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Estate Recovery

Q: What is estate recovery?

Estate recovery is the legal process by which the State of Michigan attempts to recover expenses paid for long-term care from the assets owned by people age 55 and over who received Medicaid benefits.

Q: What is meant by estate recovery?

Here's a simple example:  if an elderly nursing home resident qualifies for Medicaid benefits and owns a home worth $100,000 at their death, if the state has paid $100,000 or more in Medicaid benefits, the state will receive all of the cash proceeds from the home after it is sold.  If the state has paid less in Medicaid benefits then the amount of money received when the home is sold, the elderly person's family or heirs may still receive some money after the state is paid.

Q: When does the estate recovery process occur?

Estate recovery only occurs after the death of the person who was receiving Medicaid long-term care benefits.

Q: What programs does Michigan's estate recovery program apply to?

Estate recovery claims may be asserted for expenses paid to individuals receiving Medicaid nursing home benefits, the MI Choice Waiver Program, the Adult Home Help Services program, and the Home Health Program.  Michigan's estate recovery program also seeks reimbursement for Medicaid-covered hospital expenses, Medicaid-covered prescription medication, and expenses paid by the Program of All-Inclusive Care for the Elderly.

Q: When did the estate recovery law begin?

Michigan's estate recovery law began operating on July 1, 2011.

Q: Is there a date on which estate recovery applies?

The State of Michigan is seeking estate recovery for care costs for Medicaid expenses going back to July 1, 2010.

Q: What is meant by "estate?"

Michigan law defines estate, for purposes of estate recovery, to include only assets in the probate estate.  Assets that would be in a person's probate estate include assets that are titled solely in the deceased person's name.

Q: What assets are typically in the estate of a person receiving Medicaid?

Since a person receiving Medicaid can typically only own their home, a vehicle, a bank account with $2,000 or less in it, and their household furniture and furnishings, these are the assets that could be in their probate estate and which the state may file an estate recovery claim against.  In particular, the home will be the main asset the state seeks recover against in estate recovery.

Q: Are there any assets the state cannot pursue for estate recovery?

Yes.  An estate recovery claim cannot be assert against property that passes outside probate by trust or otherwise, such as payable-on-death or transfer-on-death designations for bank accounts.

Q: What if the nursing home resident is married? Does estate recovery still apply then?

No.  Estate recovery cannot take place against the home so long as the nursing home resident's spouse, who is called the community spouse in Michigan, is residing in the home.  However, this exception would not apply if the community spouse is not actually residing in the home, such as if they have moved to an independent senior living residence or assisted living facility.

Also, if the community spouse passes away before the nursing home spouse, the state may pursue estate recovery against the home when the nursing home spouses passes away, but this would only occur if proper estate planning had not been done for the community spouse after the nursing home spouse qualified for Medicaid.

Q: Are there any other exceptions to estate recovery?

There are several exceptions to estate recovery that may apply from time-to-time.

First, estate recovery cannot take place against the home of a nursing home resident who is receiving Medicaid so long as their child who is under age 21, child of any age who is blind, or child of any age who is disabled remains in the home. 

Second, there is an exception to estate recovery if certain relatives are residing in the home and that relative provided care to the nursing home resident for at least two years before the senior moved to the nursing home and the care the relative provided allowed the person to remain at home longer, i.e., their care delayed their admission to a nursing home for a least two years.  There are strict proof requirements for this exception, including medical documentation from physicians.

Third, estate recovery may be deferred if the nursing home resident's brother or sister is living in the home, and the sibling was living there for at least one year before the senior moved to a nursing home, and the sibling has an ownership interest in the home.

Finally, there is a hardship exception if the value of the nursing home resident's home is less than half the value of the average home in the county in which the home is located.

Q: My father was living in a nursing home and I paid for his funeral after he died? Can I still be reimbursed when the house is sold or will the State of Michigan receive all of the cash proceeds through estate recovery?

There are some other costs and expenses of the deceased nursing home resident that have priority over estate recovery.  The estate recovery claim is lower in priority then the costs and expenses of (1) the probate court administration costs and expenses (which would be the probate court costs, probate inventory fee, and probate attorney fees), (2) reasonable funeral and burial expenses, and (3) certain probate court allowances.  Estate recovery is higher in priority than the expenses of the deceased person's final illness and the clams of other unsecured creditors (such as family members who were owed money, credit cards, etc.).

Q: What's the best way to plan ahead to avoid estate recovery?

If you are planning ahead and a move to a nursing home is not imminent, a Medicaid Asset Protection Trust is the best way to plan ahead to avoid estate recovery.  A revocable estate and longevity trust may also be used to protect against estate recovery for married couples, but not in every situation.

Q: When my mother moved to a nursing home, the person at the nursing home said she had to spend all her savings down to $2,000.00 before she would qualify for Medicaid, but she could keep the home and we, her children, could sell the home after her death and split the cash proceeds. My mother paid over $75,000 to the nursing home before she qualified for Medicaid and she only gets to keep $60 a month out of her Social Security. Are you sure estate recovery applies?

Unfortunately, yes, unless one of the exceptions noted above applies.  The estate recovery law is new in that it just went into effect on July 1, 2011.  Your family may have an argument that the state should not be able to recovery for Medicaid benefits received before that date, but it may need to be litigated until the that aspect of the law becomes settled.  I understand your frustration about all of your mother's savings that have been spent and now the state wants to pursue a claim against her home too.  It's a shame when seniors have worked, saved, and paid taxes for these programs all their life and now, when they need to use the program, the state is going against their homes when they pass away.  Also, it was not correct that all of the $75,000 in savings had to be spent down; at least half that amount could have been protected.  

Q: My father is already in a nursing home and receiving Medicaid. Is there anything that can still be done to avoid estate recovery?

Certain deeds may be used in this situation.  It has to be done just right so the Michigan Department of Human Services does not consider the Medicaid recipient to have made a gift or divestment of the home, which would result in the loss of Medicaid benefits.  Consult with Andrew Byers or another qualified elder law attorney before taking any action in this situation.

Q: My mother lives in a nursing home and is receiving Medicaid. I received a letter from HMS. Does this have anything to do with estate recovery?

 Yes.  HMS (Health Management Systems, Inc.) is the company the state contracted with to operate the estate recovery program.  HMS receives 13.9% of all funds they collect through Michigan's estate recovery program.

Peace of Mind Made Simple

Andrew Byers is an estate planning, elder law, and probate attorney in Troy, Michigan with 27 years of practical experience you can use to safeguard your savings and protect yourself. I strive to help my clients avoid and solve problems with clear, effective, and affordable legal services and counsel. I advise clients in Troy, Michigan and surrounding communities in Oakland County and the rest of Metro Detroit. Take the first step to obtaining peace of mind by contacting me using the online form or by calling (248) 469-4261.

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