How New York Medicaid Estate Recovery Can Reach Your Home After Death

New York's Medicaid program pays for much of the long-term care older adults in Queens and Brooklyn receive, whether in a nursing home or at home. The State is required to seek repayment of some of that spending through the Office of the Medicaid Inspector General. When families come to me with questions about a parent's house, I explain that Medicaid does not have one single recovery right but two, and which one applies depends on the kind of Medicaid the person received. A person who enters a nursing home on institutional Medicaid can face a lien on their home during their lifetime as well as a claim against their probate estate after death. A person who received any other kind of Medicaid, including home care, over the age of 55, faces only a claim against the estate, and only if the property passes through probate.

The first recovery right: a lien during life for nursing home residents

When a Medicaid recipient has been an inpatient of a nursing home or similar medical facility for at least six consecutive months and there is no reasonable expectation that they will return home, the State treats them as permanently institutionalized. At that point it may place a lien on the recipient's home, which is served on the recipient and filed with the County Clerk. The lien does not force a sale. If the recipient is discharged and returns home, the lien is released. If the recipient passes away with the lien still in place, the house becomes part of the estate and is pursued through estate recovery, as explained in the State's published guidance on real property liens. Permanently institutionalized recipients are also subject to the estate claim described below regardless of their age, so for this group both recovery rights are in play.

The law does not permit a lifetime lien in every case. No lien may be placed on the home while it is lawfully occupied by the recipient's spouse, by a child under 21, by a child of any age who is blind or disabled, or by a sibling who holds an equity interest in the home and lived there for at least one year immediately before the recipient entered the nursing home. That is why I advise families with a parent entering long-term nursing care to look closely at who is living in the house, because that often determines whether a lien can attach at all.

The second recovery right: a claim against the probate estate

For every other Medicaid recipient, including those who received home care, there is no lien during life. The State's only recovery right arises after death, and it applies to recipients who were 55 or older when the benefits were paid. Even then, the claim is made against the estate, and in New York that means the probate estate: property the recipient owned in their own name at death that passes under a will or by intestacy through the Surrogate's Court. A house held with a surviving joint owner, a house deeded years earlier with a retained life estate, property already transferred into an irrevocable trust, and accounts with a named beneficiary all pass outside of probate and are not reached by the claim. That is why I recommend that anyone receiving home care through Medicaid, or expecting to, review how the house is titled into a Medicaid Asset Protection Trust, since a home that does not need to pass through probate is generally beyond the reach of this claim.

Deferrals, exemptions, and undue hardship

Recovery is deferred where the recipient left a surviving spouse, a surviving child under 21, or a surviving child of any age who is certified blind or disabled. A deferral is a hold rather than a cancellation. Recovery may also be waived in whole or in part for undue hardship, such as where the property is of modest value and is the beneficiary's primary residence. Hardship will not be granted to maintain a lifestyle or where it results from planning transfers.

When the notice arrives

The first contact is usually a Notice of Intent to File a Claim with an Estate Questionnaire, sent to a beneficiary or the estate representative. It should be completed and returned even when the answers are mostly negative, because that is how a deferral, an exemption, or a hardship request gets on the record. The claim is against the estate, not the family, so children and the executor are not personally responsible for paying it out of their own funds. Medicaid is a preferred creditor, but it is paid after funeral expenses, the administrative costs of the estate including reasonable attorneys' fees, and federal liens. As I discussed in a prior article on the duties of an executor, paying valid claims before distributing anything to beneficiaries is part of the job, and distributing first is what creates personal exposure. Handled in the proper order, a Medicaid claim can be resolved as an ordinary part of settling the estate.

If your loved one left behind a home which needs to be protected from a Medicaid recovery claim, contact us today at (347) 766-2685 for a free phone consultation.

Contributed by Roman Aminov, Esq, a Queens estate attorney in New York City.