Reimbursement for Medicaid Benefits From an Estate
Medicaid can provide benefits to people who have certain non-countable assets, such as a house or a car, even though selling those assets technically could allow an individual to pay for nursing care. The program then has the right to get reimbursed from the individual’s estate after they die, following federal policy. States handle the process of Medicaid estate recovery individually.
Estate recovery is subject to certain limits. A state can recover no more than the amount spent on the individual’s behalf once they turned 55. This claim does not have priority over the claims of other creditors of the estate, so the program will be reimbursed only if there is money remaining once other creditors have been paid. A state likely will try to recover Medicaid benefits for long-term care, and a state may try to recover standard Medicaid costs. If you are eligible for Medicaid, you should receive a notice from the state that discusses this process.
Recovering from the Estate
The definition of an estate may affect the types of property from which the state can collect reimbursement. In some states, the estate may be limited to the probate estate of the deceased individual, which contains assets that were owned by the decedent when they died and that do not have any future owner designated. In other states, the estate may be defined as any property that the decedent owned when they died, regardless of whether it passes through probate. If the state must proceed through the probate process, it will file a claim in probate court like any other creditor. If the state can access assets that were not included in probate, it must notify the decedent’s heirs by following the process provided by state law.
In certain situations, a state may attempt to get reimbursement for Medicaid benefits by placing a lien on real estate owned by the recipient during their lifetime. The state can collect on its lien when the property is sold, even if it is sold before the recipient’s death.
Avoiding Medicaid Reimbursement
Medicaid recipients may try to avoid Medicaid estate recovery by transferring their assets while they are still living. However, they should be careful of coverage penalties imposed if they give away assets for less than their fair market value in the five years leading up to their Medicaid application. An experienced attorney may be helpful in this situation.
Exemptions and Waivers
A state cannot get reimbursement for Medicaid benefits when the decedent’s spouse is still alive, or when the decedent has a child who is under 21, disabled, or blind. This remains true even if the spouse or child did not live with the decedent. If a sibling of the decedent lived in the home of the decedent for one year before the decedent was institutionalized, and they still live in the home and hold equity in it, the state cannot get reimbursement by collecting from the decedent’s home. A similar exception applies to a child who cared for the decedent, such that their care allowed the decedent to stay in the home longer than they could have otherwise. The child must have lived in the home until the decedent was institutionalized, and they must still live in the home.
If the decedent’s heirs can prove that it would create an undue hardship, a state may voluntarily waive its right to recover Medicaid benefits. This may happen if the heirs are struggling to make ends meet and have little or no sources of income beyond the decedent’s estate. In some cases, a state may waive estate recovery if it would not be cost-effective.
The state must provide notice of its right to reimbursement to the decedent’s heirs so that they can claim any applicable exemption or waiver.