MEDICAID WANTS EVERYTHING MY MOTHER OWNED
For many people, Medicaid is a lifeline. It provides health insurance to needy individuals and pays for many of the costs associated with long-term care – such as adult day care, home health care, assisted living residence, and nursing homes.
Medicaid is a welfare program. A person must be poor to receive Medicaid benefits. So, what I’m about to say may seem odd, but after a Medicaid beneficiary dies, Medicaid will seek estate recovery from the beneficiary’s estate. In other words, if the person did own anything at the time of death, the Medicaid office will place a lien on the estate, and the executor will be required to pay most – if not all – of the estate’s assets over the State in order to reimburse the Medicaid program.
How can someone own assets and be poor? If a person cannot have any – or practically any – assets in order for them to qualify for Medicaid, what assets could Medicaid possibly place a lien against?
There are different programs of Medicaid, and as I always tell people, when it comes to Medicaid and Medicaid planning, there is no one set of circumstances – everyone’s situation differs. I’ll provide two examples of how a person might qualify for Medicaid, yet have assets in his name at the time of death that could be subject to a Medicaid lien.
The first example involves a single man who continues to live at home but qualified for Medicaid in order to provide himself with health insurance and pay for the cost of the adult day care center that he attended; I’ll call him “Mark” for purposes of this article. Now, Mark might have received Medicaid benefits for years before his eventual death.
Medicaid might have paid tens of thousands of dollars for his care. But the whole time, Mark continued to live in his home and his home remained titled in his name. When Mark passed away, Medicaid would put a lien on his estate, which consisted almost entirely of his home. If Medicaid paid $70,000 for his care during his life, Medicaid will put a lien on his estate for $70,000.
When the executor of Mark’s estate sells his house, the executor must repay Medicaid that $70,000 after deducting certain expenses that have a priority over the Medicaid lien, such as funeral expenses and the executor’s commission. Since houses in this area are typically worth more than $70,000 (typically, much more), Medicaid will probably be repaid in full for the services that it paid for during Mark’s life.
A second example of a situation in which Medicaid could and may seek estate recovery involves a married couple. Assume that Mary and Robert are husband and wife. They own their home jointly. Robert enters a nursing home and qualifies for Medicaid. Robert lives in the nursing home for two years before he passes away. Robert’s name is never removed from the deed to the house.
In this situation, the house will pass automatically to Mary after Robert’s death; Mary is the surviving joint tenant. The deed to the house does not have to be re-drafted. Mary, automatically, owns the entire house.
But Robert had an interest in the house at the time of his death, and he was a recipient of benefits under the Medicaid program. Like Mark, Robert probably received tens of thousands of dollars in benefits during his life. Let’s assume that he received $100,000 in benefits from the Medicaid program during his life and that his interest in the marital home was worth $150,000.
Medicaid could place a lien on the house. Since Mary lives in the house, Medicaid won’t enforce the lien, meaning that Medicaid will not actively seek recovery from the home since the surviving spouse continues to live in the home, but a lien could be placed on the home and may be enforced at some time in the future.
There are methods that could be employed to avoid estate recovery in both of these situations. A problem often occurs because people mistakenly believe that after a family member has qualified for Medicaid, the family has nothing more to worry about. In some instances, that line of thinking is incorrect and can be quite costly.