Enactment of Medicaid Estate Recovery Program – July 25, 2008
By Nancy Ann Hornacek
As an estate planning attorney, I am aware that changes in the law impact a client’s estate plan. The purpose of this article is to familiarize you with Michigan’s recently enacted Medicaid estate recovery program.
Estate recovery is a program by which the State of Michigan collect monies from a decedent’s estate to reimburse the State of Michigan for certain Medicaid services provided to the decedent. The Michigan Department of Community Health (“MDCH”) is responsible for tracking the assets and services of Medicaid recipients subject to estate recovery. Michigan’s Medicaid estate recovery law provides that the assets which may be recovered by the State are the assets of a Medicaid recipient’s “estate.” Under Michigan law, an “estate” includes real and personal property that pass from a deceased person to his or her heirs through probate administration. Examples of real and personal property that are not part of a person’s “estate” and are conveyed without probate administration are jointly owned property, property owned by a trust, property subject to a life estate, and property that passes to a beneficiary under a transfer on death instrument, such as a life insurance policy that names beneficiaries.
Michigan’s estate recovery program only affects people who began receiving Medicaid long-term care services after September 30, 2007. Federal law also limits estate recovery to persons who receive Medicaid services after age 55 or who are permanently institutionalized, regardless of their age.
The timeline when estate recovery takes place is based on the Medicaid recipient. If the Medicaid recipient was single, estate recovery takes place after he or she dies. If the Medicaid recipient was married, no estate recovery takes place during the lifetime of a surviving spouse. And if a Medicaid recipient left a surviving child who is under age 21 or a child who is blind or permanently disabled, as determined by the Social Security Administration, no estate recovery occurs.
There are circumstances when Michigan will not seek estate recovery from a person’s homestead. For instance, if the Medicaid recipient has a surviving spouse or a child who is under age 21 living in the home, then estate recovery of the homestead will not take place.
In addition, there are situations when property is exempt from estate recovery. Under Michigan’s estate recovery law that part of the value of a person’s homestead that is equal to or less than 50% of the average price of a home in the county where the homestead is located, as of the date of the Medicaid recipient’s death, is exempt from estate recovery. Michigan’s estate recovery law also exempts the portion of an estate that is the primary income-producing asset of survivors, including, but not limited to, a family farm or business.
At this time it is uncertain when Michigan will begin its estate recovery program. Before the estate recovery program is implemented the MDCH must establish policy and procedures for estate recovery activities and obtain the federal government’s approval of its program. MDCH must also prepare materials for Medicaid applicants to explain the estate recovery program.
One thing that is certain is you should understand the estate recovery program and how the estate recovery program impacts you.