Medicaid Recovery: The Truth is… They Want all Funds Back
Medicaid recovery is a very real and incredibly unpleasant situation. Unfortunately, after an individual who received Medicaid benefits passes away, it is the state’s job to recover funds allocated for that person’s care. Most seniors who come to us want to avoid that situation entirely. Think about it. You have worked hard for a majority of your life and rather than being able to pass on property to future generations, those assets go right to the state. In this article we talk about the realities of Medicaid Recovery and what it means for your estate after you pass on.
How Medicaid recovery works
As most people know, the programs exists to help provide funds for individuals who require long term care. In practice, that sounds incredibly altruistic of the state to provide such a service. However, if you receive such benefits, upon your death, it now becomes the state’s responsibility to recover funds to offset the cost of any benefits you received.
The state must recover from the deceased’s probate estate (assets in the deceased’s name only).
What is an estate?
Any and all property or assets that transfer from the deceased beneficiary to their heirs through probate.
What property can the state recover?
It is up to the state if they decide to seek or defer recovery of an estate. The have the option to recover assets such as:
Living trust assets,
And Jointly held assets.
The last asset the state can grab… your home
In most cases of estate recovery, recipients have already spent down their liquid assets and the only remaining possession of value is an individual’s home. There are a few requirements that must be satisfied before you home can be recovered.
If you are receiving benefits and no one else is living in the home than a lien can be placed on your home. If the home sells, that income will be used to pay back any assistance you received. Additionally, that extra income means you are no longer eligible to receive Medicaid. You will then be required to use the remaining money to cover nursing home care until you meet eligibility requirements again.
They may not attempt to recover from the estate if:
You are under 55 years old,
A spouse is living in the home,
You have a disabled or bling child,
Your child is under 21 years old,
Or your sibling has equity interest in your home.
There are also other circumstances where they may not recover such as:
If the home is in an irrevocable trust,
Or if tenancy by entirely has been established (this allows spouses to jointly own property as a single entity),
Or if the house is in the spouse’s name only and the benefit recipient has relinquished all control.
Lastly, according the Michigan Department of Human Resources, they will not recover if:
The home has modest value meaning it is less than 50% of average market value for a home in that county.
They have established undue hardship. They estate subject to recovery is a primary income producing asset such as a business or farm and income is limited.
Note: If assets were diverted than one cannot qualify for undue hardship.
Since there are many rules and regulations surrounding Medicaid recovery, we recommend speaking with an elder law attorney or senior planning specialist to develop a plan to avoid this situation.
For more information: Contact Senior Care of Michigan below to speak with a Senior Planning Expert.