Medicaid Estate Recovery Program And The Family Home

Medicaid is a federally funded program in which the government helps pay for the cost of medical care for disabled and elderly individuals.  To recoup some of the cost of this enormously expensive program, the federal government has created the Medicaid Estate Recovery Program (“Estate Recovery”) in which states are required to pursue reimbursement from the estates of individuals who received benefits during their lifetimes while over age 55.

In New York State an elderly individual can receive assistance paying for the cost of their medical care, particularly if they reside in a nursing home or are receiving assistance from a home health aide. Medicaid allows you to retain your primary residence while you are receiving benefits.  The rationale for this is that you may end up returning home after a stay in a nursing home or you may be receiving care at home from a home health aide.

Unfortunately, the Estate Recovery Program requires that states put a lien on any real property or co-op that remained in the recipient’s name if they needed nursing home care as well as an estate claim being placed on their probate estate. This essentially allows Medicaid to ask for reimbursement for services rendered to an individual upon their death.  The lien/claim must be paid before any leftover assets can be paid to the recipient’s beneficiaries (even if they had a will). An experienced estate planning or elder law attorney can protect against the financial harm that Estate Recovery can cause to their families.

It is possible to protect your family home by engage in asset protection planning.  A skilled estate planning and elder law attorney can assist you in establishing a Medicaid trust or asset protection trust.  This trust is established during your lifetime (ideally five (5) years before you require care) and your family home and any other significant assets will be transferred from your individual name into the name of the trust.  After this is done, anything in the trust will no longer be an asset of yours and cannot be considered so when you apply for Medicaid benefits and therefore will not be subject to Estate Recovery. Crucially, since New York, unlike most other states, only allows Medicaid to go after probate assets, by avoiding probate, you avoid Medicaid’s estate recovery.

The asset protection trust will allow you to continue to reside in the trust even though the trust is technically the new owner.  Further, depending upon how the trust is drafted, you can sell the home and purchase a new one (also titled in the name of the trust) and your trustees have the discretion to use the principal for the benefit of your chosen beneficiaries during your lifetime.  The trust will serve as an estate planning tool in that it directs how you would like the trust’s assets to be distributed upon your death.

Even if no asset protection planning was done prior to applying for Medicaid, there are exceptions to the estate recovery rules and estate recovery will not be pursued against the home:

  • The estate of a recipient with a surviving spouse will not be collected upon while they are still alive.
  • If a blind or disabled child lives in the home (even if they are adults).
  • It is possible to apply for “deferred recovery” if there are minor children residing in the home.
  • If the recipient owned the home jointly with a surviving sibling who resides in the home.
  • A surviving heir or beneficiary may also make a request for “undue hardship” within 30 days of receiving a notice of claim from Medicaid if the asset is the only income to the family because it is a family business with limited income or it’s a family farm OR the property is of modest value and is the surviving beneficiary’s primary residence.  However, undue hardship will not be granted simply so that a beneficiary can maintain a certain lifestyle.

The attorneys at the Law Offices of Roman Aminov, P.C. can assist you in asset protection planning as well as in applying for Medicaid benefits when the time comes. Call us today at 347-766-2685 to discuss your estate planning and asset protection goals.

This article is for educational purposes only - to provide you with general information, not to provide specific legal advice.  Use of this post does not create an attorney-client relationship and information contained herein should not be used as a substitute for competent legal advice from a licensed attorney in your state.


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