Losing Your House to Medicaid Estate Recovery

Medicaid recipients qualify for coverage based on their very limited countable assets. However, the Medicaid applicant’s home is often an exempt asset.

People on Medicaid may require long-term care or assisted living, which can cost hundreds of thousands of dollars in Medicaid benefits. Once a recipient passes away, the state will determine if it can recover some of those costs of care from the deceased recipient’s estate.

States use two methods to attempt to recover a recipient’s home for reimbursement:

1. Pre-death lien, commonly referred to as a real estate TEFRA lien
2. Collection from the recipient’s probate estate after they’ve passed

For more information about Medicaid recovery and keeping your home, talk to an experienced elder law attorney.

Pre-Death Lien on Your Home

A Tax Equity and Fiscal Responsibility Act (TEFRA) lien can be placed on the home only if the recipient cannot reasonably expect to return to it. If the state determines that the recipient will not return, the state’s Medicaid agency must give the recipient prior notice and an opportunity to request a hearing to contest the decision.

If the recipient does return home in the future, the state must remove the lien it has placed. The state Medicaid services may not file a pre-death TEFRA lien if any of the following family members are living in the home, including:

• Surviving spouse
• Registered domestic partner
• Children under 21, or a disabled child of any age
• Sibling with an equity interest in the home who has resided there for at least one year before the recipient’s placement in a facility

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Estate Recovery After Death

If a family member remains in the home after the Medicaid beneficiary passes, the state must defer the estate recovery program’s efforts. The Medicaid Estate Recovery Program (MERP) requires states to recover, when possible, the costs of care from the estate. The state is prohibited from recovery if there is a surviving spouse.

The state may agree to delay recovery if it would cause an undue hardship to a survivor who is an heir of the deceased Medicaid recipient. Undue hardship exemptions exist in any of the following circumstances:

• The property is the heir’s sole income-producing asset (like a farm), and their income is limited
• Recovery would deprive the heir of shelter when the heir lacks the financial means to live elsewhere and requests a hardship waiver.

Can You Avoid Estate Recovery?

The methods discussed above will only delay the state’s recovery of the recipient’s home. However, there are some methods that may help the recipient’s heirs and loved ones protect their assets and hold onto the home, though these methods come with risk:

• Transferring the home into the recipient’s spouse’s name only. Transfers between spouses avoid a transfer penalty. However, the living spouse may need Medicaid in the future, leaving the beneficiaries no better off in saving the home.
• Transfer the home to a child or other heir five years prior to applying for Medicaid. The applicant would lose all rights to the property and would be at the heir’s whim if the heir later changes their mind. Also, the applicant’s health may force them to apply sooner and suffer a penalty period of no coverage.

These methods and other alternatives carry additional risk for the Medicaid applicant. Making the wrong moves could risk losing coverage for up to five years due to an improper asset transfer.

Find Legal Help To Keep Your Home

Moving into nursing home care does not mean you may not return home in the future. An attorney can help you plan for the future with care planning to keep your home after qualifying for Medicaid programs.

Talk to an experienced elder law attorney for legal advice. An attorney can help with Medicaid planning and explain the Medicaid estate recovery program. You can also talk to an attorney about estate planning tools, including living trusts, special needs trusts, and a power of attorney for healthcare decisions.