Medicaid Estate Recovery is a process where states attempt to recoup the costs of Medicaid benefits provided to a deceased beneficiary. “The payoff for Ohio’s aggressive efforts to recoup Medicaid expenses from the estates of residents — sometimes forcing people from their homes after loved ones die — is less than 1% of what the state spends through the program”, a Dayton Daily News analysis found. This can have significant emotional and financial ramifications for the deceased family and heirs.

Financial Impact:

• Asset Seizure – States can claim assets from the deceased’s estate to recover Medicaid costs, including the family home. For example, if a Medicaid recipient passes away and their estate includes a house valued at $200,000, the state may place a claim on the property to recover the costs of long-term care services provided. This can be a substantial financial burden on heirs, who may have to sell the home to satisfy the Medicaid lien.

• Reduced Inheritance – Heirs may receive less inheritance due to the state’s claim on the estate, which can be extremely challenging for low-income families. For instance, if a Medicaid recipient’s estate includes $40,000 in savings and the state claims $30,000 to recover Medicaid costs, the heirs would only inherit $10,000. This significant reduction in inheritance can create financial strain for families already struggling to make ends meet.

Legal Complexities: 

Navigating Medicaid Estate Recovery can be legally complex, requiring families to seek legal assistance to protect their assets. For instance, if a family discovers that their deceased loved one had a Medicaid lien on their home, they may need to hire an attorney to negotiate with the Medicaid agency and ensure the lien is properly addressed. This legal assistance can help protect the family’s assets and prevent the loss of the home.

Emotional Stress: 

The process can be emotionally exhausting for families, especially when it involves the potential loss of a family home.

Exemptions and Protections:

• Spousal Protections – If the deceased has a surviving spouse, the estate recovery may be delayed until the spouse’s death. For example, if John, a Medicaid recipient, passes away and leaves behind his wife, Jane, the state will not immediately seek to recover Medicaid costs from John’s estate. Instead, the recovery process will be postponed until after Jane passes away, allowing her to continue living in their family home without the immediate financial burden of Medicaid estate recovery.
• Child Exemptions- Medicaid cannot recover assets from the estate if the deceased has a surviving spouse, a child under 21, or a blind or disabled child of any age. For example, if John, a Medicaid recipient, passes away and leaves behind his wife, Jane, and their 19-year-old daughter, Susie, Medicaid cannot place a claim on John’s estate to recover costs. This protection allows Jane and Emily to retain their family home and other assets without the immediate financial burden of Medicaid estate recovery.
• Hardship Waivers – Ohio offers hardship waivers to protect families from undue financial hardship. For instance, if a Medicaid recipient in Ohio passes away and their estate includes a family home, the heirs can apply for a hardship waiver if selling the home to satisfy Medicaid recovery would cause significant financial distress. This waiver can help prevent the forced sale of the home, allowing the family to retain their residence while addressing the Medicaid lien in a more manageable way.
• Type of Assets – Initially, Medicaid could only recover from probate assets. However, the definition of “estate” has been expanded to include any property in which the Medicaid recipient had an interest at the time of death. For example, if a Medicaid recipient had a living trust containing a vacation home, joint bank accounts with a spouse, and a life estate in a family farm, all these assets could be subject to Medicaid recovery. This means that the state can claim these assets to recover Medicaid costs, potentially impacting the inheritance for the recipient’s heirs.

5-Year Look-Back Period:

The 5-year look-back period is a rule designed to prevent individuals from transferring assets to others in order to qualify for Medicaid benefits while preserving their wealth. Here’s how it works:

• Asset Transfers – When an individual applies for Medicaid, the state reviews any asset transfers made within the five years preceding the application. This includes gifts, sales below market value, and other transfers.
• Penalties – If any transfers are found that violate the look-back period, the applicant may face a penalty period of Medicaid ineligibility. The length of this penalty is determined by the value of the transferred assets.
• Exceptions – Certain transfers are exempt from penalties, such as transfers to a spouse, a child under 21, or a blind or disabled child of any age. Additionally, transfers made for fair market value are not penalized.

Example:

If a Medicaid applicant transferred $50,000 to their adult child four years before applying for Medicaid, this transfer would be subject to the look-back period. The state would calculate a penalty period based on the value of the transfer, during which the applicant would be ineligible for Medicaid benefits.

Title Insurance Companies: Safeguarding Buyers from Medicaid Liens:

Title insurance companies have specific duties to address all liens including Medicaid liens before property transfer. They conduct a thorough title search to identify any existing Medicaid liens, review the results, and resolve any identified liens by coordinating with the Medicaid agency. They issue an Owner’s Title Insurance Policy, which protects the buyer and lender against future claims or disputes, including undiscovered Medicaid liens. If a hidden lien surfaces after the title is issued, the title insurance company investigates and resolves the claim, ensuring the buyer’s interests are protected.

Here are links to additional resources for your consideration: Ohio Medicaid Estate Recovery and Ohio State Bar Association.

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