LTC Bullet: Idaho Decision Draws Attention to Estate Recovery

Monday September 28, 1998


Federal law (OBRA '93) requires states to implement estate recovery programs to recoup Medicaid monies spent on providing long-term care. Many states have failed, however, to create viable programs capable of recovering meaningful amounts of money.

The absence of a genuine estate recovery risk enables widespread denial of the need for LTC insurance. Why worry about LTC if Medicaid will pay for your care after the insurable event occurs?

Even in states that do enforce estate recovery, Medicaid planning attorneys are equally as adept
at helping clients avoid estate recovery as they are at obtaining Medicaid eligibility in the first place. The "Marriage Settlement Agreement" (described below) is characteristic of such Medicaid planning handiwork.

One issue frequently litigated is whether or not states can recover Medicaid monies from the estates of Medicaid recipients' spouses. The Idaho Supreme Court recently ruled that the state may recover from the estate of a Medicaid recipient's spouse after already receiving the balance of the Medicaid recipient's estate.

The Idaho Supreme Court decision may persuade other states to take a similar position on the scope of estate recovery and efforts to evade it. Details of the Idaho decision are presented below:

In Estate of Knudson v. Jackson (Idaho Sup. Ct., No. 23928, 1998 Ida. Lexis 70, June 16, 1998),
Barbara Jackman (the Knudsons' niece, guardian of Mrs. Knudson and holder of a durable power of attorney for Mr. Knudson) executed a "Marriage Settlement Agreement" transferring most of the couple's community property into Mr. Knudson's separate property before Mrs. Knudson began receiving medical assistance which totaled $41,600 at her death.

After paying expenses and legal fees, Barbara Jackman delivered the balance of Mrs. Knudson's
estate to the Idaho Dept. of Health and Welfare: $1,638. Upon Mr. Knudson's subsequent death,
the Department sought to recover the remaining balance of Mrs. Knudson's Medicaid payments
from Mr. Knudson's estate.

At issue was the proper interpretation of an Idaho statute providing that medical assistance "paid on behalf of an individual who was fifty-five (55) years of age or older when the individual received such assistance may be recovered from the estate, or if there be no estate the estate of the surviving spouse, if any, shall be charged for such aid paid to either or both...." (Idaho Code Sec. 56-218(1))

In upholding the Department's claim, The Idaho Supreme Court ruled that disallowing recovery
from Mr. Knudson's estate because the Department had received the balance of Mrs. Knudson's
estate "would mean that if the estate of a spouse who received Medicaid assistance had even one
cent, or a toothbrush, the Department could collect nothing from the estate of the surviving

The court also held that Idaho's recovery statute does not violate federal law since the federal law's definition of recoverable assets includes those a person is entitled to receive but disavows. The court found the Knudsons' "Marriage Settlement Agreement" to be such a disavowal.

Source: "State May Recover From the Estates of Both Spouses," The Elder Law Report, Vol. X, Nos. 1/2, September 1998. Call (800) 562-1973 for subscription information.