H&W v. Cathie Peterson RE: The Estate of Melvin Peterson (deceased) , 157 Idaho 827 ( 2014 )

IN THE SUPREME COURT OF THE STATE OF IDAHO
Docket No. 40615
IN THE MATTER OF THE ESTATE OF )
MELVIN PETERSON, DECEASED. ) Coeur d’Alene, April 2014
-------------------------------------------------------- )
IDAHO DEPARTMENT OF HEALTH & ) 2014 Opinion No. 132
WELFARE, )
) Filed: December 12 2014
Petitioner-Respondent, )
) Stephen W. Kenyon, Clerk
v. )
) SUBSTITUTE OPINION, THE
CATHIE PETERSON, ) COURT’S PRIOR OPINION
) DATED AUGUST 13, 2014 IS
Respondent-Appellant. ) HEREBY WITHDRAWN.
)
Appeal from the District Court of the First Judicial District, State of Idaho,
Boundary County. Hon. Jeff M. Brudie, District Judge.
District court decision affirming magistrate court’s decision on Medicaid
recovery, affirmed in part and remanded for proceedings consistent with this
opinion.
Featherston Law Firm, Chtd. Sandpoint, for appellants. Brent C. Featherston
argued.
Hon. Lawrence G. Wasden, Idaho Attorney General, Boise, for respondents.
William C. Cartwright, Deputy Attorney General argued.
_________________________________
BURDICK, Chief Justice
This case arose out of the Department of Health and Welfare’s (IDHW) attempt to
recover Medicaid benefits from Melvin Peterson’s estate that were paid during his lifetime. At
issue is whether any part of a real estate transfer from Melvin Peterson to his daughter Cathie
Peterson is subject to Medicaid recovery.
I. FACTUAL AND PROCEDURAL BACKGROUND
The relevant facts of this case are not in dispute. Melvin Peterson died on March 3, 2007,
at the age of 83. Prior to his death, he was the owner of residential real property located in
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Boundary County. On December 6, 2001, Melvin Peterson executed a Gift Deed of his real
property to his daughter, Cathie Peterson, retaining for himself a life estate in the property.
Shortly thereafter, he applied for Medicaid and began receiving Medicaid benefits in March
2003. At the time of his death, Melvin Peterson had received a total of $171,386.94 in Medicaid
benefits.
Cathie Peterson was appointed personal representative of her father’s estate on July 26,
2007. IDHW filed a timely Claim Against Estate and later an Amended Claim Against Estate in
the amount of $171,386.94. Cathie Peterson, in her capacity as personal representative,
disallowed the claims without stating a reason. In response, IDHW filed a Petition for Allowance
of Amended Claim. After a hearing on March 25, 2008, the court granted IDHW’s petition.
After receiving no response to its claim against the estate, IDHW filed a Petition to
Require Payment of Claim on May 5, 2008, setting forth its demand for payment of the value of
Melvin Peterson’s life estate. Using the Life Estate Remainder Table contained in IDAPA
16.03.05.837 and Melvin Peterson’s age at the time of his death, IDHW valued the life estate at
$41,444. After a hearing, the magistrate court entered an order requiring payment of IDHW’s
claim on June 12, 2008. This June 12, 2008 Order held that the life estate was an asset of the
estate for purposes of Medicaid recovery and ordered the personal representative to add the life
estate interest to the estate’s inventory and assign it an appropriate value. However, the personal
representative instead filed and was granted a motion to hire an appraiser to determine the fee
simple value of the residential real property. After the personal representative failed to file an
appraisal, IDHW filed various motions relative to the appraisal, sale of the property, and
payment of its claim. On August 11, 2009, the magistrate court granted IDHW’s motions to
compel appraisal, sale of the property, and payment of the Medicaid claim, which the personal
representative subsequently appealed.
On appeal, the district court vacated the magistrate’s August 11, 2009 Order and
remanded the matter for additional findings of fact and conclusions of law. Shortly after the
ruling on appeal was entered, Cathie Peterson, in her capacity as personal representative, sought
permission from the magistrate court to sell the property, liquidate an escrow account, and pay
counsel for the personal representative of the estate. On the same day, she also filed an Amended
Personal Representative’s Inventory assigning the life estate zero value.
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On September 17, 2010, Attorney Brent Featherston filed a Demand for Notice and
Special Appearance on behalf of “Cathie Peterson, individually,” stating that he was seeking to
vacate and dismiss all orders entered by the magistrate court regarding her real property. IDHW
responded by filing a petition to remove Cathie Peterson as personal representative of the estate,
which the magistrate court granted.
Following a court trial, the magistrate court held that the life estate remainder interest
was an estate asset of value for purposes of Medicaid reimbursement and that its value was to be
determined in accordance with IDAPA 16.03.05.837.01. On appeal, the district court affirmed
the magistrate court in its November 16, 2012 Opinion. Cathie Peterson then timely appealed to
this Court on December 27, 2012.
II. ISSUES ON APPEAL
1. Whether Cathie Peterson waived her appeal of the decision that Melvin Peterson’s life
estate was an asset subject to Medicaid recovery.
2. Whether the court had subject matter jurisdiction to determine the issues before it.
3. Whether the court had personal jurisdiction over Cathie Peterson individually.
4. Whether any part of the gift transaction Melvin Peterson made to his daughter before
applying for Medicaid benefits is subject to Medicaid recovery.
5. Whether Cathie Peterson was entitled to offsets to the value of the real property based on
improvements she made.
6. Whether either party is entitled to attorney fees on appeal.
III. ANALYSIS
A. Standard of Review
“On appeal of a decision rendered by a district court while acting in its intermediate
appellate capacity, this Court directly reviews the district court’s decision.” Idaho Dep’t Of
Health & Welfare v. McCormick, 153 Idaho 468, 470, 283 P.3d 785, 787 (2012) (quoting In re
Doe, 147 Idaho 243, 248, 207 P.3d 974, 979 (2009)). However, to determine whether the district
court erred in affirming the magistrate court, we review the record before the magistrate court to
determine whether substantial and competent evidence supports the magistrate’s findings of fact.
Pelayo v. Pelayo, 154 Idaho 855, 858, 303 P.3d 214, 217 (2013). We review questions of law
such as statutory interpretation de novo. McCormick, 153 Idaho at 470, 283 P.3d at 787.
Interpretation of a statute begins with an examination of the statute’s literal
words. Where the language of a statute is plain and unambiguous, courts give
effect to the statute as written, without engaging in statutory construction. Only
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where the language is ambiguous will this Court look to rules of construction for
guidance and consider the reasonableness of proposed interpretations. Moreover,
unless a contrary purpose is clearly indicated, ordinary words will be given their
ordinary meaning when construing a statute. In construing a statute, this Court
will not deal in any subtle refinements of the legislation, but will ascertain and
give effect to the purpose and intent of the legislature, based on the whole act and
every word therein, lending substance and meaning to the provisions.
In re Estate of Wiggins, 155 Idaho 116, 119, 306 P.3d 201, 204 (2013) (internal citations and
quotation marks omitted).
B. Whether Cathie Peterson waived her appeal of the decision that Melvin Peterson’s life
estate was an asset subject to Medicaid recovery.
IDHW argues that because the June 12, 2008 Order was an appealable order that was not
appealed within 42 days, it is no longer subject to challenge on appeal. The June 12, 2008 Order
granted IDHW’s Petition to Require Payment of Claim to the extent of available assets and
ordered that Melvin Peterson’s retained life estate be deemed an asset of his estate for Medicaid
recovery purposes and that the personal representative assign an appropriate value to it in the
estate’s inventory. About a year later, IDHW filed a Petition to Compel Sale of Home, which the
magistrate court granted on August 11, 2009. In her capacity as personal representative, Cathie
Peterson timely appealed the August 11, 2009 Order. In this first appeal, IDHW argued that the
June 12, 2008 Order was final and not timely appealed. The district court issued its Decision on
Appeal on May 26, 2010, holding that the June 12, 2008 Order was interlocutory and not
appealable, and further vacated the judgment and remanded the case for the trial court to set forth
adequate findings of fact. IDHW now argues that the district court erred in holding that the June
12, 2008 Order was interlocutory and asks this Court to reverse that decision.
Idaho Code section 17-201 allows appeals from a judgment or order of the magistrate
division to the district court in eight different probate matters, three of which IDHW argues
apply to the June 12, 2008 Order:
4. Against or in favor of setting apart property, or making an allowance for a
widow or child.
5. Against or in favor of directing the partition, lease, mortgage, sale or
conveyance of real property.
7. Refusing, allowing or directing the distribution or partition of an estate, or any
part thereof, or the payment of a debt, claim, legacy or distributive share.
I.C. § 17-201.
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In its May 26, 2010 Decision on Appeal, the district court concluded that the June 12,
2008 Order was interlocutory because the trial court did not determine any value, nor distribute,
nor set aside, nor partition the life estate in the order itself. The district court is correct that the
June 12, 2008 Order was interlocutory. Thus, Cathie Peterson did not waive her challenges to the
June 12, 2008 Order by failing to appeal it and this Court may review any challenges to that
order on appeal under Idaho Appellate Rule 17(e). Matter of Estate of Keeven, 110 Idaho 452,
456–57, 716 P.2d 1224, 1228–29 (1986) (“If there is a final appealable order in a case and an
appeal is properly taken from that order, then all other orders which would otherwise not be
appealable may be considered by this Court.”).
C. Jurisdiction
Cathie Peterson contends that the court did not have subject matter jurisdiction to
determine the title to her real property in a probate proceeding. She argues that she cannot be
held personally liable except through a separate proceeding requiring process and acquisition of
the court’s jurisdiction, which did not occur in this case. She also contends that while she
submitted to the court’s jurisdiction as personal representative of the estate, the court lacks
personal jurisdiction over her individually because IDHW failed to provide her with meaningful
due process.
1. Subject Matter Jurisdiction
Both the magistrate court and the district court had subject matter jurisdiction to
determine whether any part of Melvin Peterson’s gift transaction of his residential property
constituted a part of his estate. Cathie Peterson contends that such a decision is a question of title
outside of a probate court’s jurisdiction. Her argument is based on following language from this
Court: “It is the general rule that where title to real property is in issue between an estate and its
heirs and a third person, such issue must be tried in an independent action brought for that
purpose in a competent tribunal and cannot be tried by the probate court.” In re Lundy’s Estate,
79 Idaho 185, 193, 312 P.2d 1028, 1032 (1957).
What Cathie Peterson overlooks is that Idaho adopted the Uniform Probate Code (Code)
in 1971, fourteen years after In re Lundy was decided. In a more recent case, the petitioner made
a similar mistake relying on Idaho case law from before the adoption of the Code that said the
determination of whether an irrevocable contract exists was outside the realm of the probate
court. Miller v. Estate of Prater, 141 Idaho 208, 213, 108 P.3d 355, 360 (2005). In Miller, this
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Court stated that the Code provides “the court handling a probate with wide ranging powers to
determine contested matters, such as that involved in this case.” Id. We held that “it is clear that
the court handling a probate has jurisdiction to determine the existence and enforcement of a
contract to make a will or devise.” Id. This conclusion was based on consideration of the
following Code provisions:
I.C. § 15-3-104 provides that, “No proceeding to enforce a claim against the estate
of a decedent or his successors may be revived or commenced before the
appointment of a personal representative.” I.C. § 15-1-201(5) defines “claims” to
include liabilities of the decedent “whether arising in contract, in tort or otherwise
...” As pointed out by the Estate, I.C. § 15-3-105 provides the “court” with
exclusive jurisdiction of “formal proceedings” to determine how decedent’s
estates are to be “expended and distributed.” According to I.C. § 15-1-201, formal
proceedings are those conducted before a judge with notice to interested persons.
I.C. § 15-3-106 provides catch-all authority for the court to determine any other
controversy to which an estate may be a party, covering any matters not addressed
in I.C. §§ 15-3-104 and 105. Necessarily included in such matters are contracts to
make a will or devise, which are specifically addressed in I.C. § 15-2-701.
Id. Determining whether some or all of the property gift Cathie Peterson received from the
decedent constitutes a part of the estate falls within the catch-all jurisdictional authority provided
by Idaho Code section 15-3-106. Therefore, both the district court and the magistrate court had
subject matter jurisdiction in this case.
2. Personal Jurisdiction
Next, Cathie Peterson contends that the court lacked personal jurisdiction over her in her
individual capacity. While she admits she submitted to the court’s jurisdiction in her capacity as
personal representative, she appears to contend that IDHW was required to serve her with
process individually when it sought to sell her real property to satisfy its claim against Melvin
Peterson’s estate. Any contention that Cathie Peterson did not receive notice is without merit.
IDHW filed its Petition to Compel Sale of Home on July 15, 2009. Cathie was not removed as
personal representative of the estate until October 7, 2010. Moreover, IDHW’s Petition indicates
that Cathie Peterson was served with the Petition; thus, she had notice of IDHW’s intent to
compel the sale of the home. IDHW was not required to serve her a second time when she had
not only been aware of the proceedings, but had been an active participant in them. Idaho Code
section 15-3-106 states:
Subject to general rules concerning the proper location of civil litigation and
jurisdiction of persons, the court may herein determine any other controversy
concerning a succession or to which an estate, through a personal representative,
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may be a party. Persons notified are bound though less than all interested persons
may have been given notice.
Therefore, both the magistrate court and the district court had personal jurisdiction over
Cathie Peterson.
D. Whether any part of the gift transaction Melvin Peterson made to Cathie Peterson
before applying for Medicaid benefits is subject to Medicaid recovery.
The Medicaid program is a “cooperative endeavor [with the States] in which the Federal
Government provides financial assistance to participating States to aid them in furnishing health
care to needy persons.” Harris v. McRae, 448 U.S. 297, 308 (1980). The States receive federal
payments for the program, but such payments are conditioned on various federal rules governing
when and to what extent payments may be recovered from individuals. 42 U.S.C. § 1396p. In the
Medicaid recovery context, Congress has stated the general rule that “[n]o adjustment or
recovery of any medical assistance correctly paid on behalf of an individual under the State plan
may be made,” and then specifies certain exceptions to that rule. 42 U.S.C. § 1396p(b)(1).
However, more broadly, Medicaid has always been intended to be “the payer of last resort.”
Arkansas Dep’t of Health and Human Servs. v. Ahlborn, 547 U.S. 268, 291 (2006) (quoting
S.Rep. No. 99–146, at 313 (1985)). Accordingly, excess resources saved by virtue of Medicaid
funds are meant to be tracked and recovered. Idaho Dep’t of Health & Welfare v. McCormick,
153 Idaho 468, 471–72, 283 P.3d 785, 788–89 (2012).
The Idaho counterpart of the federal Medicaid Law is Idaho Code section 56-218, which
provides for the recovery of certain assistance provided by Medicaid:
Except where exempted or waived in accordance with federal law medical
assistance pursuant to this chapter 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 individual’s estate, and the estate of the spouse, if any, for
such aid paid to either or both . . . .
This statute allows recovery of claims against the estate of a Medicaid recipient if the estate
contains property or assets in which the Medicaid recipient had some legal title or interest at the
time of his or her death. For the purposes of Medicaid recovery, Idaho has adopted an expanded
definition of “estate,” which in addition to all of the assets included in the individual’s estate
under probate law, also includes:
Any other real and personal property and other assets in which the individual had
any legal title or interest at the time of death, to the extent of such interest,
including such assets conveyed to a survivor, heir, or assign of the deceased
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individual through joint tenancy, tenancy in common, survivorship, life estate,
living trust or other arrangement.
I.C. § 56-218(4)(b).
This Court has recognized that the legislative purpose behind the Medicaid recovery
statutes is to prevent individuals from transferring their assets to survivors, heirs, or assigns,
while at the same time benefiting from taxpayer funds intended to assist the poor. See
McCormick, 153 Idaho at 472, 283 P.3d at 789. Accordingly, in addition to allowing the State to
recover Medicaid benefits from a decedent’s estate, Idaho Code section 56-218 also allows the
State to file an action to void gratuitous transfers of property made within a specified time of the
recipient receiving Medicaid benefits:
Transfers of real or personal property, on or after the look-back dates defined in
42 U.S.C. 1396p, by recipients of such aid, or their spouses, without adequate
consideration are voidable and may be set aside by an action in the district court.
I.C. § 56-218(2).
The look-back period applicable in this case is 36 months from when Melvin Peterson
applied for Medicaid benefits. 42 U.S.C. § 1396p(c)(1). The parties do not dispute that Melvin
Peterson transferred his residential estate, subject to a retained life estate, to Cathie Peterson for
no consideration within the applicable look-back period. Instead of attempting to void this
transaction under Idaho Code section 56-218(2), IDHW sought to have Melvin Peterson’s
retained life estate included as an asset of his estate under Idaho Code section 56-218(4)(b)’s
expanded definition of “estate.” However, the magistrate court held that the remainder interest
that was gifted to Cathie, not the retained life estate interest, was subject to Medicaid recovery
under Idaho Code section 56-218(4)(b). The district court agreed with the magistrate court’s
reasoning and affirmed its order. Indeed, after noting that the parties “consistently referred to the
life estate as the property to be valued,” the district court attempted to clarify what was subject to
recovery:
The lower court referred to the property interest to be valued as the life estate
remainder interest. The correct interest to value for Medicaid recovery purposes is
the property interest that was conveyed for less than fair market value, not the
property interest retained. It is clear the magistrate court in the instant matter
understood the property interest to be valued, as evidenced by his Order that
reads, “The value of the estate’s interest in the real property gift deeded to Cathie
Peterson…shall be that proportion of the fair market value of the entire fee
interest in the real property….”
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Cathie Peterson and IDHW both frame the main issue of this case as being whether a
decedent’s retained life estate is subject to Medicaid recovery under Idaho Code section 56-
218(4)(b) despite both lower courts holding that the remainder interest Melvin Peterson gifted to
Cathie in 2001 was the interest subject to recovery. The district court held that because Melvin
Peterson conveyed his residential real property to Cathie, subject to his life estate interest, during
the look-back period free of cost, the transfer of the remainder interest to Cathie constituted an
“other arrangement” under Idaho Code section 56-218(4)(b), and so, was part of Melvin
Peterson’s estate subject to Medicaid recovery. Therefore, the question on appeal is whether any
part of the real property transfer from Melvin Peterson to Cathie Peterson is subject to Medicaid
recovery.
According to 42 U.S.C. § 1396p, States “shall” define the estate for recovery purposes to
include all property included in the probate estate, but “may” also define estate to include
property that passes outside of the probate estate. 42 U.S.C. § 1396p(b)(4)(A) and (B). The Idaho
legislature has chosen to include property that passes outside of probate and adopted the optional
language from 42 U.S.C. § 1396p(b)(4)(B):
Any other real and personal property and other assets in which the individual had
any legal title or interest at the time of death, to the extent of such interest,
including such assets conveyed to a survivor, heir, or assign of the deceased
individual through joint tenancy, tenancy in common, survivorship, life estate,
living trust or other arrangement.
I.C. § 56-218(4)(b).
In its argument that Melvin Peterson’s retained life estate constitutes a part of his estate
under this statute, IDHW relies on the language, “including such assets conveyed to a survivor,
heir, or assign of the deceased individual through . . . life estate.” In contrast Cathie Peterson
focuses on the language “legal title or interest at the time of death, to the extent of that interest.”
The lower courts in this case relied on the catch-all phrase “or other arrangement” and this
Court’s decision in Idaho Department of Health & Welfare v. McCormick to conclude that that
the remainder interest gifted to Cathie was subject to Medicaid recovery. To determine the
correct approach, it is necessary to look at our two most recent decisions addressing the extent to
which a Medicaid recipient’s estate is subject to recovery.
In McCormick, this Court was faced with determining whether assets that were once
community property, but were transmuted so that the recipient spouse no longer held an interest
at the time of his or her death, were available for recovery under Idaho Code section 56-
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218(4)(b). At issue was a married couple’s residence that was jointly held until the wife
transferred the property to her husband by quitclaim deed in order to qualify for Medicaid
benefits. McCormick, 153 Idaho at 469, 283 P.3d at 786. The husband, who was not a Medicaid
recipient, predeceased his wife and IDHW sought to recover the benefits paid to his wife from
his estate. IDHW claimed entitlement under Idaho Code section 56-218 to “any property or
estate which, at any time, had been the community property of the decedent and decedent’s
spouse, or which had been the property of decedent’s spouse.” Id. at 470, 283 P.3d at 787.
This Court found section 56-218(4)’s expanded definition of “estate” to be “ambiguously
inclusive.” Id. at 476, 283 P.3d at 793. Given the ambiguity of this provision, we looked to the
surrounding provisions for proper context—specifically, the definition of “asset” within the
federal statutory scheme on which Idaho’s Medicaid recovery statute is based. Id. at 473, 283
P.3d at 790. The federal definition of “estate” refers to “assets” of the individual, a term that is
specifically defined in 42 U.S.C. § 1396p(h)(1) as “all income and resources of the individual
and of the individual’s spouse, including any income or resources which the individual or such
individual’s spouse is entitled to but does not receive because of action . . . by the individual or
such individual’s spouse.” We noted that this definition of assets “seems to specifically address
resources in which the recipient had an interest at one time but disposed of through her own
actions or those of her spouse—such as a lifetime transfer of a home.” Id. at 476, 283 P.3d at
793. This definition of asset coupled with “the ambiguously inclusive language in the definition
of ‘estate’—purporting to extend recovery to assets transferred by ‘other arrangements’”— made
this Court question the Estate’s strict reliance on Idaho Code section 56-218(1)’s phrase at “at
the time of death.” Id. at 477, 283 P.3d at 794. We then looked to the overall purpose of the
statute for guidance, agreeing with the North Dakota Supreme Court’s conclusion that
“consideration of all the relevant statutory provisions, in light of the Congressional purpose to
provide medical care for the needy, reveals a legislative intention to allow states to trace the
assets of recipients of medical assistance and recover the benefits paid when the recipient’s
surviving spouse dies.” Id. (quoting In re Estate of Wirtz, 607 N.W.2d 882, 885 (N.D. 2000)).
Accordingly, we concluded that Idaho Code section 56-218(1) supports recovery from the estate
of both spouses, including assets that were once community property, but were transmuted so
that the recipient spouse no longer held an interest at the time of his or her death. Id.10
An even more recent decision from this Court also dealt with Medicaid recovery under
Idaho Code section 56-218 from the estate of a Medicaid recipient’s spouse. In re Estate of
Wiggins, 155 Idaho 116, 121, 306 P.3d 201, 206 (2013). In Wiggins, this Court looked at
whether a Medicaid applicant’s transfer of community property from his or her estate for
Medicaid eligibility by way of a marriage settlement agreement (“MSA”) also removes the
community property from the estate for purposes of Medicaid recovery. Id. at 122, 306 P.3d at
207. To answer this question we again looked to the federal definition of “asset”: “an item to
which the recipient would be entitled but for the actions of the recipient or the recipient’s
spouse.” Id. (emphasis in the original). We held that property transmuted for Medicaid eligibility
fell within this definition of “asset” and that the actual transmutation fell within the “other
arrangement” language of Idaho Code section 56-218(4)(B)’s definition of estate. Id. Noting that
this interpretation of asset was consistent with the policy behind Medicaid, we held that
removing a Medicaid applicant’s community property from his or her estate for Medicaid
eligibility by way of an MSA does not have the effect of removing the community property from
the estate for purposes of Medicaid recovery. Id.
Cathie Peterson argues that Idaho Code section 56-218(4)(b)’s “interest at the time of
death” language does not allow IDHW to recover Melvin Peterson’s life estate interest because
he had no interest in the life estate or property at the time of his death. IDHW argues that the
transfer of Melvin Peterson’s life estate interest at his death is one of the forms of conveyance
specifically named in Idaho Code section 56-218(4)(b)—“conveyed to a survivor, heir, or assign
of the deceased individual through joint tenancy, tenancy in common, survivorship, life estate,
living trust or other arrangement.” Cathie is correct that at common law a life estate terminates at
the time of death. However, this Court has previously found Idaho Code section 56-218(4)(b) to
be ambiguous based on the tension between the “interest at the time of death” language and the
broad definition of “asset.” McCormick, 153 Idaho at 475–76, 283 P.3d at 792–93. In
McCormick, the Estate also relied on this language in its argument that a lifetime transfer of
community property was not included within the definition of “estate,” but the Court found this
reliance to be misplaced holding that Idaho Code section 56-218(4)(b)’s definition of “estate”
could include a life time transfer. As far as the weight to be given to the “at time of death
language,” the Court stated:
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Overall, the ambiguously inclusive language in the definition of “estate”—
purporting to extend recovery to assets transferred by “other arrangements”—
coupled with the definition of “assets”—plainly including the resources of the
recipient’s spouse as well as assets the recipient disposed of before death—calls
into question the Estate’s strict reliance on the phrase “at the time of death.” 42
U.S.C. §§ 1396p(b)(4), 1396p(h)(1).
Id. at 477, 283 P.3d at 794. Melvin Peterson’s conveyance included a “life estate” for himself
with a “survivorship” interest or remainder interest for Cathie. While Melvin Peterson may not
have had an interest in his life estate when he died, any interest he had in the property was
transferred to Cathie at the time of his death making her interest in the property a fee simple
rather than just a remainder interest. When assets of a Medicaid recipient are conveyed to a
survivor, heir or assign by the termination of a “life estate,” the assets remain part of the
recipient’s “estate” pursuant to 42 U.S.C. § 1396p(b)(4)(B) and Idaho Code section 56-
218(4)(b). Therefore, Melvin Peterson’s life estate interest was subject to Medicaid recovery
under Idaho Code section 56-218(4)(b).
The next question is whether the district court correctly held that the remainder interest
Melvin Peterson gifted to Cathie Peterson in 2001 was subject to Medicaid recovery. Wiggins
and McCormick are equally instructive on this question. While both Wiggins and McCormick
dealt with recovering assets from a Medicaid recipient’s spouse, the language those cases relied
on is equally applicable to the case at hand. The definition of “asset” includes income and
resources that an individual is entitled to but does not receive because of his or her own actions.
See 42 U.S.C. § 1396p(h)(1). In this case, as in Wiggins and McCormick, Melvin Peterson
transferred his property in order to qualify for Medicaid assistance. Although Melvin Peterson
transferred his property to his daughter rather than his spouse, the property is still recoverable
under Idaho Code section 56-218(4)(b).
In McCormick, this Court held that Idaho Code section 56-218(4)(b) was ambiguous and
declined to adopt the Minnesota Supreme Court’s conclusion in In re Estate of Barg, 752
N.W.2d 52 (Minn. 2008) that the plain meaning of this section excluded lifetime transfers of
property. 153 Idaho at 475, 283 P.3d at 792. In relevant part this Court stated:
However, the language of 42 U.S.C. § 1396p(b)(4)(B) does not lend itself
to the definitive interpretation made by the Barg court. The court indicated that
“other arrangement” could not include lifetime transfers because it comes at the
end of a list of conveyances that occur at the time of death. However, a
conveyance of a life estate does not necessarily occur at the time of death. Nor
does a conveyance into a “living trust.” It would seem that a Medicaid recipient
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would make such conveyances prior to death and that “other arrangement” could
include other lifetime conveyances. Indeed, the use of the word “conveyed” is
more indicative of a lifetime transfer than one made in the context of a decedent’s
estate, where “devised,” “bequeathed,” or “devolved” would be more appropriate.
Further, the language “any other real and personal property and other assets in
which the individual had any legal title or interest at the time of death” is not
entirely clear. For instance, one might wonder what “other assets” a person could
own other than real and personal property. And, one could interpret the “in
which” clause to apply just to “other assets” or to both those and real and personal
property. Thus, while the Barg court seemed convinced that the language
excluded lifetime transfers, we find it to be ambiguously inclusive.
Id. at 475–76, 283 P.3d at 792–93.
The remainder interest Cathie Peterson received through a gift deed from Melvin
Peterson in 2001 is part of his “estate” under Idaho Code section 56-218(4)(b). The retention of a
life estate in his property while gifting the remainder interest to his daughter was simply a means
of transferring the property to his heirs while avoiding probate. Rather than make an outright
bequest of his property, Melvin Peterson made a lifetime transfer of a remainder interest in the
property to Cathie Peterson during the relevant look-back period. But for the transfer of the
remainder interest in his estate to his daughter in 2001, this interest would have been part of his
estate and subject to Medicaid recovery. Therefore, the remainder interest constitutes an asset
under 42 U.S.C. § 1396p(h)(1), just as community property transmuted through an MSA
constitutes an asset. This type of transfer of property falls within Idaho Code section 56-
218(4)(b)’s “other arrangement” language. Accordingly, the entire residential property that
Cathie Peterson ultimately received from Melvin Peterson is subject to Medicaid recovery under
Idaho Code section 56-218(4)(b). This conclusion is also consistent with Congress’s intent to
allow participating states broad authority to seek recovery of Medicaid benefits. 1
IDHW sought recovery of only the retained life estate based on Idaho Code section 56-
218(4)(b)’s language that assets conveyed by “life estate” were included within the definition of
estate. IDHW argued that the value of Melvin’s life estate should be calculated based on its value
right before his death using the Life Estate Remainder Table contained in IDAPA 16.03.05.837
(Rule 837). Rule 837 is entitled “Life Estate as Asset Transfer” and provides a table for
determining the value of a remainder interest that is transferred during the look back period for
the purpose of determining the appropriate transfer penalty. The transfer penalty involves
1
During oral argument, IDHW agreed it had waived any claim to Peterson’s remainder interest. Because of that
agreement and stipulation at oral argument, this opinion has no effect on that agreement between these parties.
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restricted or delayed coverage for a Medicaid applicant or participant, and thus its use is
contemplated during the lifetime of a Medicaid recipient. IDAPA 16.03.05.832. Cathie Peterson
argued that this strained interpretation and unconventional use of the life estate table in Rule 837
was inappropriate. Although we no longer need to decide this issue, we note that for purposes of
determining the value of a life estate for recovery from a Medicaid recipient’s estate, the
valuations in Rule 837 are not dispositive—parties may present evidence of alternative
valuations.
E. Whether Cathie Peterson was entitled to offsets to the value of the real property based
on improvements she made.
On appeal, Cathie Peterson argues that the magistrate court’s findings as to her
investment in the property are unsupported by the evidence and that “[i]nexplicably, the trial
court disregarded Cathie’s documented investment into the property.”
Neither the magistrate court nor the district court disregarded Cathie Peterson’s evidence.
To the contrary, the magistrate court found, and the district court affirmed, that Cathie Peterson
did expend money on legitimate improvements to the house. However, both courts held that the
measure for damages is the difference in fair market value of the property before and after the
improvements were made. Thus, to receive an offset for the improvements she made, Cathie
Peterson was required to show how these improvements increased the fair market value of the
property. The district court affirmed the magistrate court’s denial of Cathie Peterson’s claim for
offsets based on her failure to provide any evidence, not even her own opinion, as to how these
improvements enhanced the property’s value.
On appeal, Cathie Peterson fails to point to anywhere in the record where she provided
evidence that her improvements enhanced the property’s value. Therefore, she has failed to show
that the district court’s decision was unsupported by the evidence.
F. Attorney fees on appeal
IDHW asserts that it is entitled to attorney fees on appeal under Idaho Code section 12-
117 as the prevailing party. Under subsection (1) of that statute, upon appeal from any
administrative proceeding involving as adverse parties a state agency and a person, the court
“shall award the prevailing party reasonable attorney’s fees . . . if it finds that the nonprevailing
party acted without a reasonable basis in fact or law.” I.C. § 12-117. Thus, this Court will not
award fees against a party that presents a “legitimate question for this Court to address.” Kepler-
Fleenor v. Fremont Cnty., 152 Idaho 207, 213, 268 P.3d 1159, 1165 (2012).
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The question of whether a decedent’s retained life estate may be included as an asset
within the decedent’s estate for the purposes of Medicaid recovery is one of first impression that
presents a legitimate question for this Court to address. Therefore, we decline to award attorney
fees on appeal.
IV. CONCLUSION
Both the magistrate court and the district court had subject matter jurisdiction over this
case and personal jurisdiction over Cathie Peterson individually. We hold that the entire
residential property that Cathie Peterson received from Melvin Peterson is an asset of his estate
under Idaho Code section 56-218(4)(b) and subject to Medicaid recovery; thus, the district court
erred to the extent it held that only the remainder interest in the estate was subject to Medicaid
recovery. We also hold that Cathie Peterson failed to show that the district court’s decision
denying her claim for offsets was unsupported by the evidence. No attorney fees are awarded.
Costs to IDHW.
Justices EISMANN, J. JONES and HORTON, CONCUR.
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