for Mrs. Smith’s care from Mr. Smith’s estate. There was a stipulation in the case that all marital funds in excess $2,000 were properly transferred to Mr. Smith during the eligibility process. Mrs. Smith had no assets at the time of her death. The Court of appeals found that, because Mrs. Smith had transferred all of her interest in her assets to her husband prior to death, she had no estate from which estate recovery could be pursued. Estate recovery is limited by federal law to three narrow exceptions and collection from Mr. Smith’s estate was not one of the authorized methods of recovery. Accordingly, the trial court’s order allowing estate recovery was reversed.

Of note in the Smith decision, the facts before the court were submitted by stipulation. Future litigants should not expect the State to agree to a similar stipulation, so a hearing may be necessary to confirm that the Medicaid applicant had no estate at the time of death. Another issue litigants should be aware of is dicta which indicates that the State may be able to recover against assets transferred by reason of death (e.g., jointly held assets). Although the authors believe this dicta is inconsistent with 71-5-116, care should nonetheless be taken to terminate survivorship arrangements and to complete transfers between spouses prior to the death of the Medicaid beneficiary.

Note 1: In re Estate of Smith was argued by the author. The Court of Appeals held the plain language of 42 U.S.C. § 1396p(b) prohibits estate recovery except in three narrow exceptions. The State’s attempt to recover Medicaid dollars from the estate of the Medicaid applicant’s spouse did not fall within these exceptions. The Medicaid applicant did not leave an estate from which estate recovery could be pursued since the Medicaid applicant lawfully transferred all of her assets to her husband prior to death. The court rejected the State’s argument that the Medicaid applicant retrained an equitable interest that could be pursued since § 1396p(b) requires the existence of some “legal title or interest.”

Note 2: The law on estate recovery continues to develop as States become more aggressive in recovery litigation. The law is different in each State, depending whether recovery is limited to the probate estate or an expanded estate. Other estate recovery cases with varied results include In re Estate of Smith, 2006 Tenn. App. LEXIS 715 (Tenn. Ct. App. 2006); In re Estate of Barg, 722 N.W.2d 492 (Minn. Ct. App. 2006); In re Estate of Nistler, 2006 Minn. App. Unpub. LEXIS 1053 (Minn. Ct. App. Unpub. 2006); Dep’t of Human Servs. v. Laughead (In re Estate of Laughead), 696 N.W.2d 312 (Iowa 2005); Estate of DeMartino v. Div. of Med. Assistance & Health Servs., 373 N.J. Super. 210 (App. Div. 2004); State Dep’t of Human Res. v. Estate of Ullmer, 87 P.3d 1045 (Nev. 2004); In re Estate of Jobe, 590 N.W.2d 162 (Minn. Ct. App. 1999); Idaho Dep’t of Health & Welfare v. Jackman (In Re Estate of Knudson), 132 Idaho 213 (Idaho 1998).