An Iowa court of appeals held that a Medicaid recipient’s life estate in her house is part of her probate estate for the purposes of satisfying debt, so the house does not pass directly to her beneficiary under her will. Escher v. Estate of Escher (Iowa Ct. App., No. 09-1198, April 8, 2010).
Decedent entered into a real estate contract to sell her house to her sister-in-law. Decedent retained a life estate in the house and subsequently died. Her will provided that the house be given to the sister-in-law who then stopped making payments on the contract.
The state filed a claim against Decedent’s estate for reimbursement of Medicaid payments made on her behalf. The executor moved to forfeit the real estate contract and return the house to the estate because the sister-in-law was no longer making payments. The trial court determined Decednet’s life estate was an asset that should be included in the probate estate. As such, the sister-in-law was required to continue making payments. The sister-in-law argued that the house should be conveyed to her because it automatically transferred to her upon Decedent’s death.
The Iowa Court of Appeals held that the life estate is part of the probate estate for purposes of satisfying debt. According to the court, the sister-in-law did not have complete ownership of the property upon Decedent’s death due to the life estate interest which remained available as an asset to satisfy the Medicaid debt.