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Medical Assistance Transfers, State Intends to Close Property Transfer “Loopholes”

By: Kristin L. Davis

The Governor has proposed legislation to overturn the consequences of the
Minnesota Supreme Court decision In Re Estate of Francis E. Barg 722 N.W.2d 492
(Minn. App. 2006), 752 N.W.2d 52 (Minn. 2008).
At issue in Barg was the extent that the County could recover from the estate of a
surviving spouse (“community spouse” who had not received medical assistance)
for monies paid on behalf of the recipient spouse who had received medical
assistance for nursing home care. In this case, after an amount of exempt property
was set aside for the community spouse, but before the recipient spouse died, she
conveyed to the surviving spouse the homestead and other assets. The County
made a claim for reimbursement of medical assistance monies paid for the recipient
spouse in the estate of the surviving spouse. In a very complicated case involving
issues of federal preemption and statutory construction, the Minnesota Supreme
Court held that since the recipient spouse had no interest in the property at the time
of her death, the County could not make a claim against the estate of the surviving
spouse at the time of his death.
One can see the planning possibilities under the Supreme Court decision. After the
exempt property is set aside for the community spouse, the recipient spouse could
convey property outright to the community spouse and when the community
spouse died, the County could not make a claim for medical assistance
reimbursement against the community spouse’s estate.
The legislative proposal is to create a “marital interest” as a legal title interest in the
conveyed property so that even if a conveyance was made to the community spouse,
the County could still make a claim against it when the community spouse died.Sieloff and Associates, P.A.
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How effective this will be remains to be seen because the case involves issues of
federal preemption and statutory construction. The Minnesota statutory language
at issue here is Minn. Stat. § 256B.15, subd. 1(a):
“Estates subject to claims. If a person receives any medical assistance
hereunder, on the person’s death, if single, or on the death of the survivor of a
married couple, either or both of whom received medical assistance, or as
otherwise provided for in this section, the total amount paid for medical
assistance rendered for the person and spouse shall be filed as a claim against
the estate of the person or the estate of the surviving spouse in the court
having jurisdiction to probate the estate or to issue a decree of a descent
according to sections 525.31 to 525.313” (Emphasis mine).
and Minn. State. § 256B.15, subd. 2 provides in part:
“Limitations on claims…A claim against the estate of a surviving spouse who
did not receive medical assistance, for medical assistance rendered for the
predeceased spouse, is limited to the value of the assets of the estate that
were marital property or jointly owned property at any time during the
marriage…” (Emphasis mine).
My guess is that even if the statutory fix is enacted into law, we have not heard the
last of this. Also, the proposed new law raises vexing issues of retroactivity to
transactions already completed.
Pre-MA Assistance appropriation expenses
The Governor proposes to modify MA policy that currently permits asset reduction
to qualify for MA in the three-month period (during which retroactive coverage is
sought) prior to application and the month of application for MA to medical bills
incurred during the period of MA eligibility. In short, old medical bills, payment for
other “expenses” and burial funds would be disallowed in computing allowable
assets. So, maybe you cannot buy grandma a new TV anymore.
Regulation of Special Needs Trusts – individual or pooled
Special needs trusts have become popular in cases of a disabled person where one
can set up the trust to provide for special needs for the beneficiary, i.e. expenditures Sieloff and Associates, P.A.
Yankee Square Office III, 3460 Washington Drive, Suite 214, Eagan, MN 55122
Phone: (651) 454-2000 • Website: www.sielofflaw.com • Email: sieloff@sielofflaw.com Page | 3
for things other than would be paid for by government benefits, as long as when the
beneficiary died, the remainder would be paid to the government to the extent of
MA costs paid. The proposal would require annual financial reports to the DHS.
Also, upon MA application, the trust instrument, verification of trust assets and their
value would be required to be submitted.
Reverse Half Loaf” strategy to be eliminated –Asset transfers must be returned
The reverse half loaf strategy involves a person transferring assets in an amount
that allows the person to meet the asset limit and therefore become “otherwise
eligible” for the purpose of beginning the penalty period. The person who received
the transferred assets trickles them back in the amount that is needed to pay the
LTC expenses each month during the penalty period. Each month that any portion
of the transferred assets is returned, the ending date of the penalty period is
recalculated and thus shortened. Using the reverse half loaf strategy, after only a
portion of the transferred assets are returned, the shortened penalty period will
have expired and the person can enroll in MA despite having sheltered roughly half
of the assets that would otherwise have been required to be spent down. The
Governor’s proposal would require the full return of transferred assets. A hardship
waiver may be granted if the assets cannot be recovered.