If you’ve ever owned a home in Mississippi, you are probably familiar with the concept of homestead exemption, if for no other reason than to reduce the amount of ad valorum (property) taxes you pay each year. While filing for the homestead exemption in Mississippi does provide the benefit of reducing these taxes, its main function is to protect families from losing their homes to creditors.[1] The 2011 Court of Appeals of Mississippi case of Estate of Darby v. Stinson was a landmark case for Mississippi, holding that homestead property passing to a decedent’s surviving spouse, children, or grandchildren passed outside of the decedent’s estate free from the decedent’s debts, including the Division of Medicaid’s claims for estate recovery that I discussed previously.[2]
Mississippi Homestead Generally
The Mississippi homestead statute provides that citizens of Mississippi are entitled to hold the land and buildings they own and occupy as a residence exempt from seizure or sale.[3] Generally, this protection is limited to 160 acres or a value of $75,000.[4] The value of the exemption is determined by deducting existing encumbrances on the property, including taxes, from the actual value of the property.[5] Separate from the homestead exemption, individuals over the age of 70 are provided with an exemption of $50,000, which can be used to protect any property from seizure. They may allocate this additional exemption amount to their homestead, such that a total value of $125,000 can be protected.
Only one homestead exemption can be applied to a single residence, regardless of how many individual debtors reside therein, meaning no double exemption for spouses.[6] Married individuals, widows, and widowers, over the age of 60 who were previously residing in homestead property, do not lose the protection because they are no longer living in the residence.[7] Otherwise, where a debtor ceases to reside on homestead property, the homestead loses the exemption unless the removal of the debtor is temporary due to some casualty or necessity and the debtor intends to reoccupy it as soon as the cause of the absence is remedied.[8] Where a married individual owns homestead property and lives in such property with their spouse, the property cannot be sold or encumbered by the owner without the consent of the owner’s spouse or an attorney in fact for the spouse (other than the other spouse as agent).[9]
Estate of Darby v. Stinson
Arlyn Darby died in 2009 while a resident of the Sardis Community Nursing Home. During his residence at the nursing home, Mr. Darby received Medicaid benefits. Mr. Darby owned a house and a small amount of tangible personal property which were devised to his children and one grandchild. The value of the homestead did not exceed $75,000 and the value of the personal property did not exceed $10,000.[10]
The Division of Medicaid (“Division”) attempted to enforce estate recovery by filling a probate claim against Mr. Darby’s estate for approximately $123,000, which represented the total amount of Medicaid benefits paid for Mr. Darby’s medical care after he attained the age of 55. Mr. Darby’s daughter and the executrix of his estate, Linda Darby Stinson (“Stinson”), filed an objection to the claim which argued that the property was exempt and not subject to Medicaid’s claim. Following the Division’s response, Stinson filed a motion for summary judgment in which she alleged that because the property was exempt from the claims of creditors under the Mississippi homestead statute, it passed outside of the estate and therefore, was not subject to Medicaid’s claim. In response, the Division argued that the property was not exempt, or even if it was exempt because of homestead protection, that Stinson had waived Mr. Darby’s homestead exemption by execution of the contract for Medicaid benefits on his behalf. The chancery court granted Stinson’s motion and the Division appealed.
The court began by noting that when the Mississippi Legislature enacted its estate recovery provisions, it chose not to expand the definition of estate (as discussed in my prior article).[11] Thus, the Division was limited to recovering from amounts included in Mr. Darby’s probate estate alone. Neither party disputed that Mr. Darby’s real property qualified as his homestead exemption under Miss. Code Ann. § 85-3-21, thus the question became whether homestead property passed as a part of Mr. Daby’s probate estate.
The court then noted that the Mississippi Supreme Court has held that exempt property descends directly by statute and is not considered part of a decedent’s probate estate, regardless of whether the estate is solvent or insolvent.[12] The court next looked to whom such exempt property descends. Under Mississippi statute, exempt property passes on the death of the husband or wife owning it to the survivor of them and the children and grandchildren of the decedent.[13] The court stated that the Mississippi Supreme Court has interpreted the relevant statute to mean that those entitled to inherit this exempt property, including spouse, children and grandchildren, do so in fee simple free of the decedent’s debts.[14] Next, the court looked at Miss. Code Ann. § 91-1-21, which similarly provides that where there is a surviving spouse, children, or grandchildren, exempt property is not liable for the decedent’s debts. Again, the court noted that the Mississippi Supreme Court has held that the language of this statute continues a decedent’s homestead exemption for their surviving spouse, children, or grandchildren.[15]
The Division raised an argument that the broad homestead exemption descent statute coupled with a narrow definition of estate will limit the effectiveness of the estate recovery act. However, the court responded by concluding that the relevant statutes were plain and unambiguous, and therefore it refused to engage in statutory interpretation. Accordingly, the court held that under the unambiguous language of the statutes, as well as relevant case law, Mr. Darby’s exempted homestead passed from Mr. Darby to his children and grandchildren free of his debts. As such, the Division was not entitled to seek estate recovery against the property.
Finally, the court considered the Division’s argument that Stinson waived the exemption by entering into a contractual relationship with Medicaid on Mr. Darby’s behalf in order for him to become eligible for benefits. The Division claimed that language in the contract which read “an estate consists of real & personal property” waived Mr. Darby’s right to claim the homestead exemption. Before beginning its analysis, the court found that there is a general presumption against the finding of a waiver, and the party asserting the waiver bears a heavy burden of proof.[16]
The court looked at two factors: (1) knowledge of the waiver, and (2) intent to waive the exemption. In doing so, the court found no substantial evidence to suggest that Mr. Darby had any knowledge of the existence or significance of his right to waive the homestead exemption. Similarly, the court found no evidence that Mr. Darby intended to waive any of his rights. Moreover, the court noted that the language of the contract did nothing to state, or even suggest, that it took precedence over the homestead exemption statute nor did the language within the contract adopt the specific language of the federal statute to affirmatively include non-probate assets within the estate. The court concluded that by entering into the contract, Mr. Darby simply acknowledged the Division as a creditor of his estate. Unfortunately for the Division, Mr. Darby’s estate had no property against which Medicaid could recover. Accordingly, the court affirmed the chancery court’s opinion.
Following Actions by the Division
After losing at the Court of Appeals level, the Division attempted to appeal to the Mississippi Supreme Court; however, certiorari was denied. This did not stop the Division from attempting to protect its right to estate recovery. According to a 2015 Opinion Letter from the Mississippi Office of Attorney General, after the Darby opinion, the Division revised the language in its Medicaid contract to include the following language:[17]
“An estate consists of real and personal property. I understand that homestead property is in many cases protected from the claims of creditors and exempt from judicial sale and that, by signing this contract, I voluntarily give up my right to this protection for this property with respect to claims based upon this contract.”
In the opinion, the Attorney General’s Office concluded that the Division did not have the authority to require the waiver and that the homestead exemption could not be waived, because to do so would defeat the public policy of the statute and would not comply with the statutory requirements of Miss. Code Ann. § 89-1-29.
Conclusion
The Darby case was a huge win for Mississippi Medicaid beneficiaries. It ensures that the most valuable excluded asset for purposes of Medicaid eligibility owned by most individuals receives additional protection from the Division’s estate recovery process. To receive this additional protection, the Medicaid beneficiary should ensure that a proper homestead election has been made, and that their spouse, children, or grandchildren are to be the recipients of the homestead property upon their death.
This additional protection likely extends even further in practice than specifically provided by the case. Recall that Mr. Darby’s homestead property did not exceed the value of $75,000, which is the maximum value protected by the Mississippi homestead statute. However, with the increase in home value after the Covid-19 pandemic, this limit almost certainly will not protect nearly as many homes as it used to. Theoretically, the Division could possibly seek to enforce estate recovery against the excess value of the Medicaid Beneficiary’s home.[18] Fortunately, it would seem that once sufficient evidence is provided to the Division that real property is subject to a homestead exemption, they typically forgo any attempt to enforce estate recovery against such property (regardless of value).
[1] Hinds v. Morgan, 75 Miss. 509, 23 So. 35 (1898).
[2] Estate of Darby v. Stinson, 2011 WL 590868 (Miss. Ct. App. 2011); Devin Mills, “Mississippi Medicaid Estate Recovery” (October 11, 2023), https://esapllc.com/mississippi-medicaid-estate-recovery-2023/.
[3] Miss. Code Ann. § 85-3-21.
[4] Id.
[5] Id.
[6] In re Pace, 521 BR 124, 132 (Bankr. ND Miss. 2014).
[7] Id.
[8] Miss. Code Ann. § 85-3-43.
[9] Miss. Code Ann. § 89-1-29.
[10] Homestead property is not the only property which is exempt from seizure. See Miss. Code Ann. § 85-3-1, which provides a $10,000 exemption for certain tangible personal property.
[11] Miss. Code Ann. § 43-13-317.
[12] De Baum v. Hulett Undertaking Co., 169 Miss. 488, 153 So. 513 (1934).
[13] Miss. Code Ann. § 91-1-19.
[14] Weaver v. Blackburn, 294 So. 2d 786 (Miss. 1974).
[15] Mem’l Hosp. at Gulfport v. Franzke, 634 So.2d 117, 118 (Miss.1994).
[16] Walker v. J.C. Bradford & Co., 938 F.2d 575, 577 (5th Cir.1991)
[17] Mississippi AGO No. 2015-304 (Dec. 23, 2015).
[18] See Miss. Code Ann. §§ 85-3-35 and 85-3-37.
