California has a claim for reimbursement of Medi-Cal (Medicaid) expenses against the beneficiaries of real property that was conveyed by a Medi-Cal recipient who had retained a life estate in the property and the right to revoke their interest. Bonta v. Burke (Cal. Ct. App., 3rd Dist., C037609, May 23, 2002).
In 1994 Lennie J. Smith deeded her house to her daughters, Deborah Burke and Linda Osborn, but retained a life estate in the property and the right to revoke the remainder. From September 1994 until Mrs. Smith's death in December 1996, the Department of Health Services paid her health care costs. Following Mrs. Smith's death, the Director of Health Services filed a complaint to collect $45,357.58 in benefits paid.
California's estate recovery program permits the Department to 'claim against the estate of the decedent, or against any recipient of the property of that decedent by distribution or survival . . . ' (Welf. & Inst. Code, § 14009.5, subd. (a).) 'Estate' is defined as 'all real and personal property and other assets in which the individual had any legal title or interest at the time of death (to the extent of such interest), including assets conveyed to a dependent, survivor, heir or assignee of the deceased individual through joint tenancy, tenancy in common, survivorship, life estate, living trust, or other arrangement[.]' (Cal. Code Regs., tit. 22, § 50960, subd. (b)(1).)
The trial court granted Mrs. Burke and Mrs. Osborn's motion for summary judgment, agreeing with them that their mother's life estate terminated at the moment of her death, their interest had vested in 1994, and consequently nothing passed to them 'by distribution or survival.' The Department appealed, maintaining that as long as the recipient of services reserves an interest in the property and the power to revoke the remainder until she dies, the property is in her estate.
The California Court of Appeal, Third District, reverses, agreeing with the Department that Mrs. Smith retained a significant interest in the property until her death. 'As a consequence,' the court writes, 'the property had no value to [the daughters] until Smith died. Consistent with the legislative policy of reaching assets not irrevocably transferred to beneficiaries, Smith's interest in the real property passed to her daughters at the time of her death, who took it by survival. The Department, therefore, is entitled to recover from the recipients of her property the cost of the medical services rendered to Smith.'
To download the full-text of this decision in PDF format, go to: https://www.courtinfo.ca.gov/opinions/documents/C037609.PDF
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