A Medicaid recipient's estate is liable for the repayment of benefits because the recipient had a beneficial interest in property deeded to her son but later placed in a constructive trust following the son's unlawful transfer. Estate of Steffes v. State (Iowa Ct. App., No. 5-140/04-0601, March 31, 2005).
Cordellia Steffes and her husband owned two farms. Sometime prior to 1990, they deeded the farms to their son Alden. In litigation following Alden's transfer of the farms, the district court concluded that Mrs. Steffes had beneficial ownership of the farms, with Alden serving only as trustee. The Department of Human Services provided Mrs. Steffes with Medicaid benefits for nursing home care she received from January 1995 through her death in June 2002. On learning of the trust, the Department determined it was a resource available to Mrs. Steffes when she applied for benefits and issued her estate a notice of overpayment.
Although an administrative law judge (ALJ) ruled the trust assets did not disqualify Mrs. Steffes from receiving Medicaid assistance because there was no evidence that Alden had any discretion to convey the land back to her or her husband, the Department reversed the ALJ. It found that Mrs. Steffes was the trust's only beneficiary and nothing limited the amount of trust principal that could be made available to her. The district court affirmed. The estate appealed, arguing that Mrs. Steffes never received income, assets, or benefits from the trust, and the property was transferred into the trust more than five years before the receipt of Medicaid benefits.
The Court of Appeals of Iowa affirms, ruling that the trust is a "Medicaid qualifying trust." The court cites the district court's initial and unappealed ruling in the litigation over Alden's transfers of the farms, in which the district court determined that Mrs. Steffes held "the beneficial ownership to the real estate." This, the court rules, is sufficient to establish that Mrs. Steffes may be a beneficiary of payments from the trust. "The assets were available to her had she pursued her legal rights against the trustee," the court writes. "This is all that matters. . . . The five-year look-back rules alluded to by the estate are inapplicable, as [Mrs. Steffes] retained a beneficial interest in the corpus of the trust."
For the full text of this decision, go to: https://www.judicial.state.ia.us/appeals/opinions/20050331/04-0601.asp.
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