This opinion is nonprecedential except as provided by Minn. R. Civ. App. P. 136.01, subd. 1(c).
STATE OF MINNESOTA IN COURT OF APPEALS A23-0901
Brad Hammerberg, as trustee for the Leonard J. and Margaret T. Schubert Irrevocable Trust, dated June 23, 2005, Respondent,
vs.
Minnesota Department of Human Services, et al., Appellants.
Filed April 22, 2024 Reversed Larson, Judge
Mille Lacs County District Court File No. 48-CV-22-1916
Kenneth H. Bayliss, Bradley W. Hanson, Chad A. Staul, Quinlivan & Hughes, PA, St. Cloud, Minnesota (for respondent)
Keith Ellison, Attorney General, R.J. Detrick, Assistant Attorney General, St. Paul, Minnesota (for appellants)
Lauren L. Fink, J. Noble Simpson, Christopher J. Kradle, Maser, Amundson & Boggio, PA, Richfield, Minnesota (for Amicus Curiae MSBA Elder Law Section)
Considered and decided by Reyes, Presiding Judge; Larson, Judge; and Ede, Judge.
NONPRECEDENTIAL OPINION
LARSON, Judge
Appellant Minnesota Department of Human Services (DHS) challenges a district
court order reversing a DHS decision that real property held in a trust was subject to a lien under Minn. Stat. § 265B.15 (2022) for the amount of medical assistance (MA) provided
to decedent Margaret Schubert during her lifetime. Because the agency correctly
determined the real property was subject to a lien, we reverse the district court.
FACTS
The parties stipulated to the following facts. Leonard and Margaret Schubert 1
owned real property in Mille Lacs County. In 2005, the Schuberts created an irrevocable
trust, naming respondent Brad Hammerberg as trustee. As relevant here, the Schuberts
conveyed real property valued at approximately $480,228 to the trust. The trust instrument
provided, in relevant part, that “[t]he settlors or the survivor of them shall be entitled to the
use and possession of any real estate held in the trust.” The trust instrument also stated:
On the death of the survivor of the settlors, the trustee shall distribute all property then belonging to the income or principal of the trust to such person or persons out of a class composed of [the settlors’] descendants . . . and in such estates, interests and proportions, as the surviving settlor may, by a will specifically referring to this Article, appoint.
Thus, upon the death of the Schuberts, the trust instrument required distribution of the
remaining assets to the Schuberts’ descendants per stirpes, subject to the Schuberts’ ability
to modify the distribution of the assets in their will. The trust instrument required the
trustee to pay all income derived from the trust to the Schuberts. The Schuberts also had
the right to remove and replace the trustee. The trustee had the authority to distribute some
1 Because Leonard and Margaret share a last name, we refer to them by their first names for clarity.
2 or all of the principal from the trust to the Schuberts’ living children during the Schuberts’
lifetime.
Leonard died in 2017 without receiving MA. Margaret applied for MA in 2016.
Margaret was determined to be eligible, but the real property held in the trust was not
considered an asset. On March 28, 2019, Margaret died after receiving $210,396.93 in
MA.
In March 2018 and October 2019, DHS recorded notices of potential claims
(hereinafter, the liens) against the real property held in the trust to recover MA paid on
behalf of Margaret. In December 2019, Hammerberg requested that DHS withdraw the
liens because, in part and primarily, Margaret did not own the real property at the time of
her death. DHS declined.
On May 2, 2022, Hammerberg requested a DHS fair hearing. On June 30, 2022, a
human-services judge (HSJ) held a dispositive-motion hearing pursuant to Minn. Stat.
§ 256B.15, subd. 1f(c). Following the hearing, the HSJ recommended that the DHS
commissioner affirm DHS’s determination that the property was subject to the liens and
MA recovery. The HSJ specifically recommended that the appeal was untimely and, even
if it was timely, DHS could recover the value of its claims. See Minn. Stat. § 256B.15,
subd. 1a(b)(5). The commissioner, through her designee the co-chief HSJ, adopted the
recommendation.
On September 23, 2022, Hammerberg appealed the commissioner’s decision to the
district court pursuant to Minn. Stat. § 256.045, subd. 7 (2022). Following a hearing, the
district court reversed the commissioner’s decision.
3 DHS appeals.
DECISION
DHS challenges the district court’s decision to reverse the commissioner’s
determination that the real property held in the trust was properly subject to MA recovery
under section 256B.15. After a district court’s review, where it accepts no new evidence,
we independently review an agency decision without deferring to the district court. In re
Gillette Children’s Specialty Healthcare, 883 N.W.2d 778, 784-85 (Minn. 2016). We
show “substantial judicial deference to the fact-finding processes of the administrative
agency.” Quinn Distrib. Co. v. Quast Transfer, Inc., 181 N.W.2d 696, 699-700 (Minn.
1970).
We review appeals pursuant to section 256.045 using the standard set forth in the
Minnesota Administrative Procedure Act, Minn. Stat. §§ 14.001-.69 (2022). Zahler v.
Minn. Dep’t of Hum. Servs., 624 N.W.2d 297, 301 (Minn. App. 2001), rev. denied (Minn.
June 19, 2001). We may reverse or modify the commissioner’s decision
if the substantial rights of the petitioners may have been prejudiced because the administrative finding, inferences, conclusion, or decisions are:
(a) in violation of constitutional provisions; or
(b) in excess of the statutory authority or jurisdiction of the agency; or
(c) made upon unlawful procedure; or
(d) affected by other error of law; or
(e) unsupported by substantial evidence in view of the entire record as submitted; or
4 (f) arbitrary or capricious.
Minn. Stat. § 14.69. We review legal questions de novo. In re Estate of Barg, 752 N.W.2d
52, 63 (Minn. 2008).
With these standards in mind, we begin by briefly outlining the law regarding MA
benefits and notices of potential claims. We then address whether DHS appropriately
recorded the liens on the real property held in the trust. Finally, we address the appropriate
disposition in this case.
I.
Medicaid is a cooperative federal-state program that provides medical assistance for
certain persons “whose income and resources are insufficient to meet the costs of necessary
medical services.” 42 U.S.C. § 1396-1 (2018); Alexander v. Choate, 469 U.S. 287, 289 n.1
(1985); In re Schmalz, 945 N.W.2d 46, 50 (Minn. 2020). The federal Medicaid program
grants “financial assistance to [s]tates that choose to reimburse certain costs of medical
treatment for needy persons.” Schweiker v. Gray Panthers, 453 U.S. 34, 36 (1981)
(quotation omitted); see also Martin ex rel. Hoff v. City of Rochester, 642 N.W.2d 1, 9
(Minn. 2002) (stating that Medicaid “is a publicly funded program to ensure medical care
to certain individuals who lack the resources to cover the costs of essential medical
services”).
A state’s participation in Medicaid is voluntary. Choate, 469 U.S. at 289 n.1;
Schmalz, 945 N.W.2d at 50. Each participating state enacts and “administers its own
program.” Barg, 752 N.W.2d at 58-59. Minnesota participates in Medicaid through its
medical assistance (as previously indicated, MA) program established under Minn. Stat.
5 §§ 256B.01-.851 (2022). To receive federal Medicaid funds, Minnesota must, in relevant
part, “comply with the provisions of [42 U.S.C. § 1396p] with respect to liens, adjustments
and recoveries of medical assistance correctly paid, . . . transfers of assets, and treatment
of certain trusts.” 42 U.S.C. § 1396a(a)(18) (2018) (footnote omitted). DHS is responsible
for administering the MA program. See Minn. Stat. § 256.01, subd. 2(a) (2022) (stating
that the DHS commissioner shall “[a]dminister and supervise all forms of public assistance
provided for by state law”).
Minnesota has long required MA recipients “to use their own assets to pay their
share of the cost” for care. Barg, 752 N.W.2d at 61. The estate-recovery statute provides
that, within one year after an MA recipient’s death, DHS may record a notice of potential
claim against property held by the estate in the records office of the applicable county.
Minn. Stat. § 256B.15, subd. 1c(a)-(b). A notice of potential claim constitutes a lien on the
property. Id., subd. 1f(a). DHS, as the lien claimant, can recover MA costs through various
mechanisms depending on the surviving status of the deceased recipient’s relatives, if any.
See id., subds. 1h-1j.
Under federal law, an “estate” subject to Medicaid recovery “include[s] all real and
personal property and other assets included within the individual’s estate, as defined for
purposes of State probate law.” 42 U.S.C. § 1396p(b)(4)(A) (2018). Since 1993, federal
law has also permitted states to expand the definition of “estate” for Medicaid recovery
purposes to include:
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
6 to a survivor, heir, or assign of the deceased individual through joint tenancy, tenancy in common, survivorship, life estate, living trust, or other arrangement.
Id., (b)(4)(B) (emphasis added). Thus, a state may elect to recover assets that “under
ordinary probate law, would not be part of the [decedent’s] estate.” Barg, 752 N.W.2d at
61.
In 2009, the Minnesota Legislature exercised this option and amended section
256B.15, subdivision 1a(b), to expand the definition of a decedent’s estate for the purposes
of MA recovery. 2 2009 Minn. Laws ch. 79, art. 5, § 39, at 776-77. Today, section 256B.15,
subdivision 1a(b)(5) provides, in relevant part, that a decedent’s estate includes “assets
conveyed to a survivor, heir, or assign of the person through survivorship, living trust,
transfer-on-death of title or deed, or other arrangements.” (Emphasis added.)
II.
DHS asks this court to reverse the district court’s order on the ground that the
commissioner correctly determined DHS could place the liens on the real property in the
trust. DHS specifically argues that under section 256B.15, subdivision 1a(b)(5), the real
property held in the trust is part of Margaret’s estate because, absent the lien, the real
property would pass to her heirs upon her death via a living trust.
DHS presents a question of statutory interpretation, which we review de novo.
Schmalz, 945 N.W.2d at 49 n.3. The goal of statutory interpretation is to effectuate the
2 Prior to 2009, section Minn. Stat. § 256B.15 did not include any reference to trusts. See Minn. Stat. § 256B.15, subd. 1a (2008) (referring only to the “estate” of the person in question).
7 intent of the legislature. Minn. Stat. § 645.16 (2022). The first step is to determine whether
the language of the statute is ambiguous. Olson v. Lesch, 943 N.W.2d 648, 656-57 (Minn.
2020). “A statute is unambiguous if it has only one reasonable interpretation.” In re
Welfare of Children of J.D.T., 946 N.W.2d 321, 327 (Minn. 2020). We afford some
deference to an agency’s interpretation “where the statutory language is technical in nature,
and the agency’s interpretation is longstanding.” Special Sch. Dist. No. 1 v. E.N., 620
N.W.2d 65, 68 (Minn. App. 2000). However, “we owe no deference to an agency’s
interpretation of an unambiguous statute.” Schwanke v. Minn. Dep’t of Admin., 851
N.W.2d 591, 594 n.1 (Minn. 2014). When interpreting a statute, we read “words and
phrases . . . according to rules of grammar and according to their common and approved
usage.” Minn. Stat. § 645.08(1) (2022). When a statute does not define a legal term, we
may look to legal definitions to determine the plain meaning of the term. See Getz v. Peace,
934 N.W.2d 347, 354-55 (Minn. 2019).
As set forth above, Minnesota defines a person’s estate for the purpose of MA
recovery to include “assets conveyed to a[n] . . . heir . . . through . . . [a] living trust.” Minn.
Stat. § 256B.15, subd. 1a(b)(5). Here, the parties do not dispute that the trust instrument
created a living trust. See Black’s Law Dictionary 1821 (11th ed. 2019) (defining both
“living trust” and “inter vivos trust” as “[a] trust that is created and takes effect during the
settlor’s lifetime”); see also, e.g., First & Am. Nat’l Bank of Duluth v. Higgins, 293 N.W.
585, 590-92 (Minn. 1940). And the trust instrument explicitly provided that “[o]n the death
of the survivor of the settlors, the trustee shall distribute all property then belonging to the
income or principal of the trust to such person or persons out of a class composed of [the
8 settlors’] descendants.” Accordingly, the trust instrument provided that, upon Margaret’s
death, the real property would be conveyed to Margaret’s heirs “through . . . [a] living
trust,” as required for the real property be part of Margaret’s “estate.” See Minn. Stat.
§ 256B.15, subd. 1a(b)(5). Thus, the conveyance falls within the plain language of the
statute. 3
In response, Hammerberg makes three main arguments, which we address in turn.
Hammerberg first argues that we cannot read the Minnesota statute so broadly because
section 1396p(b)(4)(B), the federal authorizing statute, has narrower language.
Hammerberg points to the parenthetical phrase, “(to the extent of such interest),” 42 U.S.C.
§ 1396p(b)(4)(B), arguing this language excludes conveyances via living trusts. We
disagree. Hammerberg’s interpretation of the federal authorizing statute is unreasonable
when the parenthetical phrase is read in the context of the entire sentence. The federal
authorizing statute provides that a state can define the estate to include:
any . . . real . . . property . . . 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[n] . . . heir . . . of the deceased individual through . . . [a] living trust.”
3 We granted leave to the Elder Law Section of the Minnesota State Bar Association to submit a brief as amici curiae. See Minn. R. Civ. App. P. 129.01(a). Hammerberg and the amicus argue that only life estates and joint tenancies fall within the definition of an “estate” under section 256B.15. But Hammerberg and the amicus describe the law as it existed before the legislature expanded the definition of “estate” for the purpose of MA recovery in 2009. See 2009 Minn. Laws ch. 79, art. 5, § 39, at 776-77. Today, section 256B.15, subdivision 1a(b), plainly contemplates that an individual’s estate includes interests beyond life estates and joint tenancies.
9 42 U.S.C. § 1396p(b)(4)(B) (emphasis added). To interpret the parenthetical phrase to
exclude conveyances via living trusts would render the language “including such assets
conveyed to a[n] . . . heir . . . through . . . [a] living trust” meaningless. Id. (emphasis
added); see also Am. Fam. Ins. Grp. v. Schroedl, 616 N.W.2d 273, 277 (Minn. 2000) (“A
statute should be interpreted . . . to give effect to all of its provisions. . . .”). Thus, we
disagree with Hammerberg that the federal authorizing statute warrants a different result
in this case.
Second, Hammerberg contends we should affirm the district court’s order because
DHS failed to identify the specific type of interest Margaret possessed in the real property
at the time of her death. Again, we disagree. Neither the federal authorizing statute nor
the Minnesota statute require DHS to identify the legal interest the individual possesses
before placing a notice of potential claim on real property. See 42 U.S.C. § 1396p(b);
Minn. Stat. § 256B.15, subd. 1a. Therefore, the commissioner did not commit reversible
error when it failed to identify Margaret’s legal interest in the real property held in the
trust. 4
4 The district court determined that the interest Margaret held was a license. See Chicago & North Western Transp. Co. v. City of Winthrop, 257 N.W.2d 302, 304 (Minn. 1977) (defining a license as “an interest in land in the possession of another which (a) entitles the owner of the interest to a use of the land, and (b) arises from the consent of the one whose interest in the land used is affected thereby, and (c) is not incident to an estate in the land, and (d) is not an easement” (quotation omitted)). This was error. Margaret’s interest was not a license because she had the sole right to possess the real property held in the trust, and this right was neither dependent on the consent of the trustee nor revocable by the trustee.
10 Third, Hammerberg argues that we should reverse the commissioner’s decision
because it failed to satisfy the standard set forth in Barg. We are unpersuaded. Initially,
we question whether the standard in Barg applies to this case. In Barg, the supreme court
addressed whether certain property was recoverable from a surviving spouse’s estate, an
issue not presented here. See 752 N.W.2d at 56, 59 n.5 (providing that the “discussion of
spouses is premised on circumstances similar to those of the Bargs. One spouse, who we
refer to as the recipient spouse, applies for and receives Medicaid benefits. The other, who
we refer to as the community or surviving spouse, receives no Medicaid benefits and
survives the recipient spouse”).
But even if we assume Barg applies, Margaret’s interest in the real property meets
the Barg standard. Under Barg,
for an interest to be traceable to and recoverable from a surviving spouse’s estate, the interest must be (1) an interest recognized by law, (2) which the Medicaid recipient held at the time of death, and (3) that resulted in a conveyance of an interest of some value to the surviving spouse that occurred as a result of the recipient’s death. 5
Id. at 72. Principles of real property and probate law form the basis for determining
whether someone has a legal interest in property at the time of their death. See id. For the
purposes of estate recovery, “[a]t the time of death” means “a point in time immediately
before death.” In re Estate of Gullberg, 652 N.W.2d 709, 713 n.1 (Minn. App. 2002).
5 With regard to the third element, as described above, this case does not involve the conveyance of an interest to a surviving spouse. In his brief, Hammerberg’s only argument with respect to the third element is that no conveyance occurred because Margaret did not hold any legally recognized interest in the real property at the time of her death. Thus, we do not separately analyze the third element.
11 We conclude the record shows that Margaret had a legally recognized interest in the
real property held in the trust at the time of her death recognized under both real property
and probate law. Based on real-property principles, Margaret possessed a qualified
beneficial interest in the trust because she was entitled to use, possess, and collect any
income from the property until her death. See Minn. Stat. § 501C.0103(m) (2022)
(defining qualified beneficiary as, in relevant part, “a distributee or permissible distributee
of trust income or principal”). This position granted Margaret the right to maintain suit
against the trustee to, among other things, “compel the trustee to perform his duties as
trustee,” “enjoin the trustee from committing a breach of trust,” and “compel the trustee to
redress a breach of trust.” Morrison v. Doyle, 582 N.W.2d 237, 243 (Minn. 1998)
(quotation omitted). The trust instrument further provided Margaret with the power to
unilaterally remove and replace the trustee.
Principles of probate law similarly indicate that Margaret possessed a legal interest
in the real property at the time of her death. The trust provided Margaret with the right to
determine through her will how the property would be distributed among her descendants
upon her death. And under Minnesota probate law, a person can only devise by will an
interest in property that they personally possess. See In re Estate of Van Den Boom, 590
N.W.2d 350, 353 (Minn. App. 1999) (applying this principle to probate proceedings), rev.
denied (Minn. May 26, 1999).
For these reasons, we reverse the district court’s decision on the ground that the
commissioner correctly determined the real property held in the trust was subject to the
liens under section 256B.15.
12 III.
Finally, the parties dispute the proper disposition of this case. Hammerberg
contends that, even if we conclude DHS properly recorded the liens on the real property
held in the trust, we must remand to the district court because certain issues have been left
unresolved. DHS asserts that reversal without a remand is appropriate because
Hammerberg only challenged the validity of the liens. We agree with DHS.
Hammerberg requested, and DHS held, a fair hearing pursuant to Minn. Stat.
§ 256B.15, subd. 1f(c). There, the parties raised two issues: (1) whether Hammerberg
timely challenged the liens and (2) whether DHS properly determined that the real property
held in the trust was subject to the liens. Those issues have been resolved in this case.
Thus, while questions may remain regarding the value of Margaret’s interest and the
collection of assets pursuant to the liens, those issues are outside the scope of this
administrative appeal. See N. Am. Water Off. v. LTV Steel Mining Co., 481 N.W.2d 401,
405 (Minn. App. 1992) (stating that, for agency decisions, we will not consider issues the
parties raise “for the first time on appeal”). 6
6 We also note that equitable claims are outside the scope of judicial review in an agency appeal. See Minn. Stat. § 14.69.
13 Therefore, we reverse the district court’s decision and express no opinions on issues
not properly raised before our court on appeal. 7
Reversed.
7 As an alternative basis for affirming the district court, Hammerberg contends that the commissioner used an unlawful procedure when it retroactively applied Minn. Stat. § 256B.15, subd. 1a(b)(5). But because neither the HSJ nor the district court considered or decided this argument, we decline to consider it. See Thiele v. Stich, 425 N.W.2d 580, 582 (Minn. 1988) (“A reviewing court must generally consider ‘only those issues that the record shows were presented and considered by the [district] court in deciding the matter before it.’” (quotation omitted)).