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S1329................................................by JUDICIARY AND RULES ESTATES - EXEMPT PROPERTY - Amends and adds to existing law relating to exempt property and allowances to provide for an allowance for certain tangible personal property; to remove provisions dealing with encumbered chattels and deficiencies of exempt property; to provide for a certain family allowance for the decedent's surviving spouse and disabled, minor children; to remove a calculation for a family allowance; to provide a reference to exempt property; to remove reference to dependent children; to provide reference to disabled children; to remove a provision regarding the charge of the family allowance against any benefit or share passing to the surviving spouse or children by will; to remove references to the homestead allowance; to remove references to the family allowance; to remove a provision providing for a certain lump sum family allowance; to remove a provision permitting a personal representative or certain interested persons to petition the court for a certain family allowance; to provide for limitations on exempt property and family allowance by will; and to remove provisions dealing with petitioning the court for an exempt property allowance claim under certain circumstances. 01/22 Senate intro - 1st rdg - to printing 01/23 Rpt prt - to Jud 02/05 Rpt out - to 14th Ord
]]]] LEGISLATURE OF THE STATE OF IDAHO ]]]] Fifty-ninth Legislature Second Regular Session - 2008IN THE SENATE SENATE BILL NO. 1329 BY JUDICIARY AND RULES COMMITTEE 1 AN ACT 2 RELATING TO EXEMPT PROPERTY AND ALLOWANCES; AMENDING SECTION 15-2-401, IDAHO 3 CODE, TO REMOVE A REFERENCE TO THE HOMESTEAD ALLOWANCE; REPEALING SECTION 4 15-2-402, IDAHO CODE, RELATING TO HOMESTEAD ALLOWANCE; AMENDING SECTION 5 15-2-403, IDAHO CODE, TO REMOVE REFERENCES TO THE HOMESTEAD ALLOWANCE, TO 6 PROVIDE FOR AN ALLOWANCE FOR CERTAIN TANGIBLE PERSONAL PROPERTY, TO REMOVE 7 PROVISIONS DEALING WITH ENCUMBERED CHATTELS AND DEFICIENCIES OF EXEMPT 8 PROPERTY AND TO MAKE TECHNICAL CORRECTIONS; AMENDING SECTION 15-2-404, 9 IDAHO CODE, TO PROVIDE FOR A CERTAIN FAMILY ALLOWANCE FOR THE DECEDENT'S 10 SURVIVING SPOUSE AND DISABLED, MINOR CHILDREN, TO REMOVE A CALCULATION FOR 11 A FAMILY ALLOWANCE, TO REMOVE REFERENCES TO THE HOMESTEAD ALLOWANCE, TO 12 PROVIDE A REFERENCE TO EXEMPT PROPERTY, TO REMOVE REFERENCE TO DEPENDENT 13 CHILDREN, TO PROVIDE REFERENCE TO DISABLED CHILDREN AND TO REMOVE A PROVI- 14 SION REGARDING THE CHARGE OF THE FAMILY ALLOWANCE AGAINST ANY BENEFIT OR 15 SHARE PASSING TO THE SURVIVING SPOUSE OR CHILDREN BY WILL; AMENDING SEC- 16 TION 15-2-405, IDAHO CODE, TO PROVIDE A CODE REFERENCE, TO REMOVE REFER- 17 ENCES TO THE HOMESTEAD ALLOWANCE, TO REMOVE REFERENCES TO THE FAMILY 18 ALLOWANCE, TO REMOVE A PROVISION FOR A CERTAIN LUMP SUM FAMILY ALLOWANCE 19 AND TO REMOVE A PROVISION PERMITTING A PERSONAL REPRESENTATIVE OR CERTAIN 20 INTERESTED PERSONS TO PETITION THE COURT FOR A CERTAIN FAMILY ALLOWANCE; 21 AMENDING CHAPTER 2, TITLE 15, IDAHO CODE, BY THE ADDITION OF A NEW SECTION 22 15-2-406, IDAHO CODE, TO PROVIDE FOR LIMITATIONS ON EXEMPT PROPERTY AND 23 FAMILY ALLOWANCE BY WILL; AND AMENDING SECTION 56-218, IDAHO CODE, TO 24 REMOVE PROVISIONS DEALING WITH PETITIONING THE COURT FOR AN EXEMPT PROP- 25 ERTY ALLOWANCE CLAIM UNDER CERTAIN CIRCUMSTANCES AND TO MAKE TECHNICAL 26 CORRECTIONS. 27 Be It Enacted by the Legislature of the State of Idaho: 28 SECTION 1. That Section 15-2-401, Idaho Code, be, and the same is hereby 29 amended to read as follows: 30 15-2-401. APPLICABLE LAW. This part applies to the estate of a decedent 31 who dies domiciled in this state. Rights to thehomestead allowance,exempt 32 property,allowance and the family allowance for a decedent who dies not domi- 33 ciled in this state are governed by the law of the decedent's domicile at 34 death. 35 SECTION 2. That Section 15-2-402, Idaho Code, be, and the same is hereby 36 repealed. 37 SECTION 3. That Section 15-2-403, Idaho Code, be, and the same is hereby 38 amended to read as follows: 39 15-2-403. EXEMPT PROPERTY. In addition to anyhomesteadfamily allowance, 40 the decedent's surviving spouse is entitled from the estate to value, not 2 1 exceeding ten thousand dollars ($10,000) in excess of any security interests 2 therein, in tangible personal property, including, but not limited to, house- 3 hold furniture, automobiles, furnishings, appliances, family heirlooms and 4 personal effects, subject to the terms of section 15-2-406, Idaho Code. If 5 there is no surviving spouse, the decedent's children are entitled jointly to 6 the samevalue unless the decedent's will provides otherwise. If encumbered7chattels are selected and if the value in excess of security interests, plus8that of other exempt property, is less than ten thousand dollars ($10,000), or9if there is not ten thousand dollars ($10,000) worth of exempt property in10the estate, the spouse or children are entitled to other assets of the estate,11if any, to the extent necessary to make up the ten thousand dollar ($10,000)12valuetangible personal property, subject to the terms of section 15-2-406, 13 Idaho Code. Rights to exempt propertyand assets needed to make up a defi-14ciency of exempt propertyhave priority over all claims against the estate,15except that the right to any assets to make up a deficiency of exempt property16shall abate as necessary to permit prior payment of homestead allowance and17family allowance, and except as otherwise provided. These rights are in addi- 18 tion to any benefit or share passing to the surviving spouse or children by 19 the will of the decedent,(unless otherwise provided in the will), or by 20 intestate succession, or by way of elective share. 21 SECTION 4. That Section 15-2-404, Idaho Code, be, and the same is hereby 22 amended to read as follows: 23 15-2-404. FAMILY ALLOWANCE.(a)If the estate has total assets, net of 24 secured debts and exempt property pursuant to section 15-2-403, Idaho Code, 25 which do not exceed the amount necessary to totally discharge its debts, then 26 iIn addition to the right toa homestead allowance andexempt property, the 27 decedent's surviving spouse and minor children, under the age of twenty-one 28 (21) years, whom the decedent was obligated to support and children who were 29 in fact being supported by the decedent and who are disabled, as provided in 30 42 U.S.C. section 1382c, are entitled to areasonable allowance in money out31of the estate for their maintenance during the period of administration, which32allowance may not continue for longer than one (1) year if the estate is inad-33equate to discharge allowed claims. The allowance may be paid as a lump sum or34in periodic installmentsfamily allowance of the amount of said total assets 35 or the sum of one hundred thousand dollars ($100,000), whichever is less. It 36 is payable to the surviving spouse, if living, for the use of the surviving 37 spouse and minor anddependentdisabled children; otherwise to the children, 38 or persons having their care and custody. If a minor child ordependentdis- 39 abled child is not living with the surviving spouse, the allowance may be made 40 partially to the child or the child's guardian or other person having the 41 child's care and custody, and partially to the spouse, as their needs may 42 appear. The family allowance is exempt from and has priority over all claims 43 exceptthe homestead allowanceexempt property, except as otherwise provided. 44(b) The family allowance is not chargeable against any benefit or share45passing to the surviving spouse or children by the will of the decedent unless46otherwise provided in the will, or by intestate succession, or by way of elec-47tive share. The death of any person entitled to family allowance terminates48the right to allowances not yet paid.49 SECTION 5. That Section 15-2-405, Idaho Code, be, and the same is hereby 50 amended to read as follows: 51 15-2-405. SOURCE -- DETERMINATION -- DOCUMENTATION -- MISCELLANEOUS PRO- 3 1 VISIONS. If the estate is otherwise sufficient, property specifically devised, 2 including the provisions pursuant to section 15-2-513, Idaho Code, may not be 3 used to satisfy rights to thehomestead allowance, family allowance or,exempt 4 property. Subject to this restriction, the surviving spouse, the guardians of 5 the minor children, or children who are adults may select property of the 6 estate ashomestead allowance, family allowance, orexempt property. The per- 7 sonal representative may make these selections if the surviving spouse, the 8 children or the guardians of the minor children are unable or fail to do so 9 within a reasonable time or if there is no guardian of a minor child. The per- 10 sonal representative may execute an instrument to establish thehomestead11allowance,family allowance,or exempt property.The personal representative12may determine the family allowance in a lump sum not exceeding eighteen thou-13sand dollars ($18,000) or periodic installments not exceeding one thousand14five hundred dollars ($1,500) per month for one (1) year, and may disburse15funds of the estate in payment of the family allowance and any part of the16homestead allowance payable in cash.The personal representative or any inter- 17 ested person aggrieved by any selection, determination, payment, proposed pay- 18 ment, or failure to act under this section may petition the court for appro- 19 priate relief, which may include a family allowance other than that which the20personal representative determined or could have determined. Despite any lan- 21 guage to the contrary in this chapter, thehomestead allowance,family allow- 22 ance,and exempt property are not mandatory automatic allowances, but rather 23 must be applied for by the surviving spouse and/or children, as appropriate, 24 as set forth in this title. Even though these allowances and the right to 25 apply for exempt property are not claims against estates, the manner of and 26 time period for applying for these allowances or the exempt property shall be 27 the same as set forth in sections 15-3-801, 15-3-803 and 15-3-804, Idaho Code; 28 provided however, that the personal representative shall not be required to 29 give actual notice to a surviving spouse or a minor or dependent child of the 30 right to apply for these allowances or the exempt property, and provided fur- 31 ther that any notice actually given by the personal representative does not 32 need to make any additional or special reference to an application by the sur- 33 viving spouse or dependent or minor children also being barred if not submit- 34 ted within the time period set forth in the notice. Also, the personal repre- 35 sentative shall not be liable to the surviving spouse, minor or dependent 36 child, any creditor, or any other successor to the estate in the same manner 37 as provided in section 15-3-801(c), Idaho Code, as a result of giving or fail- 38 ing to give notice. Thehomestead allowance,family allowance,and exempt 39 property may not be enforced or applied for on behalf of a surviving spouse or 40 a minor or dependent or adult child of the decedent by a creditor of the sur- 41 viving spouse or a minor or dependent or adult child of the decedent, or by 42 any person or entity claiming by, through, or because of the surviving spouse 43 or minor or dependent or adult child of the decedent. Despite any language to 44 the contrary in other sections of this chapter, thehomestead allowance,fam- 45 ily allowance,and exempt property do not take precedence over reasonable 46 administrative costs and expenses of the estate of the decedent. 47 SECTION 6. That Chapter 2, Title 15, Idaho Code, be, and the same is 48 hereby amended by the addition thereto of a NEW SECTION, to be known and des- 49 ignated as Section 15-2-406, Idaho Code, and to read as follows: 50 15-2-406. LIMITATIONS ON EXEMPT PROPERTY AND FAMILY ALLOWANCE BY WILL. 51 The decedent may provide by will that a surviving spouse, and/or adult chil- 52 dren, but not minor or disabled children: 53 (1) Are not entitled to any exempt property or family allowance; or 4 1 (2) Are entitled to limited exempt property or a limited family allow- 2 ance, as provided in the will; but 3 (3) May not condition such elimination or limitation upon whether the 4 estate of the decedent is subject to a claim for estate recovery for medicaid 5 benefits paid to the decedent or to a spouse of the decedent. 6 SECTION 7. That Section 56-218, Idaho Code, be, and the same is hereby 7 amended to read as follows: 8 56-218. RECOVERY OF CERTAIN MEDICAL ASSISTANCE. (1) Except where exempted 9 or waived in accordance with federal law medical assistance pursuant to this 10 chapter paid on behalf of an individual who was fifty-five (55) years of age 11 or older when the individual received such assistance may be recovered from 12 the individual's estate, and the estate of the spouse, if any, for such aid 13 paid to either or both: 14 (a) There shall be no adjustment or recovery until after the death of 15 both the individual and the spouse, if any, and only at a time when the 16 individual has no surviving child who is under twenty-one (21) years of 17 age or is blind or permanently and totally disabled as defined in 42 18 U.S.C. 1382c. 19 (b) While one (1) spouse survives, except where joint probate will be 20 authorized pursuant to section 15-3-111, Idaho Code, a claim for recovery 21 under this section may be established in the estate of the deceased 22 spouse. 23 (c) The claim against the estate of the first deceased spouse must be 24 made within the time provided by section 15-3-801(b), Idaho Code, if the 25 estate is administered and actual notice is given to the director as 26 required by subsection (5) of this section. However, if there is no admin- 27 istration of the estate of the first deceased spouse, or if no actual 28 notice is given to the director as required by subsection (5) of this sec- 29 tion, no claim shall be required until the time provided for creditor 30 claims in the estate of the survivor. 31 (d) Nothing in this section authorizes the recovery of the amount of any 32 aid from the estate or surviving spouse of a recipient to the extent that 33 the need for aid resulted from a crime committed against the recipient. 34 (2) Transfers of real or personal property, on or after the look-back 35 dates defined in 42 U.S.C. 1396p, by recipients of such aid, or their spouses, 36 without adequate consideration are voidable and may be set aside by an action 37 in the district court. 38 (3) Except where there is a surviving spouse, or a surviving child who is 39 under twenty-one (21) years of age or is blind or permanently and totally dis- 40 abled as defined in 42 U.S.C. 1382c, the amount of any medical assistance paid 41 under this chapter on behalf of an individual who was fifty-five (55) years of 42 age or older when the individual received such assistance is a claim against 43 the estate in any guardianship or conservatorship proceedings and may be paid 44 from the estate. 45 (4) For purposes of this section, the term "estate" shall include: 46 (a) All real and personal property and other assets included within the 47 individual's estate, as defined for purposes of state probate law; and 48 (b) Any other real and personal property and other assets in which the 49 individual had any legal title or interest at the time of death,(to the 50 extent of such interest), including such assets conveyed to a survivor, 51 heir, or assign of the deceased individual through joint tenancy, tenancy 52 in common, survivorship, life estate, living trust or other arrangement. 53 (5) Claims made pursuant to this section shall be classified and paid as 5 1 a debt with preference as defined in section 15-3-805(5), Idaho Code. Any dis- 2 tribution or transfer of the estate prior to satisfying such claim is voidable 3 and may be set aside by an action in the district court. The personal repre- 4 sentative of every estate subject to a claim under this section must, within 5 thirty (30) days of the appointment, give notice in writing to the director 6 of his or her appointment to administer the estate.However, if an exempt7property allowance claim is made in an estate subject to a claim under this8section by one (1) or more persons not described in subsection (2) of this9section, then, to the extent such exempt property allowance claim exceeds the10fair market value of the actual personal property of the decedent held by the11estate subject to a claim under this section (including, but not limited to,12such items as household furniture, automobiles, furnishings, appliances, and13personal effects), the persons making such exempt property allowance claim14must file with the court, and with the personal representative or administra-15tor of the estate, and with the department, a written statement under oath16containing the following:17(a) A statement that no personal property of the decedent has been trans-18ferred without adequate consideration to any person or entity, including19any one (1) or more of the persons making the exempt property allowance20claim, to the actual knowledge of any of the persons making the exempt21property allowance claim, within a time period commencing one (1) year22prior to the death of the decedent and ending on the date of the state-23ment; or24(b) A statement that personal property of the decedent has been trans-25ferred without adequate consideration to any person or entity, including26one (1) or more of the persons making the exempt property allowance claim,27within a time period commencing one (1) year prior to the death of the28decedent and ending on the date of the statement, to the actual knowledge29of any of the persons making the exempt property allowance claim, and30stating the fair market value of the personal property so transferred, and31stating a reasonable description of such property, and stating the method32of determining the fair market value of the personal property so trans-33ferred.34If the written statement indicates that there has been such a transfer of per-35sonal property, then the fair market value of the personal property so trans-36ferred shall be subtracted from the remaining exempt property allowance claim,37after subtraction of the personal property held by the estate, as described38above, and only any still remaining portion of the exempt property claim may39be paid by the estate to the persons making the exempt property allowance40claim. The statement submitted under paragraph (a) or (b) of this subsection,41must be signed under oath by all persons making the exempt property claim.42 (6) The department may file a notice of lien against the property of any 43 estate subject to a claim under this section. 44 (a) In order to perfect a lien against real or personal property, the 45 department shall, within ninety (90) days after the personal representa- 46 tive or successor makes a written request for prompt action to the direc- 47 tor, or three (3) years from the death of the decedent, whichever is 48 sooner, file a notice of lien in the same general form and manner as pro- 49 vided in section 56-218A(3)(a), Idaho Code, in the office of the secretary 50 of state, pursuant to section 45-1904, Idaho Code. Failure to file a 51 notice of lien does not affect the validity of claims made pursuant to 52 this section. 53 (b) The department may release the lien in whole or in part to permit the 54 estate property to be administered by a court-appointed personal represen- 55 tative. 6 1 (c) The department may foreclose its lien, without probate, in any of the 2 following circumstances: 3 (i) Where no personal representative has been appointed after one 4 (1) year from the date of death of the survivor of both the individ- 5 ual and spouse, if any; 6 (ii) Where the property has been abandoned by the decedent's heirs 7 or successors, if any; 8 (iii) Where the real property taxes that are due and payable have 9 remained unpaid for two (2) years and, after demand by the depart- 10 ment, the heirs or successors, if any, have failed to seek appoint- 11 ment or pay the property taxes; or 12 (iv) Where all parties interested in the estate consent to foreclo- 13 sure of the lien. 14 (7) The director shall promulgate rules reasonably necessary to implement 15 this section including, but not limited to, rules establishing undue hardship 16 waivers for the following circumstances: 17 (a) The estate subject to recovery is income-producing property that pro- 18 vides the primary source of support for other family members; or 19 (b) The estate has a value below an amount specified in the rules; or 20 (c) Recovery by the department will cause the heirs of the deceased indi- 21 vidual to be eligible for public assistance. 22 (8) The cause of action to void a transfer without adequate consideration 23 established in this section shall not be deemed to have accrued until the 24 department discovers, or reasonably could have discovered, the facts consti- 25 tuting the transfer without adequate consideration.
STATEMENT OF PURPOSE
RS: 17511
The allowances in the Idaho Probate Code for surviving spouses and
children (especially adult children) have caused endless problems
in interpretation and implementation. Additionally, such
allowances have created problems because of the Deficit Reduction
Act changes to Medicaid and also interpretations of existing rules
and statutes by Idaho Medicaid estate recovery. One of the major
problems caused by the allowances is in the situation of blended
families, where the husband and wife each have family from prior
marriages, often separate property, and wish to leave their
separate property, and perhaps their share of community property,
to their own children, believing that leaving the property to their
current spouse will result in all the property passing to the
children of the surviving spouse at his or her death, thereby
eliminating any inheritance to the children of the first-to-die
spouse. Many cases have arisen where the surviving spouse is able
to warp the estate plan of the first-to-die spouse by taking the
probate allowances (currently up to not less than $128,000) despite
the provisions of the Will of the deceased spouse. The apparent
actual original intent of the allowances, to protect indigent
spouses and minor or dependent children, was seldom met by the
allowances, and often the surviving spouse took the allowances and
left the minor or dependent children of the deceased spouse
indigent.
This bill, done in consultation with Medicaid Estate Recovery as to
Medicaid issues, restructures the allowances to meet their original
intent. The homestead allowance and existing family allowance are
both deleted in their present form and replaced with a family
allowance which only is used when the estate is unable to pay its
debts, and therefore will not be able to make any distribution to
a surviving spouse or minor or dependent disabled children. In
that event, the amount of the net assets of the estate, or
$100,000, whichever is less, becomes the family allowance. The
$100,00 amount is reflective of the current homestead allowance,
which is the amount also exempt from bankruptcy or seizure by
unsecured creditors in a homestead. As an example, if a husband
and wife owned their residence with an equity of $100,000, current
Idaho law (Title 55, Chapter 10) would protect all that equity.
However, if one spouse died, leaving the house to the surviving
spouse, the one-half ownership of the deceased spouse would no
longer be protected, but would be subject to the estate debts, even
though the surviving spouse is entitled to a full $100,000
homestead. This aberration in the law is corrected by this bill.
This bill will not have any current fiscal effect on Medicaid
estate recovery, since Idaho Medicaid estate recovery currently
claims the right to make a contingent claim in the estate of the
community spouse, if the institutionalized spouse is still alive
and receiving Medicaid benefits. This claim is independent of the
allowances. However, this bill does remove the problem of whether
the failure of an institutionalized spouse to take allowances will
be a transfer which disqualifies the institutionalized spouse from
receiving Medicaid for the penalty period, currently approximately
25 months, based on the allowance amounts and the current Idaho
Divestment Penalty Divisor.
The bill also greatly simplifies the exempt property allowance by
limiting it to only tangible personal property of certain types and
eliminating any cash equivalent. This solves a number of Medicaid
estate recovery problems, and allows the much more complex
provisions in Section 56-218 (Section Seven of this bill), which
were implemented several sessions ago in an attempt to solve those
problems, to be eliminated. This will greatly clarify and simplify
the interaction between Medicaid estate recovery and the exempt
property provisions. These provisions are totally non-
controversial, and therefore a companion bill containing only the
exempt property provisions will also be introduced in case this
bill is not enacted for any reason.
FISCAL NOTE
This bill will have no fiscal impact.
CONTACT:
Robert L. Aldridge, Trust & Estate Professionals of Idaho, Inc.
Telephone: office: (208) 336-9880 Cell: (208) 631-2481
STATEMENT OF PURPOSE/FISCAL NOTE S1329