This column appeared in the San Antonio Express-News on January 5, 2018.
Dear Mr. Premack: My grandmother made me a 25% heir of her estate in her Will. Three daughters with her first husband were left the other 75%. My mother, who had a different father, was not included as an heir. Grandmother died in late November 2017. After the funeral, I found out my aunt, who was Agent in my Grandmother’s Durable Power of Attorney, signed a Lady Bird Deed on my grandmother’s house and acreage. At the time, grandmother was in an Alzheimer’s care nursing home on Medicaid. The Lady Bird Deed included those three daughters, but not me. The property is now being sold, and I am not included for a share. Is there anything I can do? - D.O.
By way of background, the Lady Bird Deed is one of the only legal methods to preserve the property from a Medicaid Estate Recovery (MERP) claim. Your Grandmother’s Alzheimer’s Nursing Home care was being paid for by the taxpayer via the Medicaid program. Upon her death, Medicaid could have made a claim against any property passing under her Will in probate court. The Lady Bird Deed avoided probate court, and thus avoided the estate recovery claim from Medicaid.
Without the Lady Bird Deed, the house and acreage would have been sold, and the proceeds would have been paid to the state as reimbursement for Medicaid’s assistance. So, you would have received nothing, and your aunts would have received nothing. Your complaint, however, is that they protected the house and acreage without including you for the 25% you would have inherited under the Will.
Can you do anything to get that 25%? Due to a change in the law, the answer depends on 1) when the Lady Bird Deed was signed by the Agent, and 2) how large Medicaid’s claim would be.
If the Deed was signed before September 1, 2017, you may have no recourse. But as of September 1, 2017, Section 751.122 was added to the Durable Power of Attorney Act by the Texas Legislature. It requires that an Agent “preserved to the extent reasonably possible the Principal’s estate plan”. There are some mitigating factors. First, the Agent must have actual knowledge of the estate plan. If the Agent is unaware that there is a Will or unaware of what the Will says, the Agent cannot preserve the plan.
Second, preserving the estate plan must be consistent with the Principal’s best interest. For instance, if the Principal had been duped into leaving money to a scam artist, then preserving that plan would not be in the Principal’s best interest. Also, the Agent can consider the Principal’s future need for maintenance, can consider the Principal’s income tax and estate tax planning, and can consider the Principal’s ability to qualify for public benefits like Medicaid.
Assuming that the Agent (your aunt) was aware of your Grandmother’s Will, and that the Lady Bird Deed was signed by her after September 1, 2017, we have to ask if the Deed (which failed to preserve the estate plan) gave any benefits to your Grandmother. The answer would be no, because Grandmother would have qualified for Medicaid assistance either way. The benefit of the deed was solely to her three daughters by eliminating Medicaid’s estate recovery claim.
Hence, you could file suit against the Agent for breach of her duty to preserve the Principal’s estate plan. If the evidence allows the court to take your side, the Deed would be voided. The house and acreage would then pass 25% to you and 75% to your aunts, after all debts of the estate are satisfied. MERP would bring a claim, and the value of the house and acreage would be sold with the money going to the state. So yes, you can take action, but depending on the size of Medicaid’s claim you may not receive any benefits.
Paul Premack is a Certified Elder Law Attorney with offices in San Antonio and Seattle, handling Wills and Trusts, Probate, and Business Entity issues. View past legal columns or submit free questions on legal issues via www.TexasEstateandProbate.com or www.Premack.com.