Unfortunately, Medicaid benefits are not always offered for “free.” Medicaid benefits are treated like an interest-free loan, and when the recipient leaves a nursing home or passes away, the government will try to be paid back what it spent on the recipient. Medicaid estate recovery is the government’s process for recouping some of its losses, if it can. 

Medicaid Estate Planning, Globe and Stethoscope

We have heard many horror stories of family members receiving a notice in the mail that the government would be forcing the sale of their recently deceased relative’s home because of the Medicaid benefits the relative received, and the family members often had no clue that could even happen. However, Medicaid estate recovery can only involve the recipient’s estate. The government cannot try and recover funds from the recipient’s family members. 

Medicaid Estate Recovery Process

For purposes of Medicaid estate recovery, the government uses the recipient’s estate as the court defines their estate and what is in it. Generally, a person’s estate is composed of all the money and other property owned by that person at death. When the government pursues Medicaid estate recovery from a recipient, they are making a claim against the recipient’s estate. This is a process in which any person or entity that believes they are owed money by the decedent makes a claim for that money before the decedent’s estate is distributed by the court. 

Since Medicaid benefits are like an interest-free loan, the government has to make a claim against the recipient’s estate to attempt to be paid back at least some of what it paid for the recipient’s care while the recipient was still alive. Estate recovery can apply to any Medicaid claims paid for nursing facility cost of care, related hospital expenses while residing in a nursing facility, personal care services, and prescription drugs. 

Medicaid estate recovery affects both the recipient and their loved ones. Estate recovery affects the recipient by potentially taking away some or all of their assets after the recipient has passed, and because of that, estate recovery also affects the recipient’s loved ones by reducing or completely taking away their possible inheritance. 

Circumstances When Medicaid Estate Recovery May Not Occur

There are limitations to what the government can attempt to use for Medicaid estate recovery within the recipient’s estate. The first limitation to Medicaid estate recovery is that the government cannot force the sale of the recipient’s home if, at the time of the recipient’s death:

  • Their spouse is still living, 
  • They have a child under the age of 21, 
  • They have a child that is permanently blind or disabled, or 
  • They have a sibling that co-owned the home with them and lived there for at least a year before the recipient left the home. However, this limitation defers the estate recovery rather than doing away with it entirely, so if the recipient’s spouse was living in the home when the recipient died, but the spouse died 2 years later, the government could pursue estate recovery against the house after the spouse’s passing. 
 

Medicaid estate recovery is completely waived if the total assets in the recipient’s estate are less than $5,000 or the total Medicaid benefits paid on behalf of the recipient are less than $3,000. 

Undue Hardship

Estate recovery can also be partially or completely waived because of an undue hardship. An undue hardship waiver must be filed within 60 days of the recipient’s death. In North Carolina, undue hardship exists in 2 circumstances: 

(1) when real or personal property included in the recipient’s estate is the sole source of income for a surviving heir, their spouse, and related family members in their household, and the gross income available to the surviving heir, their spouse, and related family members in their household is 200% below the poverty level; or 

(2) when estate recovery would result in the forced sale of the residence of a surviving heir who is living in and has continuously lived in the property since the recipient’s death, lived in the property for at least 12 months immediately prior to and on the date of the recipient’s death, and who would be unable to obtain an alternate residence because the gross income available to the surviving heir, their spouse, and related family members in their household is below 200% of the federal poverty level and assets are valued below $12,000.

 

While the thought of possibly having the government take your or a loved one’s home is stressful, there are various planning techniques to avoid this situation altogether. If you want to begin planning to receive Medicaid benefits or have a loved one receiving Medicaid benefits and want to minimize possible estate recovery, please give our office a call at 919-443-3035 or visit our website to schedule a free needs assessment call. 


 
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