State Can Recover Life-Time Medicaid Benefits From Jointly Owned Real Estate

Trial court rules that the state could recover the value of life-time Medicaid benefits from a piece of real estate that the Medicaid recipient co-owned with her son.

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In re Estate of Lovan. (Iowa Ct. App., No. 1-038 / 10-1314, Feb. 23, 2011).

Facts.  Lo Lovan and her son, Sammy Lovan, purchased a house as tenants in common.  On several occasions, Mrs. Lovan and her son refinanced the mortgage, both executing all subsequent mortgage documents and continuing to own the property as tenants in common.

During her lifetime, Mrs. Lovan applied for and received Medicaid benefits.  Although Mrs. Lovan met the asset and income requirements for Medicaid eligibility, the Medicaid program is permitted to recover amounts paid on her behalf from her estate (if the estate is not insolvent, as is the case with many Medicaid recipients).  Accordingly, upon her death, the state filed a claim against her estate to recover the amount of benefits provided to her during her lifetime.

Sammy Lovan, her son, argued that the house was not part of his mother’s estate, and therefore, not subject to the Medicaid reimbursement claim made by the state.  He explained that his mother signed the mortgage documents with him in order to help him receive financing; however, he personally paid all of the mortgage payments and additional residential expenses without the assistance of his mother.

Holding.  The probate court held that Mrs. Lovan had a one-half interest in the house, as tenants in common with her son, which cleared the way for the state to file its Medicaid reimbursement claim against one-half of the home’s value; Mr. Lovan appealed the decision.  The Iowa Court of Appeals agreed with the probate court, finding that the son did not provide clear and convincing evidence to overcome the presumption that he owned the property as tenants in common with his mother.  In affirming the probate court’s decision, the court of appeals determined that, while the son may have initially required his mother’s signature to obtain a loan, she should not have continued to execute documents associated with the subsequent refinancing.

Recommendation.  The inevitable forced sale of the home by Sammy to reimburse Medicaid for Mrs. Lovan’s lifetime benefits could have been avoided if she properly transferred her assets prior to applying for Medicaid.  There are many strategies which can be implemented in order to protect the assets of a person who intends to apply for Medicaid benefits, including the retention of exempt assets which cannot be recovered by the state after the Medicaid recipient passes away.  (The full text of the income and asset rules and regulations of the Virginia Medicaid Manual can be found here.)