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What is Medicaid’s Estate Recovery Program?

Posted on September 29, 2023


After becoming incapacitated, older adults often require assistance in covering the high expenses of continued care. The mounting bills can be daunting, and being approved for Medicaid can bring significant relief. However, it’s essential to be mindful of a possible trap ahead of time. Although Medicaid covers medical expenses, states have the option to recoup their payments by selling off your assets after death.

If you haven’t planned effectively for your long-term care, you can get caught by Medicaid’s estate recovery program. It is critical to seek the help of a skilled medicaid planning lawyer. They can assist you in developing a Medicaid planning strategy that aligns with your long-term care goals and financial situation. Speak with an experienced Long Island Medicaid planning attorney today by contacting Schlessel Law PLLC at (516) 574-9630.

Here’s what you need to know.

Defining the Estate

Your estate includes any assets that you own at the time of your death. That can include real estate, bank accounts, investment accounts, and retirement accounts. Medicaid cannot touch these assets until you die. There is also a spousal impoverishment provision that protects up to $130,380 (as of 2022) of your assets to care for your spouse if necessary.

Medicaid can also file a lien on your house at the point that you are institutionalized and are unlikely to return home, but cannot seize or repossess the house if your spouse, a child under 21, a blind child of any age, a disabled child of any age, an adult child of any age who lived in the home for at least two years before you are institutionalized who provided care and has lawfully resided in the home continuously since that time, or a sibling with an equity interest in the home lives there and has for more than one year prior to your entry into the nursing home. The lien can be removed if you sell the house and use the proceeds or part of the proceeds to reimburse Medicaid. 

Certain estate planning measures can protect some portions of your estate from the Medicaid clawback, but you’d need to engage in your estate planning early, ideally long before you might ever apply to Medicaid for help with your long-term care needs since there is a 5-year look-back period. Certain long-term care plans may be able to spare you the need to use Medicaid entirely. 

New York Medicaid Estate Recovery Exemptions And Limitations Description
Age Limitation Medicaid recovery for those 55+ receiving Medicaid or institutionalized. No recovery for those under 55.
Exempted Assets After Probate Certain assets exempted after probate, including trust-intended assets, life insurance, jointly-owned accounts, retirement payouts, IRAs, joint real estate, and more.
Family Situation Impact Recovery depends on family situation: surviving spouse, child under 21, or child with a permanent disability may prevent recovery.
Expanding Definitions of Medicaid Beneficiary’s Estate Changes allow broader estate definitions, possibly including the home, even if the beneficiary is married.

But Medicaid is a needs-based program!

Correct. Many who need Medicaid to pay for their nursing home care do not have many assets, to begin with. However, during the application process, your primary residence doesn’t count as one of your assets if a spouse or the individuals listed above are living at the property. The home could be worth a considerable sum, but if all of the other income and assets line up with Medicaid’s guidelines you can still get Medicaid.

Nevertheless, the law is well aware the asset exists and thus will try to recoup whatever they can against this asset, especially here in New York where the median house price, statewide, is $400,158. Here on Long Island, the price tag is even higher, at $623,000.

Estate planning attorney on Long Island

Estate recovery only applies to certain Medicaid benefits.

Medicaid can only use estate recovery when:

  • You were age 55 or older when receiving Medicaid benefits; or
  • You are an individual at any age who has been permanently institutionalized.

It is seen as a loan that is used for your long-term services and support.

You are not subject to estate recovery if you qualify for Medicare under the following programs:

  • Qualified Medicare Beneficiary (QMB)
  • Specified Low-Income Beneficiary (SLMB)
  • Qualifying Individual (QI) 
  • Qualified Working Disabled Individual (QDWI)

It can be very beneficial to have an attorney looking out for your interests or your loved one’s interests if you are applying for Medicaid because there are steps that we can take with your application which might allow you to qualify for one of these programs even if you aren’t sure whether you can or not. 

Medicaid Estate Recovery New York

Medicaid imposes strict eligibility criteria, evaluating both your existing assets and certain past financial decisions. It includes a provision that allows the state of New York to recover expenses by claiming assets from your estate after your passing.

If you’re 55 years old or older, or if you’ve been a permanent resident in a medical institution and received Medicaid benefits, there’s a chance that your assets could be subject to estate recovery after your passing. But if you’re 54 years old or younger and received Medicaid coverage for purposes other than a nursing home stay, estate recovery does not apply to you. However, irrespective of your age, if Medicaid covered the costs of a nursing home stay, the potential for recovering funds from your estate remains a consideration.

The state has the authority to seek reimbursement for any healthcare program costs, which may include:

  • Community services
  • Hospital in-patient treatment
  • In-home care
  • Nursing home stays
  • Prescription drug costs

Given that the family home is often the primary asset owned by a Medicaid recipient that could substantially cover medical expenses, the estate recovery process may involve the appropriation and sale of your residence. To shield your acquired assets from such a devastating loss for your family, it is recommended to create an estate plan that safeguards your lifetime achievements.

Navigating Medicaid estate recovery in New York can be complex, but a skilled Long Island Medicaid planning attorney can be your trusted guide through the process. At Schlessel Law PLLC, our attorneys understand the intricacies of estate recovery and can work tirelessly to protect your assets. We can help you develop a comprehensive plan to safeguard your estate while still qualifying for Medicaid benefits. Contact us today to start your journey towards comprehensive Medicaid estate planning.

Medicaid Trust New York

Medicaid Trust, also known as Irrevocable Income Only Trust or Medicaid Asset Protection Trust, is used to safeguard assets and help people qualify for Medicaid long-term care. To safeguard assets, it is necessary to establish the trust at least 2.5 years before home care Medicaid is required or 5 years before nursing home care becomes necessary. Assets placed in this trust are considered completed gifts to the beneficiaries, and thus cannot be revoked. This type of trust is irrevocable and offers protection to the assets from Medicaid after the required look-back period.

In order to establish a Medicaid Trust, the individual creating the trust (the grantor) is required to designate a trustee other than themselves or their spouse. However, the grantor retains the ability to remove and replace any trustee and maintains a limited power of appointment to change beneficiaries. The grantor also has the right to live in their home rent-free for life with their spouse.

The grantor may receive income generated by the trust assets, but they are not allowed to access the principal. The trust can hold a variety of assets, such as checking or brokerage accounts, as well as the grantor’s residence title, but not Individual Retirement Accounts since they are already protected for Medicaid purposes by law. After the grantor’s passing, the trust assets are distributed to the beneficiaries without undergoing probate.

New York Medicaid Estate Recovery Exemptions And Limitations

Medicaid has strict eligibility criteria that consider both the assets you currently have as well as some of the financial decisions you have made in the past. Medicaid provisions also contain a clause that allows the state to claim some things from your estate, in order to recover the costs of your care after you pass away. This is called Medicaid Estate Recovery.

If a patient over the age of 55+  were eligible for Medicaid benefits or was institutionalized under Medicaid, estate recovery can occur. Estate recovery will not occur if you were 54 years old or younger and received Medicaid coverage for anything other than a nursing home stay. 

Some assets can be exempted from any recovery once the family completes the probate process after the owner passes away. Any property that was intended to go to a beneficiary named in a trust is generally exempt from Medicaid. These include policies for life insurance, jointly-owned bank accounts, 401(k) payouts, IRA, jointly-owned real estate, and many others.

Your family situation at the time you die will determine whether estate recovery can be attempted. If there is a surviving spouse, most estates will not be reclaimed. The state will also be prevented from taking the assets if there is a surviving child under the age of 21, or if the owner has a child with a permanent disability. 

However, as new laws become implemented, the specific assets that can be obtained from your estate change. A federal change allows states to use a more expansive definition of the Medicaid beneficiary’s estate. This expansion allows for the state to pursue property, such as your home, in some cases even if you are married.

How can we prevent Medicaid estate recovery? 

Reach out to Schlessel Law today. Our team can help you handle your estate and long-term care planning in a way that advantages you, and not the government. Contact us to set up a consultation today.

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