Learn the basics of Medicaid, estate recovery and protecting the home from the devastating cost of long-term care cost from Certified Elder Law Attorney, Christopher J. Berry.
Hi there. On this episode of Berry’s Bites, I’m going to talk about Medicaid eligibility and estate recovery and the reason I thought that would be a good topic today is I’ve just received the brochures for a national webinar that the National Business Institute asked me to participate in along with another attorney. So Medicaid, basically, this is a big picture of what I’m going to talk about on that webinar. Medicaid is a governmental program that will help pay for nursing home care. But to qualify for nursing home care, there’s an asset test where a single individual can only have $2,000 worth of accountable assets. Married couple, they’re gonna cut your assets in half. At most, you can have $123,000. But to get there, you have to cut your assets in half and then Medicaid looks back five years to see if you’ve moved any money around and if you have, they’re going to penalize you.
Trusts, Medicaid and Estate Recovery Transcript:
Hi there. On this episode of Berry’s Bites, I’m going to talk about Medicaid eligibility and estate recovery and the reason I thought that would be a good topic today is I’ve just received the brochures for a national webinar that the National Business Institute asked me to participate in along with another attorney. So Medicaid, basically, this is a big picture of what I’m going to talk about on that webinar. Medicaid is a governmental program that will help pay for nursing home care. But to qualify for nursing home care, there’s an asset test where a single individual can only have $2,000 worth of accountable assets. Married couple, they’re gonna cut your assets in half. At most, you can have $123,000. But to get there, you have to cut your assets in half and then Medicaid looks back five years to see if you’ve moved any money around and if you have, they’re going to penalize you.
So one of the strategies to qualify for Medicaid is to set up an asset protection trust, like a castle trust, which is a form of asset protection trust where you move the assets into the trust and then if you make it five years, then everything inside of that trust would be protected from that nursing home or Medicaid spend out. So that’s one type of trust and we’re gonna talk about different types of trusts in the workshop. That’s a trust where if you move the home into the trust and once we make it five years, then everything inside that trust is protected from that nursing home Medicaid spend down and then also, this is the key point. It’s also protected from estate recovery. So Michigan has had estate recovery since 2011 I want to say and what estate recovery says is that even though the home is exempt while you’re alive, when you pass away, they can place a lien on the home to recover whatever the state paid out in benefits.
For example, if the state of Michigan paid out $50,000 for longterm care, then they can place a lien on the home for $50,000 that when that house is sold, then would have to be paid back to the government. So that’s what estate recovery is and now different states have different rules surrounding estate recovery. But in Michigan, the way estate recovery works is that they’re only going to put a lien on the house if the house enters probates. So keep that in mind. So if the home avoids probate, then it’s also going to avoid estate recovery. So could you put the home into a basic revocable living trust and avoid estate recovery? The answer is yes. But the complicated piece here is that if the home is in a revocable living trust, your basic estate planning trust, then it’s actually a countable asset for Medicaid. So you have to take the home out of the trust and if you just leave it in that individual’s name, it’s going to be exempt while they’re alive.
But then upon death, if it’s just in their name, it enters probate and this is where estate recovery attaches to the home. So one of strategies we utilize if we’re in a crisis planning situation where a loved one will need nursing home very soon or is in a nursing home right now is we’ll do what’s called a ladybird deed, which is a very specific type of deed that says it’s in your name while you’re alive and then when you pass away, it avoids estate recovery and goes to whoever you’ve named as a beneficiary. Basically, it’s like a beneficiary designation for your home. So that’s what we do in a crisis planning strategy. If we’re planning ahead to try to avoid the nursing home Medicaid spend down and avoid estate recovery, then what we’re going to do is we’re going to put that home into an asset protecting trust, like an S trust. So this has been Chris Berry. Hopefully, that was helpful. Thanks.