Dangers of Incomplete and Last-Minute Estate Planning: A Mississippi Case Study

Estate planning is often delayed until the last possible moment, frequently done on an ad hoc basis- addressing issues as they arise without developing a comprehensive plan. A recent Mississippi case illustrates how such delays can leave seniors vulnerable to manipulation and undue influence, potentially unraveling their true intentions for their legacy. Havoc often ensues in the vacuum created by last-minute or incomplete planning. This article explores a real-life example of a will  invalidated due to the undue influence of a testator’s son, and how individuals and  families can protect themselves from similar risks.

The Case: A Will Invalidated Due to Undue Influence

In the case, In re the Matter of the Estate of Autry, the Mississippi Supreme Court affirmed a ruling setting aside several deeds and invalidating a decedent's will due to lack of authentication, lack of  capacity, and undue influence.  The case is an object lesson regarding the benefits of  comprehensive estate planning.

Effie Mae Autry  and her husband made a will within 2014, but he predeceased her.  She had three sons, two of whom also predeceased her, leaving five grandchildren (three from one son, two from the other). Effie's 2014 will, stipulated that, if her husband predeceased her, 143 acres of real property would be divided equally:  one-third to her surviving son, Steve; one-third to her grandchildren from one deceased son; and one-third to her grandchildren from the other deceased son. Effie also provided for a $1,000 bequest to her church and specific bequests to Steve and each grandchild.

In early 2019, Marcus, one of Effie’s grandchildren, filed a petition for conservatorship after Effie’s bank notified him that Steve and his wife had accompanied Effie to the bank and tried to remove Marcus’s name from her accounts or close the accounts. Steve lacked a power of attorney to act on Effie’s behalf. Marcus later withdrew the petition because the conservatorship confused and upset Effie. Notably, Marcus' name was on Effie's accounts, suggesting that Effie had not executed a power of attorney; otherwise, Marcus would not have needed to file for conservatorship.  This indicates that Effie and her husband relied solely on wills for estate planning.

Later in 2019, Steve called the family’s longtime attorney who had drafted Effie’s 2014 will, to discuss drafting a new will and deeds. After meeting with Effie and Steve, the attorney refused to prepare new documents, citing a significant decline in Effie’s mental capacity and concerns about Steve's potential undue influence. The attorney even warned other attorneys about the situation.

Undeterred, Steve then engaged another attorney to draft a new will and deeds for Effie. Steve drove Effie to this new attorney's office, where the attorney, unaware of the prior attorney's refusal or 2014 will, discussed a new will with Effie. The attorney testified that Effie appeared competent and clear about her intentions. Several days later, Steve drove Effie, Effie’s "caregiver," and the caregiver’s sister to the attorney's office to execute the new will and deeds. Effie signed a will leaving all of her assets to Steve, providing for the grandchildren only if Steve predeceased her and omitting the church bequest. The caregiver’s sister and the attorney's secretary signed as witnesses but failed to include their addresses in a required affidavit. Effie also executed several warranty deeds conveying all real property to Steve, retaining a life estate for herself.

After Effie’s death in 2021, Marcus contested the validity of the 2019 will and the deeds. The court ruled that the will and deeds were invalid because: (1) improper authentication by the witnesses, (2) Effie lack pf testamentary capacity, and (3) Steve undue influence. The Mississippi Supreme Court affirmed the ruling. The case highlights the risks associated with last-minute estate planning and the vulnerabilities seniors face without a comprehensive plan.

What Happens Next?

The case isn't over.  It now proceeds back to the probate court.  The next step is likely to admit the 2014 will, if that will is signed and authenticated properly. However, even a will drafted by an attorney and executed in an attorney's office, as the 2019 will was, can invalidated for technical errors or contested on other grounds.  If no valid will is admitted, he estate will be  administered as intestate. 

In Mississippi, intestate distribution (Miss. Code § 91-1-3 (2024)) mirrors Effie’s 2014 will: one-third to Steve, one-third to the grandchildren of one deceased son (split equally), and one-third to the grandchildren of the other deceased son (split equally). However, certainty is elusive. The grandchildren could argue that Steve’s share be withheld due to his wrongdoing, or Steve might contest Marcus’s share, citing the conservatorship attempt. Other tort claims, such as fraud or breach of fiduciary duty, could arise, though Mississippi does not recognize the tort of intentional interference with an inheritance. 

Additionally, Medicaid estate recovery could complicate matters if Effie qualified for long-term care after transferring assets, now invalidated. While unlikely, this highlights an overlooked risk: Effie’s family likely did not anticipate the full consequences of their reactive decisions. Discord is common even in well-planned estates, but incomplete planning exacerbates conflict.

A Word On Motivations

In my practice, I focus solely on my client's motivations, assuming the worst from others in order to protect the client.  Courts evaluate actions based on legality, not intent.  However, considering motivations can illuminate the consequences of poor planning.

It’s tempting to view Steve as selfishly attempting to seize the estate. Yet, the court noted intriguing details: Steve was married but had no children, and the 2019 will, upon Steve’s death, distributed assets to most grandchildren, excluding Marcus and his sister (possibly due to the conservatorship). The will did not benefit Steve’s wife, suggesting alignment with Effie’s broader intentions. Effie’s severe dementia and need for around-the-clock care, partly provided by the caregiver whose sister witnessed the will, further complicate the narrative.

The deeds, retaining a life estate, likely represented a hasty Medicaid planning attempt to protect assets from nursing home costs. Marcus’s dismissal of the conservatorship may reflect a shared family goal to avoid asset loss, as a finding of incompetency would have invalidated transfers. These dynamics underscore how complicated last-minute planning can be, and how a comprehensive estate plan could have prevented conflict and better served the family.

The Weaknesses of Incomplete and Last-Minute Planning

Last-minute estate planning often occurs when seniors are vulnerable— due to illness, cognitive decline, or emotional distress, making them susceptible to manipulation. In Autry, Steve exploited his mother’s weakened condition to influence the will. Rushed decisions, especially without proper legal guidance, often fail to reflect the testator’s true intentions. Courts scrutinize last-minute changes, particularly those deviating from prior plans or disproportionately benefiting one person.

Vulnerabilities Seniors Face Without a Comprehensive Plan

Without a comprehensive estate plan, seniors are exposed to several risks, including, but not limited to:

Lack of Legal Protections: Without powers of attorney or trusts, no trusted individual is authorized to act if the senior becomes incapacitated.

Increased Risk of Manipulation: Seniors without a plan are more likely to be targeted by those seeking to exploit their assets, as there are fewer legal safeguards in place.

Family Conflict: Ambiguous or incomplete estate plans can lead to disputes among family members, causing emotional and financial turmoil.

In Autry, the absence of a robust plan not only made it made it easier for the son to exert influence, but it allowed conflict that could only be resolved by the court.  

How a Complete Estate Plan Would Have Prevented

 and Resolved the Autrey Case

A revocable living trust offers transparency and protection. Unlike a will, which remains private until probate, a trust’s existence is evident in deeds, bank accounts, insurance policies, and other assets. This visibility deters manipulation, as third parties (e.g., new attorneys) are aware of the existing plan. In Autry, a trust would have prevented Steve from engaging an unaware attorney to draft a new will, and the 2019 will’s invalidity due to authentication errors would have been irrelevant.. 

 

In the Autrey case, one person exploited the limitations of a will, to obtain legal counsel to make a new will, that counsel being wholly unaware of the prior estate plan, such as it was.  The son might argue today that the grandchildren also exploited the weaknesses of the will by so easily contesting the second will, which was legally invalid even though it was drafted by an attorney, executed in the attorney's office, and a staff member of that attorney served as a witness.  The court did not need to find undue influence because the will was invalid as executed!  The reason I suspect the court considered and resolved the undue influence claim is to solve the problem of technical invalidity- a will can be invalid as a will for technical reasons, but evidence a clear intention to replace a former will.  That circumstance  results in no will, increasing the cost and complexity of the administration.  Your trust protects you from such exploitation.

Powers of attorney, which accompany every revocable trust, help protect you from conservatorship and guardianship by making them unnecessary, and if drafted properly, protect the trust assets from guardian control.  They even disincentivize third-party guardians (those appointed by a court that are not your family) by limiting what a guardian can manage of your entire estate.  Finally, in states that are required to give preference to agents nominated under a power of attorney when appointing a guardian, they help in getting your most  trusted family or advisors  appointed. 

Ad hoc solutions, like adding Marcus to Effie’s accounts, create uncertainty and risk. Banks rarely document the context of such changes (e.g., whether the account holder was advised or accompanied). Adding a co-owner can inadvertently make the account vulnerable to the co-owner’s creditors, a risk banks may not explain, as they are not legal advisors. Seniors often first learn the consequence of adding a child to an account when they are advised of a garnishment against a child as creditors seek to  remove assets from their account. 

      

If Medicaid planning motivated the deeds, a trust would have been superior. Modern Medicaid rules in many states, including Mississippi, scrutinize life estates, potentially valuing them as assets. A trust not only allows, but encourages crisis Medicaid planning without relying on the grantor’s competence, enabling an agent or trustee to create an irrevocable planning trust that preserves the original distribution plan. This would have avoided the need for questionable transfers and protected Effie’s estate.

Keep in mind that the real world result of the Autrey case is that Steve may ultimately receive nothing.  If he was acting in what he thought was the best interest of his mother and family, this result is tragic.  Comprehensive estate planning might have prevented such a result. 

An Actionable Plan to Protect Your Legacy

To prevent a situation like this from becoming your family’s reality, it’s essential to take proactive steps well before any health crises or vulnerabilities arise. Here’s an actionable list to help safeguard your estate and ensure your wishes are honored:

Create a Trust: A trust allows you to manage your assets during your lifetime and ensures they are distributed according to your wishes after your death. It can also provide protection against undue influence by clearly outlining your intentions in a legally binding document. It can assist in aging in place, reduce the risk of guardianship, and protect assets from third-party guardians.  Additionally, a trust can help avoid probate, reducing the likelihood of costly public disputes.

Establish General Durable Powers of Attorney (GDPOA): A GDPOA allows you to appoint trusted individuals to make financial and medical decisions on your behalf if you become incapacitated. This prevents someone from stepping in and taking control without your consent. Be sure to choose someone you trust implicitly, as this role carries significant responsibility.

Nominate a Guardian: Nominate someone in advance, usually in your GDPOA. This ensures that if a guardian is required, it’s more likely to be someone you’ve chosen, not someone appointed by the court who may not have your best interests at heart.

Incorporate Aging in Place Planning: Aging in place planning involves making arrangements for your care and living situation as you age, ensuring you can stay in your home or a suitable environment. This can include modifications to your home, arrangements for in-home care, or plans for assisted living if needed.

Include Guardianship Protections in Your Trust: Your trust should include provisions that prevent a guardian from easily accessing or altering the trust assets. This adds an extra layer of protection, ensuring that even if a guardian is appointed, your estate remains secure and distributed according to your wishes.

These steps should be taken well in advance, while you are still of sound mind and not under any undue influence. Waiting until the last minute can leave you vulnerable to manipulation, as seen in the Autry case.

The Emotional and Financial Toll of Undue Influence

Cases like this don’t just result in legal battles—they can tear families apart. The emotional toll of fighting over a loved one’s estate, combined with the financial costs of litigation, can be devastating. By taking proactive steps now, you can help protect your family from this kind of heartbreak and ensure your legacy is preserved as you intended.

Conclusion: Don’t Wait—Plan Today

The Autry case serves as a powerful reminder of the dangers of last-minute estate planning and the vulnerabilities seniors face without a comprehensive plan. By creating a trust, establishing powers of attorney, nominating a guardian, and incorporating aging in place and guardianship protections, you can safeguard your estate and ensure your wishes are honored.

If you haven’t already, now is the time to take action. Consult with an experienced elder law attorney to create a plan that protects you and your loved ones from the risks of undue influence and ensures your legacy is secure.

Scrivener’s Error and Limited Power of Appointment Do Not Make Property Available to State to Recoup Medicaid Benefits

A recent Massachusetts land court ruling is instructive regarding the extent to which states will go in attempting to collect resources for Medicaid. 

Athena and Sotirios Koutoukis hired an attorney to transfer ownership of their real estate to their daughters, creating and retaining a life estate for their benefit.  They also  retained a power of appointment to convey the property to their children. Mr. Koutoukis received MassHealth (Medicaid) benefits before he died. After Mr. Koutoukis’s death, the attorney for the estate discovered that the deed included the words “tenants in common for life and further,” which was an error.

The estate filed an action in probate to correct the scrivener’s error, and the state filed a claim against the estate in order to recoup the Medicaid benefits paid on Mr. Koutoukis’s behalf. The state filed for summary judgment, arguing that because Mr. Koutoukis left property in his will to his wife, he did not intend to create a life estate and that the power of appointment in the deed made the property a countable asset. The estate also filed for summary judgment. The Massachusetts Land Court, Department of the Trial Court, granted summary judgment for the estate benefitting the Koutoukis family, holding that the deed can be reformed to correct the mistake, and the state cannot recoup benefits from the property.  Estate of Koutoukis v. Secretary of the Executive Office of Health and Human Services (Mass. Land Ct., Dept. of the Trial Ct., No. 20 MISC 000004 (RBF), Sept. 17, 2021). 

The court held that the power of appointment in the deed is a limited power that did not permit the Koutoukises to grant the property to themselves, so the property was not a countable asset for Medicaid purposes.  More importantly, the court wrote that the evidence clearly established that the Koutoukises intended to create a life estate, and the state did not provide any evidence to the contrary:

On a motion for summary judgment, the nonmoving party cannot create a dispute of material fact simply by declaring that it disputes the material fact. The nonmoving party is supposed to provide some evidence that disputes the fact; that is, some evidence that, if credited, would support the opposite of the claimed undisputed fact. On these cross-motions for summary judgment, the defendant Secretary of the Executive Office of Health and Human Services (EOHHS) has attempted to forestall summary judgment on the plaintiffs’ claim for reformation of a deed due to a scrivener’s error by the simple expedient of saying the affidavits provided by the plaintiffs do not support the claim, without providing any evidence of its own to the contrary.

As the affidavits do support the claim for reformation, there is no dispute of material fact. Based on the undisputed material facts and the applicable law, summary judgment shall enter reforming the subject deed to clarify that the parties’ intent was to create a life estate, and declaring that the life estate and the limited power of appointment in the deed do not make the subject property a 

The court noted that state "has denied many of the asserted facts relating to the claim of scrivener’s error in the subject deed without providing any affidavits or other evidence whatsoever."  

Estate of Koutoukis, at p. 4.  

The court concluded that the state cannot recoup Medicaid benefits from a Medicaid recipient’s property, left in a life estate notwithstanding a scrivener’s error,  and a limited power of appointment. Estate of Koutoukis v. Secretary of the Executive Office of Health and Human Services (Mass. Land Ct., Dept. of the Trial Ct., No. 20 MISC 000004 (RBF), Sept. 17, 2021). 

Trustee Authority to Sell Trust Property to Pay for Settlor’s Long-Term Care Costs

Reversing a lower court, Wyoming’s highest court has ruled that a trustee has authority to sell property in the trust to pay for the settlor’s long-term care even though the trust provided that the property was to be placed in trust for the settlor’s daughter when the settlor died. Jackson v. Montoya (Wyo., No. 2020 WY 116, Sept. 4, 2020).

David Jackson’s parents created a trust and transferred their property to the trust. The trust provided that the trustee had authority to pay the surviving settlor from the trust property, including selling trust property, as necessary to provide for his or her comfort. The trust also provided that on the death of both parents, the property in the trust should be conveyed to a trust for the benefit of Mr. Jackson’s sister, Candyce Montoya, who was authorized to live on the property rent free. Mr. Jackson became the successor trustee of the trust and wanted to sell the property to pay for his father’s long-term care, so he served an eviction notice on Ms. Montoya. Ms. Montoya refused to vacate the property. 

Mr. Jackson sued, seeking a declaratory judgment that the trust was entitled to the property. The trial court interpreted the trust to grant Ms. Montoya a life estate in the property, which prevented Mr. Jackson from selling the property. Mr. Jackson appealed. 

This is an all-too common cause for dispute; does a surviving spouse have the authority to sell property held in a marital trust (or sometimes even a separate trust) that benefits the surviving spouse, where the property is ultimately retained in trust for the benefit of a child?  Typically, the trust is clear and ambiguous, by, for example, reciting an order of intent and authority (for example, "it is my/our intention to provide for each other, and then for the surviving spouse, and then upon the death of both of us to provide for our surviving children, and then for our grandchildren if there is a death of one our children...").  Sometimes, though, a trust is not so clearly crafted, and in this case, ambiguity arose, at least in part, from a specific amendment which the daughter claimed provided a specific and different intention as to specific property for her benefit. 

The Wyoming Supreme Court reversed, holding that Mr. Jackson had authority to sell the property to pay for his father’s long-term care. According to the court, the trust makes clear that the trustee has the right to “sell or deal with any Trust property, in his or her sole discretion, without interference, for the benefit of the surviving settlor’s care, comfort, support, welfare or maintenance, as may be necessary.” The court ruled that when the trust provisions are read as a whole, “it is clear” that Ms. Montoya’s interest “will not vest until the death of the remaining Settlor.” 

Source of original article: "Trustee Has Authority to Sell Property in Trust to Pay for Settlor’s Long-Term Care Costs," Elderlaw Answers (9/21/2120).

In Ohio a Medicaid Lien Can Be Placed Against a Life Estate to Real Property Even After the Death of the Medicaid Recipient

An Ohio appeals court recently ruled that a deceased Medicaid recipient's life estate does not extinguish at death for the purposes of Medicaid estate recovery. Accordingly, the state may place a lien on the property after the death of the life tenant. Phillips v. McCarthy (Ohio Ct. App., 12th Dist., No. CA2015-08-01, May 16, 2016).

Lawrence Hesse transferred ownership in his farm to his three daughters, retaining a life estate for himself. Mr. Hesse later moved to a nursing home and received Medicaid benefits for one year before he died. After his death, the state filed a lien on the property for Medicaid benefits paid on Mr. Hesse's behalf.

Mr. Hesse's daughters filed a quiet title action against the state, arguing that because Mr. Hesse's life estate extinguished when Mr. Hesse died, the state could not assert a lien against the property after his death. The trial court granted summary judgment to the state, and Mr. Hesse's daughters appealed.

The Ohio Court of Appeals affirmed, holding that the state could place a lien on the property after Mr. Hesse died. According to the court, with regard to Medicaid estate recovery "a life estate interest held by a Medicaid recipient does not extinguish upon his or her death. Rather, for purposes of Medicaid recovery, a life estate interest endures post mortem and represents a quantifiable asset which the state may encumber by virtue of a properly filed lien."

Although this holding might seem irrational, it was the obvious intent of House Bill 66 passed in 2005.  I wrote about the effects of this "seemingly" innocuous change in the law over eleven years ago:

The new law also expands the State’s rights to place liens on property. As part of the State Budget bill passed on June 30, 2005, the State of Ohio now has authority to place a lien on the assets of the Medicaid recipient or the recipient's spouse...The liens, which are being placed on these properties, are akin to the "Liens for the Aged" process which was in place in many states in the 1950s and 1960. These laws were ultimately rejected by courts on various constitutional grounds. There is no guarantee that a challenge to the current law will meet with similar success. More importantly, for every family that challenges these liens, other families will simply repay the state, or the spouse will sell the family home which may result in insufficient funds to continue living independently. 

The new law also turns upside-down traditional property rights. Traditionally, right and title to property held jointly with a right of survivorship or pursuant to a transfer on death designation [or conveyed subject to a life estate] vested in the survivor (or beneficiary as the case may be) at the time of death. This “vesting” is apparently thought to create a hardship for the state, since it could undermine its lien rights. As a result, in order to prevent the vesting at death, the statute actually redefines death as follows:

• “Time of death” shall not be construed to mean a time after which a legal title or interest in real or personal property or other asset may pass by survivorship or other operation of law due to the death of the decedent or terminate by reason of the decedent's death.” See O.R.C.§5111.11 (A)(5).

So, for the purposes of the State of Ohio, a person does not "die" upon physical demise, and property interests that traditionally "vested" in and to another person upon death never really vest so long as the State also has an interest in the property.  

I have for more than a decade encouraged clients to adopt modern and more effective property transfers utilizing irrevocable trusts.  "I told you so," rings hollow and ominous given the consequences for Ohioans that want to pass to their heirs the assets they have worked so hard to protect.  

Life Estate Renders Medicaid Applicant Ineligible

Life estates are frequently used by seniors to gift real property to family members because the seniors are assured that the retained life estate secures their use and enjoyment of the property for the remainder of  their life.  These estates, however, present complicated tax and legal issues rarely considered and resolved prior to the gift.  

Life estates often complicate Medicaid eligibility.  See, for example, my prior article, "Entire Value of Property in Which Medicaid Recipient Had Life Estate is Recoverable in Idaho."    In a more recent example, North Dakota's highest court ruled that a Medicaid applicant who had a life estate in property is entitled to the income generated from that property, even though she argued she permanently gifted the income to her son. Bleick v. North Dakota Dept. of Human Services (N.D., No. 20140103, March 24, 2015).

Shirley Bleick transferred property to her son in 1988, reserving a life estate for herself, and then she moved off the property.  In 1992, her son leased a portion of the property to another farmer for $8,200 a year. The rental income went to Ms. Bleick's son. In 2011, Ms. Bleick applied for Medicaid benefits, but the application was denied. The state determined that Ms. Bleick should be receiving a portion of the rental income, so her countable assets exceeded the maximum limit.

Ms. Bleick appealed the state's decision, arguing she gifted the right to the income to her son. The trial court affirmed the state's decision to deny Medicaid benefits, and Ms. Bleick appealed.

The North Dakota Supreme Court affirmed, holding that the income stream from the life estate exceeds the asset limits for Medicaid benefits. According to the court, if Ms. Bleick intended to gift all the income from the property to her son, she could have released the life estate and transferred title to the property. The court ruled that the rental income, if it is viewed as a gift, is an annual gift. One justice dissented, arguing that all the evidence indicates that Ms. Bleick intended to permanently gift the income to her son.

The lesson could not be more clear: consult with an elder law attorney before making gifts in order assure that the consequences of the transaction are fully understood and considered. For more information, see "Six Questions to Ask Before Making Gifts."    

For the full text of this decision, go to: 

http://www.ndcourts.gov/court/opinions/20140103.htm

Six Questions to Ask Before Making Gifts

Many seniors consider transferring assets for estate and long-term care planning purposes, or just to help out children and grandchildren. Gifts and transfers to a planning trust often make a lot of sense. They can save money in taxes and long-term care expenditures, and they can help out family members in need and serve as expressions of love and caring.

But some gifts can cause problems, for both the generous donor and the recipient. 

Following are a few questions to ask yourself before writing the check:

Why are you making the gift? Is it simply an expression of love on a birthday or big event, such as a graduation or wedding? Or is it for tax planning or long-term care planning purposes? If the latter, make sure that there's really a benefit to the transfer. If the value of your assets totals less than the estate tax threshold in your state, your estate will pay no tax in any case. For federal purposes the threshold is $5.34 million (in 2014). Gifts can also cause up to five years of ineligibility for Medicaid, which you may need to help pay long-term care costs.

You should also check with your own elder law attorney or financial planner to make sure that the objective you are seeking can be (or best be) attained through the gift.  For example, some gifts that lay persons believe will help either don't help, or in fact may worsen the situation.  A home is not a countable asset when applying for Medicaid, for example, meaning that the home and its value are protected for a spouse living in the home.

A gift of the home removes the home from protection for the community spouse, and causes what would have been an unnecessary spend-down of other assets.  Gifts with retained life estates, and gifts held for the benefit of, and used for the support of the senior may not accomplish the objective sought.   

Are you keeping enough money? If you're making small gifts, you might not need to worry about this question. But before making any large gifts, it makes sense to do some budgeting to make sure that you will not run short of funds for your basic needs, activities you enjoy -- whether that's traveling, taking courses or going out to eat -- and emergencies such as the need for care for yourself or to assist someone in financial trouble.

Is it really a gift (part one)? Are you expecting the money to be paid back or for the recipient to perform some task for you? In either case, make sure that the beneficiary of your generosity is on the same page as you. The best way to do this is in writing, with a promissory note in the case of a loan or an agreement if you have an expectation that certain tasks will be performed.

Is it really a gift (part two)? Another way a gift may not really be a gift is if you expect the recipient to hold the funds for you (or for someone else, such as a disabled child) or to let you live in or use a house that you have transferred. These are gifts with strings attached, at least in theory. But if you don't use a trust or, in the case of real estate, a life estate, legally there are no strings attached. Your expectations may not pan out if the recipient doesn't do what you want or runs into circumstances -- bankruptcy, a lawsuit, divorce, illness -- that no one anticipated. If the idea is to make the gifts with strings attached, it's best to attach those strings legally through a trust or life estate.

Is the gift good for the recipient? If the recipient has special needs, the funds could make him or her ineligible for various public benefits, such as Medicaid, Supplemental Security Income or subsidized housing. If you make many gifts to the same person, you may help create a dependency that interferes with the recipient learning to stand on his own two feet. If the recipient has issues with drugs or alcohol, he may use the gifted funds to further the habit. You may need to permit the individual to hit bottom in order to learn to live on his own (i.e., don't be an "enabler").

Do you understand the tax consequences of the gift?  Sometimes there are adverse tax consequences in making a gift.  The most commonly misunderstood of these is the loss of the step-in basis of appreciated property to the fair market value on the date of death.  This -step-up in basis means, in essence, that your heirs can sell your assets in which you have capital gains without incurring a capital gains tax.  Donors can sometimes overlook this benefit.   At a minimum, a short conversation with an elder law attorney or tax professional will make clear the consequences and the options available to best accomplish your objectives. 

If after you've answered all of these questions, you still want to make a gift, please go ahead. Unless the gift is for a nominal amount, however, it is advisable to check with your attorney to make sure you are aware of the Medicaid, tax and other possible implications of your generosity.

Entire Value of Property in Which Medicaid Recipient Had Life Estate is Recoverable in Idaho

The Idaho Supreme Court has ruled that the state may recover Medicaid benefits from the entire value of a property that a Medicaid recipient transferred to his daughter while retaining a life estate for himself. In re Estate of Peterson (Idaho, No. 40615, Aug. 13, 2014).

Melvin Peterson deeded property to his daughter, retaining a life estate for himself. He then applied for Medicaid benefits. When he died, Mr. Peterson had received a total of $171,386.94 in Medicaid benefits.

The state filed a claim against the estate to recover the Medicaid benefits it paid for Mr. Peterson's care. Under Idaho law, the state may recover any property that passes outside of probate, including any property that that the Medicaid recipient had a legal interest in that passes to a survivor through a life estate or "other arrangement." The trial court ruled that the life estate remainder interest, but not the retained life estate, was an estate asset, and the appeals court affirmed. The estate appealed, arguing Mr. Peterson had no interest in the life estate at his death, so it could not be subject to recovery.

The Idaho Supreme Court affirms in part holding that both the life estate and the remainder interest were estate assets subject to Medicaid recovery. The court determines that Mr. Peterson's life estate interest in the property was transferred to his daughter when he died, and under state law "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'" for purposes of Medicaid recovery. In addition, the court rules that the remainder interest Mr. Peterson's daughter received is also part of Mr. Peterson's estate as an "other arrangement."

For the full text of this decision, go to: http://www.isc.idaho.gov/opinions/40615.pdf