Medicaid Recovery Program and Estate Planning

In September 2007 the Michigan Legislature passed into law the Medicaid Estate Recovery law found at MCL 400.112g and MCL 700.3805. Recovery will not begin until the Federal government approves of the law. If approved, it could have a direct effect on Michigan seniors and their families without proper estate planning.

The law allows Michigan to recover what it has paid in Medicaid bills for long-term care from the decedent recipient’s estate. It applies to probate estate assets. As to a home in probate, part of its value is protected and there are also other exemptions which can be found at MCL 400.112g. If 1 or more of the following individuals are lawfully residing in the Medicaid recipient’s home, then the home is exempt:

(a) The medical assistance recipient’s spouse.

(b) The medical assistance recipient’s child who is under the age of 21 years, or is blind or permanently and totally disabled as defined in section 1614 of the Social Security Act, 42 USC 1382c.

(c) The medical assistance recipient’s caretaker relative who was residing in the medical assistance recipient’s home for a period of at least 2 years immediately before the date of the medical assistance recipient’s admission to a medical institution and who establishes that he or she provided care that permitted the medical assistance recipient to reside at home rather than in an institution. As used in this subdivision, “caretaker relative” means any relation by blood, marriage, or adoption who is within the fifth degree of kinship to the recipient.

(d) The medical assistance recipient’s sibling who has an equity interest in the medical assistance recipient’s home and who was residing in the medical assistance recipient’s home for a period of at least 1 year immediately before the date of the individual’s admission to a medical institution.

Exemptions can also be made because of hardship which includes, but is not limited to:

(i) An exemption for the portion of the value of the medical assistance recipient’s homestead that is equal to or less than 50% of the average price of a home in the county in which the Medicaid recipient’s homestead is located as of the date of the medical assistance recipient’s death.

(ii) An exemption for the portion of an estate that is the primary income-producing asset of survivors, including, but not limited to, a family farm or business.

(iii) A rebuttable presumption that no hardship exists if the hardship resulted from estate planning methods under which assets were diverted in order to avoid estate recovery.

At the time an individual enrolls in Medicaid for long-term care services, the Department of Community Health must provide written materials explaining the process for applying for a waiver from estate recovery due to hardship.

Finally, the law provides that Department of Community Health shall not seek recovery if the costs of recovery exceed the amount of recovery available or if the recovery is not in the best economic interest of the state.

The way to avoid this recovery is to avoid probate by deeding property so that it is titled joint with rights of survivorship, transferring property to a revocable trust, or to name a designated beneficiary as in a life insurance policy.

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