Federal law requires the state to attempt to recover the long-term care benefits from a Medicaid recipient’s estate after the individual’s death.  Medicaid applicants and those considering Medicaid for long-term care benefits should be aware that if steps aren’t taken to protect the individual’s home before he or she applies for Medicaid, the home may need to be sold to settle a Medicaid claim upon the individual’s death.

While Medicaid cannot recover for benefits provided when the recipient was under the age of 55 years except in very limited circumstances, for Medicaid recipients age 55 or older, states must seek recovery of payments from the individual’s estate for nursing facility services, home and community-based services, and related hospital and prescription drug services. States also have the option of recovering all Medicaid benefits from individuals over the age of 55 years, including costs for any medical care and not just long-term care benefits.

Exceptions to Be Aware Of

There are a few exceptions. The state cannot recover from the estate of a Medicaid recipient who has a spouse surviving him or her until after that surviving spouse passes away.  However, it is important to be aware that after the second spouse dies, the state may file a claim against the second spouse’s estate to recover money spent for the Medicaid recipient’s care. The state also cannot recover from the Medicaid recipient’s estate if the recipient had a child who is under age 21 or a child who is blind or disabled surviving him or her at the time of the recipient’s death.

Under New York’s Medicaid law, the term “estate” for the purposes of a recovery by Medicaid, means all real and personal property as well as other assets that pass under the terms of a valid Last Will or, if there is no Will, by “intestacy” upon the Medicaid recipient’s death. Therefore, property of the Medicaid recipient that is subject to recovery will be property that was held in the recipient’s name alone at death and is property for which a Surrogate’s Court proceeding must be commenced to transfer such property to the estate’s beneficiary(ies).[1]

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Expanded Estate Recovery

While states must attempt to recover funds from such Medicaid recipient’s “estate” as defined above, they also have the option of seeking recovery against property in which the recipient had an interest but which passes outside of probate or an estate administration proceeding. This is called “expanded” estate recovery. This includes jointly held assets, assets in a living trust, or life estates.  New York repealed “expanded” estate recovery and does not allow recovery against assets the recipient held jointly with right of survivorship, or transferred to a living trust, or in which the recipient retained a life estate.

Given that a New York Medicaid applicant may not have more than $15,900 in available resources and qualify for Medicaid in 2021, the only estate asset of substantial value that a Medicaid applicant may own at death is his or her home.  This is because the home is considered an “exempt” resource and does not count toward Medicaid eligibility.[2]

States that have not opted to enact expanded estate recovery may not make a claim against the Medicaid recipient’s home if it is not in his or her probate or intestate estate.  Therefore, it is critically important that planning is undertaken to protect the home from estate recovery before the individual submits an application for Medicaid benefits.  Furthermore, while there are options to transfer the home to certain persons or trusts immediately before a Medicaid application is submitted without creating a transfer penalty period, other options, including the transfer of the home to a Medicaid Asset Protection Trust, will create a transfer penalty.

How to Protect Your Home from Estate Recovery

Consult with an Elder Law attorney with expertise in Medicaid law and Medicaid planning to discuss your best options for protecting the family home from estate recovery as far in advance of submitting a Medicaid application as possible.

In addition to the right to recover from the estate of the Medicaid recipient, state Medicaid agencies may place a lien against the home owned by a Medicaid recipient during his or her life under several circumstances, including if she or he is considered “permanently absent” from the home because she or he resides in a medical facility.  However, the state cannot impose a lien if a spouse, a disabled or blind child, a child under age 21, or a sibling with an equity interest in the house is living there. Moreover, if the “permanently absent” individual returns home, the Medicaid lien dissolves.  If the home is transferred to a revocable living trust, it is open question whether Medicaid can place a lien against the home.

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Once a lien is placed on the property, if the property is sold while the Medicaid recipient is living, not only will the recipient cease to be eligible for Medicaid due to the cash from the sale, but the recipient would have to satisfy the lien by paying back the state for its coverage of care to date.  In some states, the lien may be removed upon the recipient’s death.  In other states, the state can collect on the lien after the Medicaid recipient dies. Check with an attorney knowledgeable about Medicaid in your locality to see how your local agency handles this.

Some children or relatives may also be able to protect a nursing home resident’s house if they qualify for an undue hardship waiver. For example, if a Medicaid recipient’s daughter took care of him before he entered the nursing home and she has no other permanent residence, she may be able to avoid a claim against his house after he dies. Consult with an elder law attorney at Pierro, Connor & Strauss to find out if the undue hardship waiver may be applicable to your or your family’s situation.

[1] A probate proceeding is commenced when an individual leaves a Last Will, and an estate administration proceeding is commenced when an individual dies “intestate” – meaning he or she left no Last Will.  In that case, the property passes to the individual’s heirs at law after the payment of debts, taxes and valid claims.

[2] It is important to be aware that the home is exempt from Medicaid eligibility, but only up to the home equity limit prescribed under the Medicaid rules, which equity limit in 2021 is currently $906,000 in New York State

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