Federal law requires each state to attempt to recover long-term care benefits from Medicaid recipient’s estates after their death. This is known as Medicaid estate recovery.
If a Medicaid recipient had failed to protect their house, it may need to be sold to settle the claim.
Who Does the Medicaid Estate Recovery Program (MERP) Affect?
For Medicaid recipients ages 55 or older, states must seek recovery of payments from their estate for the following:
- Nursing facility services
- Home and community-based services
- Related hospital and prescription drug services
States may also recover costs for any medical care covered by Medicaid, not just the cost of long-term care.
Medicaid Estate Recovery Exemptions
There are a few exceptions regarding when the state can recover through MERP. These include the following:
- If the Medicaid recipient has a surviving spouse, the state can’t recover from the estate until after that spouse passes away. After the spouse dies, the state may seek to recover any money spent on the Medicaid recipient’s care from the estate.
- The state can’t recover from the estate if the Medicaid recipient has a surviving child under age 21.
- The state also can’t recover from the estate if the recipient has a surviving child who is blind or disabled.
States must attempt to recover funds from the Medicaid recipient’s probate estate (property held only in the recipient’s name). Securing Medicaid benefits requires that the recipient have minimal assets. So, their home is the only probate property of substantial value that a Medicaid recipient is likely to own at death.
Expanded Estate Recovery
Note that some states also seek recovery against property in which the Medicaid recipient had an interest but that passes outside of probate. This is called “expanded” estate recovery and may include jointly held assets, assets in a living trust, or life estates.
(States that do not use expanded estate recovery can’t claim a Medicaid recipient’s home if it is not in their probate estate.)
In addition to the right to recover from the estate of the Medicaid beneficiary, state Medicaid agencies may place a lien on real estate owned by a Medicaid beneficiary during their lifetime (unless certain dependent relatives live in the property).
What Is a Lien?
If Medicaid places a lien on your home, it means that Medicaid has a legal claim to that piece of property. In other words, the state Medicaid agency can use your home as collateral if the estate cannot pay the costs of the Medicaid recipient’s care.
The state can’t 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.
If a lien is placed on the Medicaid recipient’s property and sold while the recipient is alive, they may no longer qualify for Medicaid. This would be the case if, for example, the proceeds from the home’s sale exceeded the Medicaid asset limits in the recipient’s state.
The beneficiary also 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 beneficiary’s death. In others, the state can collect the lien after the Medicaid recipient dies. Check with your attorney to see how your local agency handles this.
How to Avoid Medicaid Estate Recovery
There are some circumstances under which the value of a house can be protected from Medicaid recovery:
- When the home is in the spouse’s name, and the Medicaid recipient has relinquished their interest
- If the house is in an irrevocable trust
- When some children or relatives of the Medicaid recipient 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 the daughter has no other permanent residence, she may be able to avoid a claim against his house after he dies. Be sure to speak with your attorney to determine whether the undue hardship waiver may apply.
Medicaid estate recovery varies by state and can be complicated to navigate under the best of circumstances. Find a qualified attorney in your area today to help you make decisions that will suit your unique situation.
This article is for informational purposes only and shall not be construed as legal advice. No attorney-client relationship between the reader and Brennan & Rogers, PLLC, or its attorneys is intended. This article should not be used as a substitute for legal advice. Laws may vary from state to state, and the educational materials found in this article may not apply in all jurisdictions. Brennan & Rogers, PLLC | 279 York Street, York, ME 03909 | 207-361-4680 | firstname.lastname@example.org