The Tennessee Court of Appeals affirmed a trial court’s ruling that TennCare’s claim for reimbursement of amounts it paid for a decedent’s long-term care services from a revocable trust created by the decedent during her lifetime was not barred by the trust’s spendthrift provision. In addition, it held that the decedent had not created a life estate in real property held by the trust that prevented TennCare from reaching it. In re Estate of Thompson, No. M2024-01564-COA-R3-CV, 2025 WL 2682663 (Tenn. Ct. App. Sept. 19, 2025).
In 2016, Vivian Thompson created a revocable trust containing a spendthrift provision and transferred real property to it using a quitclaim deed. She later received long-term care services for which TennCare, Tennessee’s Medicaid program, paid $231,416.24. After Vivian’s death in 2023, TennCare filed a claim against her estate pursuant to section 71-5-116(c) of the Tennessee Code Annotated seeking reimbursement of that amount.
The estate filed an exception to TennCare’s claim, arguing that its claim was barred by spendthrift language in the revocable trust. The estate argued that TennCare’s claim was barred by the statute of limitations set forth in section 35-15-505(g)(1) of the Tennessee Code Annotated, which applied to transfers to spendthrift trusts. In addition, the estate asserted that language in the trust and deed created a life estate in the property that was extinguished at Vivian’s death, preventing TennCare from seizing it. The parties stipulated that the amount TennCare sought was a valid claim against the estate. The trial court denied the estate’s exception, and the estate appealed.
The Tennessee Court of Appeals reviewed the trial court’s conclusions of law de novo. It rejected the estate’s argument that because Vivian’s revocable trust contained a spendthrift provision, it was barred by the limitations period in section 35-15-505(g)(1). The court noted that the comments to that section clarified that it created a limitations period relative to contesting the validity of transfers to spendthrift trusts. In the present case, TennCare did not contest the validity of the 2016 transfer of real property to the revocable trust; to the contrary, the parties had stipulated that TennCare was a creditor with a valid claim. Therefore, TennCare’s reimbursement claim was not barred by the limitations period in section 35-15-505(g)(1).
The court determined that the property held by the revocable trust was instead subject to claims by Vivian’s creditors under section 35-15-505(a)(6) of the Tennessee Code Annotated, which provides that at a settlor’s death, property held by a trust that was revocable immediately preceding the settlor’s death is subject to claims by the settlor’s creditors, whether or not the trust contained a spendthrift provision. Therefore, the real property held in the trust was subject to TennCare’s valid creditor’s claim despite the trust’s spendthrift language.
The court also disagreed with the estate’s contention that language in the trust and the quitclaim deed created a life estate in the real property held by the trust that was extinguished at Vivian’s death. The court determined that the language in the quitclaim deed did not create a life estate because the duration of the interest in the real property that the deed transferred was not measured by anyone’s life. The court further found that because the trust was revocable by Vivian, she could have transferred the property elsewhere during her life.
As a result, the court affirmed the trial court’s judgment and remanded the case for further proceedings consistent with its opinion.
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