Community Spouse’s Interest in Non-Salable Life Estates Is Not Countable by Medicaid

A Minnesota appeals court upholds a reversal of the state Medicaid agency’s denial of long-term care benefits to a nursing home resident, holding that the agency erred in considering the value of the community spouse’s interest in non-salable life estates.  In re Schmalz (Minn. Ct. App., No. A18-2156, August 12, 2019).

Between 1987 and 2002, Esther Schmalz and her husband Marvin sold three parcels of farmland to their sons, reserving life estates to themselves in each parcel.  In 2015 Esther entered a nursing home and in 2017 she filed an application for Medicaid long-term care benefits. Although it was undisputed that the sons did not intend to purchase the life estates and that there was no plan to sell the properties, the county agency determined that as a couple, the Schmalzes’ assets included the value of the life estates.

Mrs. Schmalz challenged this determination.  Following an administrative hearing, the Commissioner of the Minnesota Department of Human Services determined that the life estates were countable assets under state and federal law.  A trial court reversed the Commissioner, concluding that the unambiguous language in the pertinent state statute provides that Mr. Schmalz's life estate interests were not salable and therefore not available assets for purposes of determining his wife's eligibility.  (The Minnesota Chapter of the National Academy of Elder Law Attorneys filed an amicus brief at the trial court.)

The Commissioner appealed. On appeal, both the Commissioner and Mrs. Schmalz viewed the term “individual” as unambiguous in the statute that disallowed the counting of non-salable life estates, but while the Commissioner asserted that the term referred only to the medical-assistance applicant or institutionalized spouse, not the community spouse, Mrs. Schmalz contended it referred to either.

The Court of Appeals of Minnesota agrees with Mrs. Schmalz’s interpretation of the statute, holding that the unambiguous language in the statute does not limit the term “individual” to an applicant or institutionalized spouse, but rather to any owner of a life estate who is relevant to an eligibility determination.

For the full text of this decision, click here.

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