For a long time, the state of Michigan resisted the federal mandate to recover medicaid costs from the estates of those individuals when they died.
Effective July 1, 2011, Michigan began it’s recovery program.
How does it work? Medicaid beneficiaries who are age 55 or older and who have received long term care services after September 30, 2007, are now subject to estate recovery. Since people who qualify for Medicaid have less than $2,000.00 in assets, but, they may have a home. Therefore, estate recovery is really aimed at recovering Medicaid dollars from the equity in the house after the recipient dies.
From everyone who has a home? Not necessarily. Right now, estate recovery only applies to property passing through the probate estate of the deceased Medicaid recipient. Therefore, if the home can by-pass probate court, it will not be subject to recovery.
How can this work? By having the home (and other assets) transfer to the beneficiaries immediately upon the death of the owner without a need to go to probate court. This can be done by beneficiary designations and “Ladybird deeds” .
What is a Ladybird deed? It is a deed where the owner transfers his/her property to the beneficiaries during his/her lifetime, however, the owner holds back a life estate in the property and the right to sell. Therefore, the beneficiaries don’t really get title to the property until the owner dies.
Can this be done if the property owner is in a nursing home? Yes. If they are able to sign, they can sign the deed. If they are unable to sign, an individual acting under a Durable Power of Attorney may be able to sign for them. If that is not possible, the family can go to Probate Court and obtain a Protective Order.
Won’t these steps cost the family money? Yes, however, it is far less than would be lost if the home went into the deceased individual’s probate estate and his/her Medicaid costs are deducted from the value of the home.
Medicaid recovery can be eliminated or minimized using the proper legal tools.