In general, for a Medicaid applicant to receive Medicaid benefits, the applicant must be very close to destitute having less than two thousand dollars ($2,000) and having an exemption for his or her homestead, automobile, and prepaid funeral expenses (within certain parameters). Typically the homestead is the only real asset of value for the Medicaid recipient and therefore the only asset that may be passed through inheritance to the heirs of his or her estate.
Effective June 1, 2011, Michigan’s Department of Human Services (DHS), under its new policy detailed below, will allow the State of Michigan to recover assets from a probated estate to repay Medicaid payments made on the decedent’s behalf. This new policy is significant because as a practical matter a Medicaid recipient’s main or only remaining asset is his or her homestead. Under DHS’s new policy, the State of Michigan will have a claim to a Medicaid recipient’s probated assets upon his or her death, which means the family home will necessarily be sold to reimburse the cost of the Medicaid benefits paid to the deceased beneficiary. To avoid such a result under this new policy, Medicaid applicants will require extra planning to protect assets (the family home or homestead) from being probated upon death of the Medicaid recipient.
Enhanced Life Estate Deeds or “Lady Bird Deeds” have been utilized for years by elder law attorneys to avoid probating the homestead or other real property upon the death of the owner. This hybrid deed transfers the property on death to a beneficiary or trust which is named in the deed thereby avoiding probate. Another important feature of Lady Bird Deeds is that the life tenant is allowed to sell, lease or mortgage the property during his or her lifetime. This type of deed can be a valuable tool in keeping the homestead property out of probate and away from Medicaid estate recovery.
BRIDGES ELIGIBILITY MANUAL STATE OF MICHIGAN
DEPARTMENT OF HUMAN SERVICES
MEDICAID ESTATE RECOVERY
The federal government requires Medicaid to recover money that it paid for services from the estates of Medicaid beneficiaries who have died. Medicaid will only recover the amount Medicaid paid for a beneficiary. This is estate recovery. The state will not seek recovery of certain Medicare cost-sharing benefits.
What is an estate?
An estate includes all property and assets that pass through probate court.
Example: homes, cars, insurance money and bank accounts.
Who is subject to estate recovery?
Medicaid beneficiaries who are age 55 or older.
Are there exceptions to estate recovery?
The state may decide not to recover money if it creates an “Undue Hardship” or if any of the following people lawfully live in the beneficiary’s home:
- Beneficiary’s spouse.
- Beneficiary’s child who is under the age of 21, blind, or permanently disabled.
- Beneficiary’s sibling who has an equity interest in the home and was living in the home for at least 1 year immediately before the beneficiary’s death.
- A survivor who:
- was living in the beneficiary’s home for at least 2 years immediately before the beneficiary went into a medical facility: and
- provided care so the beneficiary could stay at home during that period.
What is an undue hardship?
An undue hardship exists when:
- The estate is the sole source of income for the survivors, such as a family farm or business; or
- The estate is a home of modest value; or
- A survivor would become or remain eligible for Medicaid if recovery occurred.
How does estate recovery work?
When a Medicaid beneficiary age 55 or older dies, the state sends an
estate recovery notice to the estate representative or heirs. The estate
recovery notice tells them:
- the state plans to file a claim;
- how much the state will claim;
- how to apply for an undue hardship waiver.
If no exceptions apply, then the state will file a claim with the estate.
How to apply for an undue hardship waiver?
An Undue Hardship application must be completed. Applications are
available from the following sources:
- online at www.michigan.gov/estaterecovery
- by email at firstname.lastname@example.org
- by sending a letter to P.O. Box XXXX.
The completed application must be received no later than 60 days from the date of the estate recovery notice. Send copies of any documents the notice specified. The state will determine if a waiver is warranted.