The Supreme Court of Iowa rules that the state has a claim against a Medicaid recipient's life estate interest in assets that were transferred before the state enacted estate recovery rules or specifically identified life estate interests as reachable. In the Matter of Estate of Laughead (Iowa, No. 40/04-0065, April 15, 2005).
In 1990, Ruby Laughead transferred her 338-acre farm to her son, Charles, reserving a life estate. Starting in 1995, the Iowa Department of Human Services provided Medicaid coverage of Mrs. Laughead's nursing home care, amounting $137,596.88. Following her death in 2002, the Department filed a claim in Mrs. Laughead's estate. Mrs. Laughead's life estate interest in the farm at the time of her death was $41,451.75, representing slightly more than one-tenth the value of the farm. Mr. Laughead, the administrator of his mother's estate, disallowed the claim. At a hearing, Mr. Laughead argued that at the time the life estate was created, Iowa law did not require Medicaid reimbursement. Alternatively, he contended that even if the estate recovery statute in effect when his mother began receiving assistance applied, it was not until 2002, just prior to Mrs. Laughead's death, that the statute was amended to require that a Medicaid recipient's life estate be included in the recipient's probate estate. Finally, he asserted that applying any version of the estate recovery statute would unconstitutionally impair his rights to the property as the remainder person.
The district court determined that the Medicaid agency had a valid claim and ordered the administrator to transfer $41,451.75 (plus interest) to the estate, ruling that the recovery statute in effect at the time of Ruby's death governed and that applying the statute was not an unconstitutional retroactive application.
The Supreme Court of Iowa affirms. Citing its ruling in In re Barkema Trust, 690 N.W.2d 50, 56 (Iowa 2004), in which the court held that the Iowa legislature intended to define 'estate' broadly, the court rules that Mrs. Laughead's life estate must be included in her probate estate under either recovery statute. The court rules that the restriction in OBRA that its amendments apply only to assets disposed of after the date of enactment do not apply to the amendments relating to Medicaid estate recovery, which are in a different section of the Act. The court also rejects Mr. Laughead's constitutional argument, ruling that his remainder interest is not impaired by subjecting his mother's life estate to the Department's repayment claim.
For the full text of this decision, go to: https://www.judicial.state.ia.us/supreme/opinions/20050415/04-0065.asp.
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