For many people, Medicaid planning is an essential addition to a well thought out estate plan. The need for Medicaid planning stems from the potential need for long-term care and the corresponding high cost of that care. Understanding the need for Medicaid planning, however, is only the beginning of formulating a successful Medicaid planning component. You also need to understand the often confusing eligibility guidelines, which can vary by state, as well as how the Medicaid Estate Recovery Program could impact your estate after your death. To help get you started, the Medicaid planning attorneys at Kulas & Crawford explain the Medicaid Estate Recovery Program, commonly referred to as “MERP.”
Qualifying for Medicaid
At some point during your retirement years, either you or your spouse may need long-term care (LTC). At a nationwide cost of over $80,000 a year, on average, and an average length of stay of about three years, your LTC bill will likely be more than you can easily afford to pay out of pocket. Since neither Medicare nor most basic health insurance policies will pay for LTC, Medicaid is the only option for help covering LTC expenses for those who cannot pay out of pocket. Eligibility for Medicaid, however, depends on your income and assets. To qualify, the value of your “countable resources” must fall below the program’s limit which is as low as $2,000 for an individual. If your resources are valued in excess of the limit when apply, your application will be denied and you may be required to “spend-down” your resources before being eligible for benefits. Understandably, the need to reduce countable resources to avoid the need to “spend-down” assets is what most people focus on when they are working on a Medicaid plan. While it is crucial to plan ahead to ensure that you are eligible for Medicaid if you need it during your lifetime, it is also important to think about how Medicaid could impact your estate after you are gone. Unfortunately, your assets remain at risk even after you qualify for Medicaid because of MERP.
What Is the Medicaid Estate Recovery Program?
Medicaid is a federal healthcare program that is administered by the individual states. Federal law (Omnibus Budget Reconciliation Act of 1993) views funds expended on a program recipient to be a debt that is ultimately owed to the state. The state, however, can only attempt to collect on that debt after the recipient’s death. In other words, if Medicaid pays for your LTC expenses anytime after you turn 55, the State of Florida has the right to file a claim against your probate estate after your death to try and recoup the money it spent on you. The state can even force the sale of non-exempt personal or real property, if necessary, to satisfy the claim.
Limitations to MERP
Fortunately, there are limitations to what assets MERP may pursue from your estate to satisfy a claim. In the State of Florida, for example, the limitations include the following:
- Medicaid will not enforce its debt in probate if, when the Medicaid recipient dies, he/she is survived by a spouse, child under the age of 21, or a child who is deemed permanently disabled by social-security standards, or a child who is blind.
- Medicaid cannot recover from property that is exempt from creditors (e.g. homestead property).
- Medicaid cannot recover from an estate under probate if the Medicaid estate recovery would result in an undue hardship for qualified heirs. This is not an easy way to avoid MERP. When deciding if the hardship exemption applies, Medicaid will consider the following factors:
- Did the heir reside at the home of the decedent for at least a year prior to the Medicaid recipient’s death and does the heir own no other residence
- Would the heir be deprived of shelter, clothing, food or medical care if Medicaid were to pursue its right to estate recovery?
- Can the heir document that they provided full-time care to the Medicaid-recipient which delayed their entry into a nursing home for at least a year prior to the Medicaid recipient’s death?
- In Florida, Medicaid can only recover from the probate estate. This is important because careful estate planning can keep many potentially vulnerable assets out of your probate estate.
Contact Vero Beach Medicaid Planning Attorneys
Please take a moment to download our FREE solid estate plan checklist. If you have additional questions or concerns about the Medicaid Estate Recovery Program, contact the experienced Medicaid planning attorneys at Kulas & Crawford by calling (772) 398-0720 to schedule an appointment.