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Factual Background:

On June 11, 1979 Leonilda Hayden executed a Quit Claim Deed conveying real property in Maryland Heights to herself “for and during her natural life, with full power in her to sell, mortgage or lease the fee simple title, but with remainder as to any part undisposed of to Suazanne Kateman, Phyliss Audrain, Mary Ann Prueitt and Kenneth Hayden, and to the heirs and assigns of said remaindermen forever.”  From 2003 to 2005 Leonilda Hayden applied for and received Medicaid through the Department of Social Services.  In 2005 Leonilda Hayden died without having exercised her power of sale under the 1979 deed.  After her death the Department of Social Services filed a petition for issuance of letters testamentary or of administration, as well as a claim against the estate for all Medicaid benefits paid by the Department to the decedent.  The appointed personal representative of the estate filed a petition seeking to take charge and sell the Maryland Heights property and an action in accounting to take all proceeds therefrom and bring it into the estate to satisfy the Department’s claim.  Drumm Jr., J., granted the personal representative’s petition to sell the property, holding that the transfer of the property to the remaindermen was a recoverable transfer which could be brought back into the decedent’s estate.  The remaindermen appealed.

On Appeal:

Where a decedent holds a life estate with the power to revoke, the life estate is subject to satisfaction of the decedent’s debts immediately prior to death, and therefore constitutes a transfer which may be recovered to satisfy creditors claims.  However, a life estate with mere power of disposition is not so subject to revocation.

Rationale:

RSMo. §461.300.1 provides that a transfers of a decedent’s property may be recovered by the personal representative of the estate to the extent necessary to discharge claims remaining unpaid after application of the decedent’s estate.  This is a “recoverable transfer”.  RSMo. §461.300.10(4) defines a “recoverable transfer” as a non-probate transfer of a decedent’s property and any other transfer of a decedent’s property other than the administration of the decedent’s probate estate that was subject to satisfaction of the decedent’s debts immediately prior to death.  As a result, a “recoverable transfer” is not limited to non-probate transfer listed in RSMo. §461.300.8 or by the exclusions to non-probate transfers listed under RSMo. §461.005(7).  Therefore, a recoverable transfer includes both non-probate transfers, as well as those transfers which were subject to satisfaction of the decedent’s debts.  The grant of a remainder to a remainderman constitutes a “transfer” and is therefore subject to the revocable transfer statute, additionally, the form of life estate granted here constitutes a valuable interest in property which is subject to seizure by creditors.  By granting herself a life estate with the power of disposition, the decedent provided her remaindermen with a vested defeasible remainder which could be destroyed by any sale, either voluntary or involuntary, during the decedent’s life.  Therefore, decedent’s life estate was subject to satisfaction of her debts immediately prior to her death, and therefore meets the definition of “revocable transfer” in §461.300.10(4).