Medicaid Estate Recovery and the Home

Jane Fearn-Zimmer explains Medicaid Estate Recovery and the Home

MLTSS Medicaid pays for long term care for individuals with low income (below $2,313 gross monthly in 2019) and low assets.

Post-mortem (after death) Medicaid liens protect the fiscal integrity of the MLTSS Medicaid program by attaching to property held by a Medicaid enrollee at death. In most cases, such Medicaid liens are imposed upon property held by a former Medicaid enrollee to recoup the cost of care and services provided to the enrollee after reaching the age of 55. After the death of the Medicaid beneficiary, the Medicaid estate recovery program collects on the Medicaid liens, with the lien proceeds being paid to the government.

In most cases, Medicaid liens attach only to property in which the Medicaid enrollee held an interest at the moment immediately before death. If the Medicaid enrollee retained no interest just before death, there is nothing subject to a Medicaid lien.

An important planning strategy is to remove the name of the future MLTSS Medicaid recipient from the title to valuable property, such as a home. If the future Medicaid recipient is married, often this property can be transferred to the healthy spouse without any Medicaid penalty period, even during the five year Medicaid look back period.

If the future Medicaid enrollee’s name is not removed from the property at the correct time, a Medicaid lien on real property can cloud title, accelerate a mortgage, and potentially place the property in foreclosure.  Even if the mortgage is not accelerated, the Medicaid lien must be paid before the real property can be sold, given away or refinanced.  Consequently, that is one reason why you should only trust your Medicaid application to an experienced Medicaid attorney, who can determine the best strategy to avoid a Medicaid lien.

Every case is different.  Irrevocable trusts will be suitable for some clients; others may be able to transfer the home without incurring a Medicaid penalty period, where there is a blind or disabled child, a sibling with an equity interest in the home, or, less frequently, to a caregiver child.  There are also some limited exceptions to Medicaid estate recovery.

The good news is that an experienced and knowledgeable elder law attorney can explain how to protect your home and your life savings, even if your loved one is already in long-term care.

Questions? Let Jane know.

Jane Fearn-Zimmer is a shareholder in the Elder and Disability LawTaxation, and Trusts and Estates Groups. She dedicates her practice to serving clients in the areas of elder and disability law, special needs planning, asset protection, tax and estate planning and estate administration. She also serves as Chair of the Elder & Disability Law section of the NJSBA.

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