Riverside County Public Guardian v. Snukst

• Court: California Court of Appeal
• Decided: January 10, 2022
• Docket: E074949
• Status: Published

Opinion

Filed 1/10/22

CERTIFIED FOR PUBLICATION

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FOURTH APPELLATE DISTRICT

DIVISION TWO

RIVERSIDE COUNTY PUBLIC GUARDIAN, as Trustee, etc., E074949 Plaintiff and Respondent, (Super.Ct.No. RIP1500200) v. OPINION SHAWNA SNUKST, Defendant and Respondent;

CALIFORNIA DEPARTMENT OF HEALTH CARE SERVICES, Claimant and Appellant.

APPEAL from the Superior Court of Riverside County. Thomas H. Cahraman,

Judge. Reversed and remanded with directions.

1 Xavier Becerra and Rob Bonta, Attorneys General, Cheryl L. Feiner, Assistant

Attorney General, Gregory D. Brown, Jennifer G. Perkell and Hadara R. Stanton, Deputy

Attorneys General, for Claimant and Appellant.

No appearance for Plaintiff and Respondent.

Law Office of Armand Tinkerian and Armand Tinkerian for Defendant and Respondent.

I. INTRODUCTION

The Medi-Cal program (Welf. & Inst. Code, § 14000 et seq.) is California’s

enactment of the federal Medicaid program. (42 U.S.C. § 1396 et seq.) 1 The Medicaid

program was designed to provide health care services to qualified indigent persons. The

California Department of Health Care Services (the department) administers the Medi-

Cal program. (Welf. & Inst. Code, § 14203; Robert F. Kennedy Medical Center v. Belshé

(1996) 13 Cal.4th 748, 751.) For a person older than 55 years of age, financial eligibility

for Medi-Cal benefits is calculated without including the value of his or her principal

residence. However, after the person’s death, federal law requires the department to seek

reimbursement for any Medi-Cal benefits provided during the decedent’s lifetime from

his or her estate or recipients of the decedent’s property by distribution or survival.

(Welf. & Inst. Code, § 14009.5, subd. (a).) The reimbursement requirement is subject to

several exemptions or hardship waivers. (Ibid.)

1 The Medicaid and Medicare programs were signed into law in 1965 and are authorized by title XIX of the Social Security Act. (42 U.S.C. § 1396 et seq.; see https://www.medicaid.gov/about-us/program-history/index.html [as of Jan 10, 2022].)

2 In this case, the department sought reimbursement from a revocable inter vivos

trust for the Medi-Cal benefits provided on behalf of Joseph Snukst during his lifetime.

Following his death, the probate court ordered the assets in the revocable inter vivos trust

to be distributed to the sole beneficiary, Shawna Snukst, rather than to the department.

We conclude federal and state law governing revocable inter vivos trusts, as well as

public policy, require that the department be reimbursed from the trust before any

distribution to its beneficiary. We, therefore, reverse and remand.

II. PROCEDURAL BACKGROUND AND FACTS

In November 2009, Joseph 2 moved into a senior care facility in Riverside; he was

diagnosed with dementia. On August 27, 2015, the Riverside County Public Guardian

was appointed conservator of Joseph’s person and estate. Joseph died on July 29, 2016.

From August 27, 2013, through July 29, 2016, Joseph was a Medi-Cal beneficiary.

During that period, the department paid $480,465.52 for Joseph’s health care services.

Twelve years before his death, on or about March 14, 2004, Joseph purchased an

annuity. Two days later, by a declaration of trust dated March 16, 2004, Joseph created a

revocable inter vivos trust (the trust) and designated the trust as the pay-on-death

2 We refer to Joseph and Shawna Snukst by their first names to avoid confusion. We mean no disrespect in doing so. (Estate of O’Connor (2018) 26 Cal.App.5th 871, 875, fn. 2.)

3 beneficiary of his annuity. 3 The trust designated Joseph’s niece, Shawna, as its sole

beneficiary. When Joseph died, the trust received $804,456.13 from his annuity.

On September 21, 2016, the public guardian notified the department of Joseph’s

death. On November 28, the department presented a creditor’s claim in the amount of

$480,465.52, to the public guardian for reimbursement of Medi-Cal benefits Joseph had

received. In the first and final account filed on August 10, 2017, the public guardian

requested authority to pay $480,465.52 to the department. The probate court denied the

request, finding that the annuity ceased to be a conservatorship asset upon Joseph’s death

and became an asset of the trust. According to the probate court, the trust “is the primary

beneficiary of the annuity. No order under Probate Code section 2580 was made to

change the beneficiary. Therefore, the annuity ceased to be a conservatorship asset upon

the death of the conservatee and became an asset of the [trust] dated March 15, 2004.

Consequently, the conservator has no authority to use the funds from this annuity to

pay the [department’s] claim.” The court added, “Even if the conservator had authority

to access these funds, the conservator would have no statutory duty to use the funds to

pay this debt of the conservatee’s estate. This was not a debt that became payable during

the conservatee’s lifetime, but rather was a creditor’s claim that arose upon his death.

Compare Probate Code section 2430 and Probate Code section 9000. Although Probate

Code 2631(a) would permit this payment to be made (if the annuity or other sufficient

3 It appears that another trust, the Joseph Snuskst Irrevocable Trust, was created on May 22, 2014, after he was diagnosed with dementia. However, a copy of this trust is not included in the record.

4 resources were available in the conservatorship estate), it would be discretionary and not

mandatory.”

By the probate court’s order on September 26, 2018, the public guardian filed an

amendment to the first and final account, which eliminated the annuity as an asset of the

estate and removed the request for payment of the department’s claim. The amendment

was approved on February 7, 2019. On April 3, 2019, the public guardian filed the

successor trustee’s first and final account for the trust, requesting authority to distribute

the remaining funds in the trust to Shawna and an order that the trust be terminated after

the funds have been distributed.

The department objected to the trustee’s accounting. It challenged the “court’s

finding that there is no authority to use the annuity funds to pay the Department’s creditor

claim” because “Welfare and Institutions Code section 14009.5” authorizes such

recovery. According to the department, “[s]uch recovery includes assets that pass

through ‘joint tenancy, tenancy in common, survivorship, life estate, living trust,

annuities purchased on or after September 1, 2004, life insurance policy that names the

estate as the beneficiary or reverts to the estate, or any retirement account that . . . names

the estate as the beneficiary or reverts to the estate.’ (Cal. Code of Regs., tit. 22, §

50960.12(a); 42 U.S.C. § 1396p(b)(4)(A)-(B).)” 4 The department argued that “[s]ince

4 Title 42 United States Code section 1396p, subdivision (b)(4), provides: “For purposes of this subsection, the term ‘estate,’ with respect to a deceased individual— “(A) shall include all real and personal property and other assets included within the individual’s estate, as defined for purposes of State probate law; and [footnote continued on next page]

5 the [trust] was a revocable living trust (see Article 1, p. 1), the department is entitled to

reimbursement . . . of $480,465.52 from [the trust].” The public guardian offered no

opposition to reimbursing the department. The probate court ordered notice be sent to

Shawna, “explaining that if the Court approved the reimbursement claim of [the

department], her distribution would be reduced by that amount.”

On August 6, 2019, the public guardian filed another amended accounting, which

included a request to pay the department’s claim. The probate court set a hearing and

requested briefing on the issue. Both the department and Shawna briefed the issue. On

February 24, 2020, the probate court denied the public guardian’s request to pay the

department’s claim; no explanation was provided.

III. DISCUSSION

The department contends the probate court failed to comply with federal and state

law by denying its claim for reimbursement for the Medi-Cal benefits that Joseph had

received. We agree.

“California participates in the federal Medicaid program and must comply with the

Medicaid Act in exchange for federal contributions to the cost of care provided to needy

individuals. [Citation.] The Medicaid Act provides that applicants may qualify for

Medicaid benefits if they are aged, blind, or disabled and their income and resources are

“(B) may include, at the option of the State (and shall include, in the case of an individual to whom paragraph (1)(C)(i) applies), 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.”

6 insufficient to meet the costs of health care. [Citation.] If the applicant is over the age of

55, his or her principal residence is excluded when determining eligibility. This allows

elderly applicants, despite having a valuable asset, to qualify for Medicaid covered

services. [Citation.] In exchange, federal law requires that the state recover all or a

portion of the Medicaid benefits paid during the recipient’s lifetime from his or her estate

at death. [Citations.] [¶] In compliance with federal law, state law also requires the

[state] to seek reimbursement from the deceased recipient’s estate or from recipients of

property from the decedent by distribution or survival. [Citation.] This requirement is

expressed in mandatory terms. Property once held by the decedent and transferred to

heirs by a trust is part of the decedent’s estate and is subject to recovery under the same

statute.” (Maxwell-Jolly v. Martin (2011) 198 Cal.App.4th 347, 353-354; see Belshé v.

Hope (1995) 33 Cal.App.4th 161, 164.)

Here, the probate court failed to provide its reasons for denying payment of the

department’s claim. Nonetheless, its prior order—which denied the same claim—

explained that the conservator had no authority to use the funds from the annuity because

it was a noncash asset, which ceased to be a conservatorship asset upon Joseph’s death

and became an asset of the trust. However, the public guardian was both the conservator

of Joseph’s estate and the trustee of the trust. Whether acting as the conservator or

trustee, the public guardian notified the department of Joseph’s death. Probate Code

section 19000 et seq. “governs claims procedures, including notice requirements and time

limitations, for revocable trusts of deceased settlors.” (Wagner v. Wagner (2008)

7 162 Cal.App.4th 249, 254; see Ross & Cohen, Cal. Practice Guide: Probate (The Rutter

Group 2021) ¶ 2:117.2 et seq., p. 2-96 et seq.)

Formally, the trustee “‘may file with the court a proposed notice to creditors’ in

order to obtain a case number and then publish and serve notice to creditors or potential

claimants as provided in [Probate Code] section 19040 and the subsequent sections of the

Probate Code. . . .” (Wagner v. Wagner, supra, 162 Cal.App.4th at p. 254.) However, a

“trustee is not required to utilize this formal claims procedure and, as an alternative, may

proceed informally in administering a decedent’s trust . . . .” (Id. at p. 255.) Probate

Code section 19202, in relevant part, provides: “(a) If the trustee knows or has reason to

believe that the deceased settlor received health care under [Medi-Cal], the trustee shall

give the [department] notice of the death of the deceased settlor . . . in the manner

provided in Section 215” by mailing or personally delivering such notice, including a

copy of the death certificate, to the department at its Sacramento office within 90 days

after the death. (Prob. Code, § 215.) Here, because the public guardian was Joseph’s

conservator, the public guardian knew that he had received Medi-Cal benefits and,

accordingly, provided notice of his death to the department.

Upon receiving notice of Joseph’s death, the department submitted its claim for

reimbursement for Medi-Cal benefits provided to Joseph. Joseph’s primary asset was the

annuity, which was paid to the trust upon his death. Shawna is the sole beneficiary of the

trust. Property once held by the decedent and transferred to heirs by way of a revocable

inter vivos trust is part of the decedent’s estate and is subject to recovery under Welfare

8 and Institutions Code section 14009.5. 5 (Belshé v. Hope, supra, 33 Cal.App.4th at

p. 164.) According to federal law, the term “‘estate,’” with respect to a deceased

individual, includes “(A) . . . all real and personal property and other assets included

within the individual’s estate, as defined for purposes of State probate law; and [¶] (B)

may include, at the option of the State . . . 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.” (42 U.S.C. § 1396p(b)(4)(A)-(B), italics

added.)

“California utilizes the federal definition of ‘estate.’ The regulations for the Medi-

Cal estate recovery program define ‘estate’ as ‘all 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 assets conveyed to a dependent, survivor, heir or

assignee of the deceased individual through joint tenancy, tenancy in common,

survivorship, life estate, living trust, or other arrangement.’” (Bonta v. Burke (2002)

98 Cal.App.4th 788, 790-791 (Bonta), italics added, quoting former Cal. Code Regs.,

tit. 22, § 50960, subd. (b)(1).) “The inclusion of the catchall ‘or other arrangement’

5 Welfare & Institutions Code section 14009.5 was amended in 2016 to limit estate recovery for individuals who die on or after January 1, 2017. (Stats. 2016, ch. 30, § 22; Welf. & Inst. Code, § 14009.5, subd. (g) [“The amendments made to this section by the act that added this subdivision shall apply only to individuals who die on or after January 1, 2017.”].) Because Joseph died on July 29, 2016, the former version of section 14009.5 applies. (Stats. 1995, ch. 548, § 2.)

9 suggests that Congress intended the definition to be as all-inclusive as possible.” (Bonta,

at p. 793; see Belshé v. Hope, supra, 33 Cal.App.4th at pp. 173-174, 175 [“We find

Congress intended the term ‘estate’ to have a broad meaning. By including probate and

nonprobate transfers on death in the estate, the purposes of [Medicaid] will be better

achieved and the broad definition will ensure that assets of a recipient are used for the

cost of care rather than given away.”].)

Despite the above authorities, Shawna contends the department was not “entitled

to proceeds from the Beneficiary’s share of her uncle’s inter vivos Trust.” In support of

this contention, she cites Citizens Action League v. Kizer (9th Cir. 1989) 887 F.2d 1003,

1006-1008 (noting that the term “estate,” before Oct. 1, 1993, was limited to the common

law definition such that property passing to a joint tenant by right of survivorship was not

part of a decedent’s estate under the Medicaid program) and Bucholtz v. Belshe (9th Cir.

1997) 114 F.3d 923, 925-926 (same, as to property passing to a beneficiary by way of a

revocable inter vivos trust). However, these federal cases “turned on an assessment of

congressional intent in the absence of an express definition of estate. Congress has now

provided a definition and California has incorporated it into its recovery program.”

(Bonta, supra, 98 Cal.App.4th at p. 792; see Cal. Code Regs., tit. 22, § 50960.12, subd.

(a) [“For individuals who die on or after October 1, 1993, and for payments made on or

after October 1, 1993, ‘estate’ is defined as all real and personal property and other assets

in which the decedent had any legal title or interest at the time of death (to the extent of

such interest), including assets conveyed to a dependent, heir, survivor, or assignee of the

decedent through joint tenancy, tenancy in common, survivorship, life estate, living trust,

10 annuities purchased on or after September 1, 2004, life insurance policy that names the

estate as the beneficiary or reverts to the estate, or any retirement account that names the

estate as the beneficiary or reverts to the estate.”].) Because the cases cited by Shawna

are based on an outdated definition of “estate,” they are no longer persuasive.

Notwithstanding ante, Shawna argues that the department’s claim “does not reach

to or apply to the inter vivos trust” because it is against Joseph’s probate estate that “does

not reach to or apply to the decedent’s inter vivos trust.” She cites Arluk Medical Center

Industrial Group, Inc. v. Dobler (2004) 116 Cal.App.4th 1324. However, Arluk did not

address a Medi-Cal reimbursement claim and, therefore, does not stand for the

proposition she advances. Rather, the Arluk court concluded that the trustee of a

revocable living trust has no duty, following the death of the settlor, to preserve trust

assets for the benefit of creditors with claims pending against the deceased settlor’s

probate estate. (Arluk, at pp. 1328, 1341.) As we previously noted, the public guardian

acted as both conservator of Joseph’s estate and trustee of the trust. Regardless of which

“hat” the public guardian was wearing, notice of Joseph’s death was provided to the

department, which timely submitted a claim against the estate, and Joseph’s estate

included “assets conveyed to a[n] . . . heir . . . through . . . living trust . . . .” (42 U.S.C.

§ 1396p(b)(4)(B), italics added; see Cal. Code Regs., tit. 22 § 50960.12, subd. (a).)

Finally, Shawna asserts that the department is not entitled to be reimbursed

because Joseph’s application for Medi-Cal benefits is not valid, 6 and there is insufficient

6 Joseph’s application for Medi-Cal benefits is not included in the record.

11 evidence of the medical services provided to him. 7 Since the probate court incorrectly

concluded that the assets in the trust were not available to reimburse the department for

Joseph’s Medi-Cal benefits, the court never decided the validity of his application or the

sufficiency of the evidence of the medical services provided. These are factual issues to

be determined by the probate court. (Cf. Raisola v. Flower St. (1988) 205 Cal.App.3d

1004, 1009.) Because we are reversing and remanding the matter to the probate court, it

may consider these factual issues on remand in the first instance. 8

To summarize, the department is required to seek recovery of Medi-Cal benefits

provided to Joseph before his death (Welf. & Inst. Code, § 14009.5, subd. (a)), and

property once held by Joseph and transferred to Shawna as part of the trust is subject to

such recovery. (Belshé v. Hope, supra, 33 Cal.App.4th at pp. 173-175.) Moreover, as a

public policy matter, “allowing the State to recover as much as possible of the costs of

medical services provided to low-income persons furthers the purpose of the Medicaid

and Medi-Cal programs. The recovered costs replenish the program and allow ‘the state

to . . . provide future services.’” (Bonta, supra, 98 Cal.App.4th at pp. 793.) The

7 She does not claim any statutory exemptions or waivers. (Welf. & Inst. Code, § 14009.5.) She also does not dispute any of the following facts: (1) Joseph received Medi-Cal benefits; (2) he left no surviving spouse or child whose entitlement to his estate would take precedence; (3) there was no hardship exemption; (4) there were sufficient assets in his estate to cover the department’s claim; and (5) the claim was timely and properly submitted.

8 We express no opinion on these factual issues or the trust’s explicit direction that its assets are to be distributed to Shawna after “providing for the payment of any debts, taxes, and administration and other expenses.”

12 department, therefore, is entitled to recover from Joseph’s estate or the beneficiary of the

trust—Shawna—the cost of the Medi-Cal benefits provided to him before his death.

IV. DISPOSITION

We reverse the probate court’s order approving the first and final account of the

trust and remand with directions that the probate court consider the matter in accordance

with the views expressed in this opinion. The department shall recover its costs on

appeal.

McKINSTER Acting P. J. We concur:

CODRINGTON J.

RAPHAEL J.