Ways to Avoid Medicaid Estate Recovery
Your mother is in a nursing home and has qualified for Medicaid. She’s been able to keep her home because it is an exempt asset, but what happens to the house after she is gone? What if it was your spouse on Medicaid and the state paid over $70,000 in benefits? Will they attempt to recover benefits upon your spouse’s death?
After a Medicaid recipient dies, the state has the right to recover any assets remaining to reimburse itself for Medicaid benefits paid out. This process is called estate recovery. Certainly, it makes sense from a public policy standpoint----if the state is going to help pay for a resident’s care while they are living, then the state should be reimbursed, as fully as possible, by any assets remaining at the resident’s death. But while this policy may make sense, families are never happy to learn that the state may put a lien on your/your parent’s home after your spouse/parent dies.
At one time, Kansas and Missouri were only pursuing certain real and personal property the Medicaid recipient had titled in their name, alone. But now both states are taking advantage of the Federal law’s expanded definition of “estate” that allows the states to recover most assets in which the Medicaid recipient has an ownership interest including jointly owned property, property held in trust, life estates, and life insurance proceeds. The states also have the right to recover assets conveyed at the Medicaid recipients’ death through transfer on death deeds or beneficiary designations.
The states are also now placing liens on the Medicaid recipient’s home. This is a way for the state to secure a debt against the Medicaid recipient’s property, meaning that the property can’t be sold or transferred until the lien is satisfied.
Fortunately, the state will not place a lien on the home if the Medicaid recipient’s spouse, minor child, or disabled child is still living in the home.
There are still, in certain circumstances, perfectly legal ways of avoiding estate recovery. For example, if a parent is a Medicaid recipient, and has a child with a qualifying disability, they may be able to give their home to that child penalty-free and avoid estate recovery at their death. Also, if they have a child who moved into their home with them and cared for them, and that care kept them out of a nursing home for at least two years, then the parent can transfer the home to that child, penalty-free, and avoid estate recovery. This is called the caretaker/child exemption.
There may also be other strategies to consider for avoiding estate recovery, but Medicaid estate recovery rules are complicated and vary from state to state. Be sure to consult with an attorney who specializes in elder law, if you are considering estate planning as a means of avoiding Medicaid estate recovery.