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Understanding Medical Assistance claims

III. Expanded definition of “estate” for an MA claim

An MA claim is unique in that it can collect from a greater variety of assets in a decedent’s estate than can most other creditors’ claims. This is because federal and state law expand the definition of “estate” for MA recovery purposes. See United States Code, title 42, section 1396p, paragraph (b), clause (4); see also Minnesota Statutes, section 256B.15, subdivision 1a, paragraph (b).

For the purposes of MA estate recovery, a person's estate consists of all the following property:

  • • The person's probate estate
  • • All of the person's interests, or proceeds of those interests, in real property the person owned as a life tenant or as a joint tenant with a right of survivorship at the time of the person's death
  • • All of the person's interests, or proceeds of those interests, in transfer-on-death (TOD) securities the person owned in beneficiary form at the time of the person's death, to the extent the interests or proceeds of those interests become part of the probate estate
  • • All of the person's interests in certain joint accounts, multiple-party accounts, pay-on-death accounts, brokerage accounts, and investment accounts, or the proceeds of those accounts, at the time of the person's death to the extent the interests become part of the probate estate
  • • Assets conveyed to a survivor, heir, or assign of the person through survivorship, living trust, or other arrangements
  • • Assets the person transferred to his or her spouse before death (see section E.3.)
  • • Life insurance policies without a designated beneficiary
  • This procedure explains these asset categories in greater detail to help you recover on an MA claim.

    A. The person’s probate estate

    A person’s probate estate contains all interests that the person has in all forms of real and personal property at the time of the person's death, except the property interests that are terminated by the person’s death. See Minnesota Statutes, section 524.1-201(17); see also Minnesota Statutes, section 525.13. You can recover from any assets in a person’s probate estate. You can also recover from any assets listed in the following sections, because “estate” for MA recovery purposes includes more than just a person’s probate estate.

    B. The person’s interests in real property owned in life estate or joint tenancy that he or she owned at death

    Typically, a person’s interest in a life estate or joint tenancy ends when he or she dies. This means that a person’s life estate and joint tenancy interests are not considered part of the person’s probate estate, as the person’s death alone is sufficient to transfer the interests to another person without the need for probate.

    Outside of an MA estate recovery context, when a person who had a life estate interest in real property (life tenant) dies, the real property transfers to the designated “remaindermen”—people who take possession of the real property upon the death of the life tenant. In joint tenancy, each joint tenant shares an undivided interest with a “right to survivorship”—the right of a joint tenant to take possession of the whole property upon the death of the other joint tenant or, if there are more than two joint tenants, after the deaths of all other joint tenants. See Hendrickson v. Minneapolis Fed. Sav. & Loan Ass'n, 161 N.W.2d 688, 690-91 (Minn. 1968); see also Minnesota Statutes, section 500.19.

    However, if you have an MA claim against a person’s estate, the person’s life estate or joint tenancy interest in real property does not end upon his or her death if the interest was created on or after August 1, 2003. See Minnesota Statutes, section 256B.15, subdivision 1, paragraphs (a)(3) and (d). Having an MA claim allows you to recover against the value of the life estate or joint tenancy interest even after the person dies.

    In addition, if joint tenants were married at the time of an MA member’s death, you can recover against a joint tenancy interest in real property that the person held at death even if the interest was created before August 1, 2003. See In re Estate of Grote, 766 N.W.2d 82, 84–86 (Minn. Ct. App. 2009) (holding that real property an MA member owned in joint tenancy at her death in 1996 passed into the estate of her surviving spouse and could be claimed against in the spouse’s estate for MA estate recovery).

    C. The person’s interests, or proceeds of those interests, in transfer-on-death (TOD) securities the person owned as beneficiary at time of death

    This section narrowly defines what TOD securities are, and how they become part of a person’s probate estate, solely for the purpose of MA estate recovery.

    1. What is a security?

    A “security” is a share, participation, or other interest in property, in a business, or in an obligation of an enterprise or other issuer, and includes a certificated security, an uncertificated security, and a security account. See Minnesota Statutes, section 524.6-301, clause (4).

    A “security account” is one of the following:
    a reinvestment account associated with a security; a securities account with a broker; a cash balance in a brokerage account; or cash, cash equivalents, interest, earnings, or dividends earned or declared on a security in an account, a reinvestment account, or a brokerage account, whether or not credited to the account before the owner's death

    an investment management or custody account with a trust company or a trust division of a bank with trust powers, including the securities in the account, a cash balance in the account, and cash, cash equivalents, interest, earnings, or dividends earned or declared on a security in the account, whether or not credited to the account before the owner's death

    a cash balance or other property held for or due to the owner of a security as a replacement for or product of an account security, whether or not credited to the account before the owner's death

    See Minnesota Statutes, section 524.6-301, clause (5).

    2. What is a TOD security?

    A TOD security is a security whose ownership, upon the death of the sole owner or the last to die of multiple owners, passes to the beneficiary or beneficiaries who survive all owners. See Minnesota Statutes, sections 524.6-306 and 524.6-307, subdivision 1.

    3. When do a person’s interests, or proceeds of those interests, in TOD securities become part of his or her estate for MA recovery purposes?

    A deceased person’s interest in a TOD security can be recovered by an MA claim when the owner’s other estate assets cannot pay for the estate’s debts. See Minnesota Statutes, section 524.6-307, subdivision 2. The deceased person’s interest can be recovered even when the security lists a beneficiary or joint owner.

    D. The person’s interests in certain joint, pay-on-death (POD), multiple-party, brokerage, and investment accounts, or proceeds of those accounts, at time of death

    This section narrowly defines what joint, POD, multiple-party, brokerage, and investment accounts are, and how they become subject to MA estate recovery.

    1. What is a joint account?

    A joint account is an account designated as a joint account and any account payable on request to one or more of two or more parties and to the parties’ survivor(s). See Minnesota Statutes, section 524.6-201, subdivision 4.

    2. What is a POD account?

    A POD account is an account payable on request to one or more parties and, on the death of the parties, to one or more POD payees. See Minnesota Statutes, section 524.6-201, subdivision 10, for a more detailed definition.

    3. What is a multiple-party account?

    A multiple-party account is a joint account or a POD account. See Minnesota Statutes, section 524.6-201, subdivision 5, for a more detailed definition.

    4. What is a brokerage account?

    A brokerage account is an arrangement between an investor and a licensed brokerage firm that allows the investor to deposit funds with the firm and place investment orders through the brokerage.

    5. What is an investment account?

    An investment account is an account holding funds invested for capital growth.

    6. When do a person’s interests in these kinds of accounts, or proceeds of those interests, become part of his or her estate for MA recovery purposes?

    A deceased person’s interests in multiple-party, brokerage, and investment accounts can be recovered by an MA claim when the owner’s other estate assets cannot pay for the estate’s debts (such as an MA estate claim), to the extent the deceased person is the source of the funds or beneficial owner. The deceased person’s interests can be recovered even when the accounts list a beneficiary or joint owner.

    See How to recover on an MA claim when someone else is probating the estate, Section E, “Rights to a decedent’s interest in multiple-party accounts,” for guidance on recovering from a multiple-party account.

    E. Assets conveyed to survivor, heir, or assign through survivorship, living trust, or other arrangements

    1. Survivorship

    Survivorship is the right of a surviving party having a joint interest with others in property to take full ownership of the entire property upon the death of the other party or, if there are more than two parties with a joint interest, upon the death of the last surviving other party. You can recover against the interest of the deceased person whose estate is subject to your MA claim.

    2. Living trusts

    A living trust is a trust that is created and takes effect during the trust settlor's lifetime. The settlor is the person who sets up the trust—the settlor is identified in the trust document. Living trusts can be revocable or irrevocable. For the purpose of estate recovery, whether the terms of the trust are revocable or irrevocable is not important. The important issue is who funded the trust and whether the MA member retained a property interest in the trust assets at the time of his or her death.

    a. Trusts funded by the MA member’s assets

    You can generally recover from a living trust when (1) the MA member was the source of the trust fund and (2) the MA member is also the beneficiary of the trust during the MA member’s lifetime. This is true even if the trust document says that the trust assets cannot be used to pay creditors such as MA. If the self-funded trust states that assets cannot be used to pay creditors, it is a “self-settled spendthrift trust”; this type of trust is not recognized in Minnesota. The exceptions to this rule are special needs trusts and pooled trusts, which are specifically recognized in Minnesota law. (DHS, not the local agency, is responsible for recovery from these trusts.)

    You can recover from a living trust funded by the MA member when the MA member is not the beneficiary of the trust only if the MA member retains some sort of ownership interest in the assets in the trust, such as the ability to reclaim or redistribute assets.

    b. Trusts funded by the assets of people other than the MA member

    Generally, you cannot recover assets in a trust that was funded by the assets of people other than the MA member. For instance, there can be no recovery against a spendthrift trust established on behalf of the MA member by a third-party grantor (using the third party’s money) and for which the MA member has no ability to alienate (give away, sell, or encumber) the principal of the trust by any means. An example of this sort of trust is a supplemental needs trust created under Minnesota Statutes, section 501C.1205.

    Likewise, a living trust established by the MA member for which the MA member is not the beneficiary, meaning that the grantor does not benefit from the trust and has given up all his or her interest in the principal and income of the trust (for example, a charitable trust to which the MA member makes cash gifts), is not subject to recovery. Self-settled charitable trusts funded by an MA member’s assets are not subject to recovery.

    Note: If an MA member inherits money, and the MA member or a third party sets up a trust with the inherited money, that trust is considered to be funded by the MA member. If the MA member is the beneficiary of a trust created by a will (testamentary trust) of a third party, the trust is not considered to be funded by the MA member.

    c. Testamentary trusts

    If a trust does not take effect during the settlor’s lifetime, it is likely a testamentary trust. A testamentary trust is a trust created by a will and takes effect when the settlor dies. The provisions of a testamentary trust are set forth in the will. Accordingly, an MA member’s assets, or a surviving spouse’s assets subject to MA estate recovery, that are used to fund a testamentary trust and are conveyed by the trust are part of the MA member’s or surviving spouse’s estate, and they can be recovered by an MA claim.

    3. Other arrangements

    For the purpose of MA recovery in a single person's estate or the estate of a survivor of a married couple, the term "other arrangements" includes any other means by which title to all or any part of the jointly owned or marital property or interest passed from the predeceased spouse to another. These means include, but are not limited to, transfers between spouses that are permitted, prohibited, or penalized for purposes of MA eligibility.

    a. Jointly owned property

    Jointly owned property is real or personal property held by two or more people with a right of survivorship.

    b. Marital property

    If either or both spouses of a married couple received MA services, all property owned during the marriage or that either or both spouses acquired during their marriage is presumed to be marital property for purposes of recovering on an MA claim, regardless of whether the property was owned or titled in the name(s) of one or both of them. Unless there is clear and convincing evidence to the contrary, there is a strong presumption that the property is marital.

    Note: If you can claim against an asset only because it meets the above definition of marital property—that is, the asset does not fall under any of the other asset categories described in this section—then you can claim against that asset only if the MA member whose services you are recovering the costs for died on or after July 1, 2009.

    F. Summary chart of recoverable assets

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