By Ross T. Andrews
Federal law requires all states to have an “estate recovery” program as a part of their Medicaid administration regime. The purpose of estate recovery for Medicaid recipients is to reimburse the state for the care that has been paid for by Medicaid. When a recipient of Medicaid passes, the administering state may attempt to reimburse themselves by becoming a debtor of the recipient’s estate. However, estate recovery is only triggered in certain contexts. First, a Medicaid recipient will create a “debt” subject to estate recovery when the recipient is 55 years of age or older, or second, when the recipient is younger than 55 who is a resident of a nursing facility, intermediate care facility, who “cannot reasonably be expected to be discharged and return to the individual’s home.”
The first scenario in which estate recovery can be triggered (anyone over age 55) has significant consequences for those who are considering any sort of advanced planning in order to obtain Medicaid eligibility to cover Nursing Home costs. For purposes of estate recovery in Iowa, a recipient’s “estate” is “any real property, personal property, or other asset in which the recipient . . . had any legal title or interest at the time of the recipient’s . . . death, to the extent of such interests, including but not limited to interests in jointly held property, retained life estates, and interests in trusts.” Does this mean that Medicaid will raid your estate upon death, subsequently leaving your family with nothing or even taking away a house from a surviving spouse? Not necessarily. Estate recovery for the recipient’s estate is “waived” when such recovery would result in a reduction in the amount received from that estate by a surviving spouse, a surviving child under the age of 21 or who is otherwise blind, or permanently and totally disabled.
However, not all individuals who die as recipients of Medicaid meet that exception, as many will have already been widowed or don’t have children that currently meet the criteria for estate recovery waiver. This poses problems for those who are Medicaid recipients who may own significant assets that are “exempt” for purposes of qualifying for Medicaid. This can be especially painful when the asset at issue is a family home. For example, if a Medicaid recipient is in a nursing home for 24 months with Medicaid spending on average $5000 per month, the Medicaid recipient will create a “debt” of $120,000 that Medicaid may try to recover from the recipient’s estate. Considering that those receiving nursing facility Medicaid will need to meet strict financial requirements, there will almost always be very little in liquid resources to satisfy the Medicaid debt. Therefore, the only resources for Medicaid to recover against will be resources “exempt” for purposes of qualifying for Medicaid such as a house or vehicle.
For those who are doing advanced planning for the possibility of Medicaid paying for long-term nursing care in the future, understanding the implications of estate recovery is essential to formulating a plan that will protect your family’s assets. While estate recovery is often unnerving to Medicaid applicants and their families, there are certain planning strategies that can protect your family’s assets Our attorneys can advise you as to what steps can be taken and how it will protect your estate from the tentacles of Medicaid Estate Recovery.
Disclaimer: These materials have been prepared by Hoefer Flaming PLLC for informational and educational purposes and do not constitute legal advice. This information is not intended to create, and receipt of it does not constitute, a lawyer-client relationship. You should not act upon this information without seeking advice from a lawyer licensed in your own jurisdiction.