In Medicaid Estate Recovery Case, Attorney Fees Are Calculated from Gross Probate Estate Not Decedent's Life Estate

An Iowa appeals court rules that in calculating the amount a state can recover for Medicaid payments, the attorney fee calculation should be based on the full value of real estate the Medicaid recipient transferred to her children and not merely the value of a life estate she had retained. In Matter of Estate of Jones (Iowa Ct. App., No. 9-549 / 08-1961, Aug. 6, 2009).

Prior to her death, Bonnie Jones deeded real estate to her children, reserving a life estate in the property. After her death, the Iowa Department of Human Services (DHS) filed a claim against her probate estate seeking repayment of $93,524.89 in Medicaid it had paid on her behalf. After assigning a value to the life estate, it was clear that the estate was insufficient to repay the debt to DHS. DHS determined that after netting out other estate obligations holding priority over its claim, including attorney fees, it was still entitled to recover $13,810.59.

The administrators of the estate sought a hearing, arguing that DHS had under-calculated the attorney fees and, thus, overstated the payment to which it was entitled. They asserted that the attorney fees should be based on the full probate estate even though DHS could only recover from the life estate. The district court concluded that in determining the proper amount of attorney fees, the gross estate included only the value of the life estate and not the remainder. The administrators appealed.

The Iowa Court of Appeals reverses and remands, concluding that because the entire value of the real property is required to be included in inheritance tax calculations and in the probate inventory, it should be taken into account when determining the maximum allowable attorney fees.

To download the full text of this decision in PDF format, go to: https://www.judicial.state.ia.us/court_of_appeals/Recent_Opinions/20090806/9-549.pdf.
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