Jack and Betty Jones have lived on their family farm in Connecticut for over forty years. Recently, Jack suffered a stroke, and his doctor told him he needed long-term care nursing home care. “Finding a nursing home is not the problem,” Betty said when she came to our office. “There is a nursing home in town where my parents lived for several years. Our family was very happy with the care they received. My concern is finding the money to pay for his care.”
She starts to sob when she says “I don’t want to lose the farm. It has been in Jack’s family for years and we want to leave it to our children. I don’t have enough money to pay for very long, and if Jack applies for benefits, the state will take the farm.” She was told by a friend, whose mother was in a nursing home, that she would have to sell the farm and spend the proceeds on nursing home care before she could qualify Jack for benefits. One of her neighbors told her she would not have to sell the farm, but upon Jack’s death, the state would take the farm to reimburse itself for the Medicaid benefits they paid on Jack’s behalf. She asked, “What should I do?”
First, we told Betty the good news. “Betty, you do not need to sell the farm to qualify Jack for benefits. In Connecticut, an applicant’s residence is exempt if the applicant’s spouse continues to reside there. Second, the state will not take the farm when he dies, but, after both you and Jack pass away, the state does have a right to recover the benefits paid on Jack’s behalf. This process is called ‘estate recovery’.”
Federal law requires each state to recover the costs of long-term care services from the estates of Medicaid recipients. In other words, each state has the right to make claim against an estate of an individual who receives Medicaid benefits. In the case of a married couple, recovery cannot be made before the death of the surviving spouse. So, if Jack passes away before Betty, the state will actually make a claim against Betty’s estate.
“Does that mean they will take the farm after I die? That I cannot leave the farm to my children?” she asks. With the proper estate planning, Betty may be able to pass the farm to her children. This may be possible through trust planning, joint tenancy or gifting.
Historically, the state has only pursued recovery against assets that were titled solely in the name of the Medicaid recipient and needed to be probated. In order to avoid probate it is recommended that all assets have a specific beneficiary listed. Simply having a will is not sufficient to avoid probate. However, as budgets have gotten tighter, they are being much more aggressive in what they will go after. It is also possible to protect assets from estate recovery if the recipient has a minor or disabled child. Any assets owned by a Medicaid recipient may be transferred to these children at any time with no impact to their eligibility.
Medicaid estate recovery rules are complicated and vary significantly state-to-state. You should consult an experienced Elder Law Attorney who practices Medicaid law before drafting any type of estate plan with the intent of qualifying for Medicaid with the hopes of avoiding estate recovery.
