Fleming & Curti, P.L.C. - Medicaid Recovers From Wife’s Estate for Care of Husband

OCTOBER 25, 2004 VOLUME 12, NUMBER 17

Medicaid Recovers From Wife’s Estate for Care of Husband

Last week Elder Law Issues reported on a North Dakota Supreme Court decision challenging Medicaid annuity planning. Just one week later the same court addressed another aspect of Medicaid planning, with results that are as unfortunate as the earlier decision.

When Lucille Bergman’s husband Carl died in a North Dakota nursing home, his care was being subsidized by the state/federal Medicaid program. In the months before his death he had received $31,425.64 in nursing home care subsidies. If he had died a widower, his estate would have been subject to the Medicaid estate recovery program, but since his wife survived him there was no requirement that his estate repay any portion of the cost of his care.

Prior to obtaining Medicaid coverage Carl Bergman had transferred his principal asset, a $50,000 annuity held with the Lutheran Brotherhood (now Thrivent Financial), to his wife. There was nothing wrong with that transfer, and in fact it would be required within a short time after Medicaid began to pay for his care in any event.

Four years after her husband’s death Lucille Bergman was diagnosed with cancer. She began to review her estate planning, and particularly to worry about her Lutheran Brotherhood account. Although she had changed the nature of the account several times (from an annuity to a money market account to an investment account), it had remained at Lutheran Brotherhood. Someone told her that the State of North Dakota might make a claim against the account for the care of her husband four years earlier, and so she withdrew most of the money and gave it to her children and grandchildren.

Mrs. Bergman died within a month of completing those gifts, and the State of North Dakota did indeed make a claim against the account. Since it had been emptied, however, the State intervened in an action filed by Ms. Bergman’s probate estate against her sons, seeking return of the funds.

Although the trial court ruled that the State had no right of recovery against a spouse’s estate, the North Dakota Supreme Court disagreed. Because the justices could trace the funds from Mr. Bergman’s estate it ruled that the gift amounted to a fraudulent transfer. The court authorized the Medicaid agency to void the transaction, and to pursue two of her sons for return of the money. Estate of Bergman, October 20, 2004.

Mrs. Bergman’s transfer would not have been challenged under Arizona’s version of the federal Medicaid laws—at least not under current interpretations. Medicaid law and rules are experiencing rapid revision across the country, however, and it is difficult to predict the outcome of a similar case in another, less hostile, state.

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