States are advised to tell applicants about the potential for Medicaid estate recovery during the eligibility determination process. The State must establish procedures and criteria to waive recovery if it would cause undue hardship. States that have adopted the Uniform Probate Code are shown at: http://www.law.cornell.edu/uniform/probate.html. For example, see Roger, Schwartz, and Sabatino (November 1994); or Wilcox, M.D. Even when a state provides comprehensive estate recovery information at the most suitable time, people may be overwhelmed by the complexity of the decisions they must make during the application process, which may take place over a fairly short and emotionally difficult period of time. Planning Ahead with your Estate to Avoid Medicaid Estate Recovery. This may be one of your children or a professional. See TERMS Of USE for more information. This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply. It is up to each state to develop and disseminate information to help the public understand the rationale and necessity for Medicaid estate recovery, as well as the rights of both the State and the recipient. Fortunately, with enough advance planning, you can avoid this outcome. Center for Long-Term Care Financing at: http://www.centerltc.com/pubs/Nebraska.pdf. The survivors may either sell the home and use the proceeds to satisfy the Medicaid claim or, if they wish to keep the home in the family, satisfy the claim with their own personal funds. The ownership of the home is not going to prevent you from gaining Medicaid eligibility if you need long-term care, but Medicaid recovery efforts can be initiated after your passing. (April 1998). (August 1995). Since applicants must meet an income and resource requirement to qualify for Medicaid, it’s possible that they won’t have many assets for Medicaid to take. The majority of states recover spending for more than the minimum of long-term care and related expenses.19. Assets in an irrevocable trust are not owned in your name, and therefore, are not part of the probated estate. Home protection trusts are irrevocable trusts that are designed to prevent losses if you have to get Medicaid to help you to pay for long-term care. Again, reports on specific state practices are inconsistent. The Gerontologist Vol. For example, compare Table 2 in Sabatino and Wood (1996) to Table 4 of the 2002 report of the Pennsylvania Medicaid Estate Recovery Work Group. We recommend you consult a lawyer or other appropriate professional if you want legal, business or tax advice. By thinking ahead, seniors receiving Medicaid benefits can avoid many of the pitfalls of our entitlements system and pass on their estates to loved ones. Partnership Insurance: An Innovation to Meet Long-Term Care Financing needs in an Era of Federal Minimalism. A description of all OBRA ‘93 asset transfer provisions and discussion of their implementation can be found in Burwell, B. and Crown, W.H. Since the beginning of the Medicaid program in 1965, states have been permitted to recover from the estates of deceased Medicaid recipients who were over age 65 when they received benefits and who had no surviving spouse, minor child, or adult disabled child. Elder Care Direction has a team of professionals who help older adults to plan according to their unique needs. Surviving child or children under age 21. For many seniors, Medicaid provides them with the life-saving nursing home and in-home nursing care they need to live comfortable, dignified lives. A home protection trust is different than the common revocable living trust. Through this program, the government may force your home to be sold so that it can recoup some of its money. and Burke, C.E. Several surveys that examined how individual states implement the estate recovery mandate yielded inconsistent findings when states were queried on whether they used a narrow or broad definition of estate, which shows how difficult it is to get a clear picture of this issue. If you give your home to your children, you will not qualify for Medicaid for an extensive period of time and will have to pay for your nursing home care during the penalty period. For example, they may waive recovery when the recovery effort itself would be costly because asset ownership is complicated or legally ambiguous, or the asset is hard to reach for some other reason. See especially Section 3810.G. The MEDSTAT Group, Cambridge, Massachusetts. States can waive estate recovery when it is not cost-effective, as defined by the State and made public through their official State Medicaid plan.20 How states interpret the Federal guidance with respect to this issue varies. Audit Report Number A-05-86-60249. The home is considered to be part of the recoverable estate unless it is protected for the spouse or certain other close relatives, or is conveyed outside of the State’s definition of “estate” (e.g., through a life estate). Sabatino, C.P. What Is the “Death Tax” and How Does It Work? Specific Federal guidance is provided on recoveries when recipients are enrolled in capitated plans where Medicaid spending is not directly tied to the cost of services provided. Federal guidance on this provision is available at: http://www.cms.hhs.gov/medicaid/eligibility/elig0501.pdf. This policy brief was prepared under contract #HHS-100-03-0022 between the U.S. Department of Health and Human Services (HHS), Office of Disability, Aging and Long-Term Care Policy (DALTCP) and Thomson/MEDSTAT. Evidence on whether these plans really produce Medicaid savings in the states that have implemented them is preliminary but positive. Reader®, Disability, Aging and Long-Term Care Research. For individuals age 55 or older, states are required to 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. When home equity becomes part of the estate, it is subject to Medicaid estate recovery. Federal policy defers to states regarding how they track or monitor assets that pass to protected relatives in cases where the State retains its right to future recoveries from Medicaid recipients’ survivors. Further impetus for obtaining professional advance planning assistance is provided by the complex tax implications of financial decisions and the natural desire to leave a financial legacy to loved ones. The option to disregard assets from eligibility is based on section 1902(r)(2) of the Social Security Act. In the case of the former home of the recipient, when a sibling with an equity interest in the home has lived in the home for at least 1 year immediately before the deceased Medicaid recipient was institutionalized and has lawfully resided in the home continuously since the date of the recipient's admission. TEFRA or “pre-death” liens are permitted under section 1917(a) of the Social Security Act. In December 2000, over 78,000 long-term care insurance policies were in force in the four states included in the Partnership for Long Term Care At that point in time, only 810 policy holders -- less than 1% -- had ever qualified for benefits. A number of states go beyond the Federal guidelines for waiving or deferring recovery. Retirement is increasingly financed by personal savings, as defined-benefit pension programs are replaced by defined-contribution programs such as IRA and 401(k) savings plans. US Department of Health and Human Services, Office of Inspector General, Office of Analysis and Inspections. (1986). See Texas estate recovery guidelines proposed on January 26, 2004 at: http://www.hhsc.state.tx.us/medicaid/EstateRecovery/Framework.html. Further, evidence is lacking on what types of assets are included under the broad definition of estate in those states that have elected to extend their recovery efforts beyond the probate estate. These new features would complement other incentives for buying long-term care insurance -- e.g., more and better long-term care choices; avoiding the need for Medicaid assistance or being a burden on one’s children; and tax advantages or credits on Federal and some state income tax. The program is jointly funded by states and the federal government and is administered by the states. A later study18 reported that 30 of 48 responding states used the minimum definition. See page 17. The 1965 Medicaid law also gave states permission to impose liens on property in the estates of deceased Medicaid recipients. States use one of two approaches in determining the amount of assets protected: either the “dollar for dollar” approach in which the value of assets protected depends on the value of the insurance benefits paid out, or the “total assets” approach which protects all assets but only for persons with state-defined comprehensive insurance coverage. Under an irrevocable trust, sometimes called a Medicaid trust in these types of situations, the trust is managed by a spouse, child, or sibling and will pass on to this individual after passing. The easiest way to avoid Medicaid estate recovery is to not hold assets when you die. Here are Three Ways to Protect Your House From Medicaid Estate Recovery: 1. For example, compare Table 6 in Sabatino and Wood (1996) to the two 1988 companion studies by the North Carolina Department of Health and Human Services, Long-Term Care Policy Office: Comparing State Medicaid Recovery Efforts at: http://www.dhhs.state.nc.us/aging/estate.htm - 6 and State Medicaid Estate Recovery Programs at: http://www.longtermcarelink.net/reference/ref_medicaid_recovery.html.