If your spouse received Medicaid benefits for long-term care, you may be concerned about a Medicaid lien being placed on your family home after their passing. Medicaid Estate Recovery programs allow the state to seek reimbursement for benefits paid, potentially forcing the sale of the home. However, with proper planning, you can take steps to protect your home and ensure it remains in your family.
At Heritage Law Office, we help families navigate Medicaid planning and estate protection strategies. Contact us today by using our online form or calling 414-253-8500 to discuss your legal options.
How Medicaid Liens Affect a Family Home
When a Medicaid recipient passes away, the state may seek reimbursement for the cost of their care through Medicaid Estate Recovery. This typically includes placing a lien on real estate owned by the deceased, including the family home.
When Can Medicaid Place a Lien on a Home?
Medicaid can file a lien before or after the death of a beneficiary under certain conditions:
- Before death: If the recipient was permanently institutionalized and not expected to return home, Medicaid may place a lien while they are still alive.
- After death: If the recipient owned a home at the time of their passing and there is no exempt surviving owner, Medicaid may seek recovery.
Who Is Protected From Medicaid Recovery?
Certain individuals may prevent Medicaid from seizing the home, including:
- A surviving spouse - As long as the spouse is alive, Medicaid estate recovery is delayed. However, the lien may apply after their passing.
- Minor or disabled children - If a child under age 21 or a permanently disabled child resides in the home, Medicaid recovery is prohibited.
- A sibling with an equity interest - If a sibling lived in the home for at least one year and has an ownership stake, Medicaid cannot recover from the home.
Without proper planning, Medicaid can still recover the cost of care once the protected individuals pass away, potentially forcing a home sale.
Strategies to Protect a Family Home From Medicaid Liens
There are several legal strategies to protect your home from Medicaid estate recovery. The best approach depends on your specific circumstances and financial situation.
1. Transferring the Home to a Spouse
If the home is solely in the name of the Medicaid recipient, transferring ownership to the healthy spouse before death can protect it from estate recovery. Medicaid does not penalize transfers to a spouse, but the home may still be at risk if the spouse later applies for Medicaid.
2. Using a Life Estate Deed
A life estate deed allows a homeowner to retain the right to live in the home for life while ensuring ownership automatically passes to heirs upon death. This can help bypass probate and prevent Medicaid from placing a lien on the property.
3. Placing the Home in an Irrevocable Trust
Transferring the home into an irrevocable trust removes it from the owner's estate, making it unavailable for Medicaid recovery. However, Medicaid has a five-year lookback period, meaning the transfer must be made at least five years before applying for Medicaid to avoid penalties.
4. Utilizing a Caregiver Child Exemption
Medicaid rules allow a home to be transferred to an adult child if they lived with and provided care for the Medicaid recipient for at least two years before they entered a nursing home. This can be a valuable exemption to keep the home in the family.
Additional Strategies to Prevent Medicaid Liens
1. Joint Ownership with Rights of Survivorship
If the home is jointly owned with rights of survivorship, ownership automatically transfers to the surviving owner upon death. This can prevent Medicaid from placing a lien on the home because the property does not pass through probate. However, this strategy requires careful planning, as it could have tax and Medicaid eligibility implications.
2. Transferring the Home to a Special Needs Trust
If a surviving spouse or child is disabled, transferring the home into a special needs trust can protect it from Medicaid estate recovery while ensuring the disabled individual remains eligible for government benefits. These trusts are designed to provide for the disabled person's care without jeopardizing their Medicaid or Supplemental Security Income (SSI) eligibility.
3. Spousal Refusal in Some States
Some states allow spousal refusal, where the healthy spouse refuses to use their assets to pay for the Medicaid applicant's care. This can protect assets, including the family home, but is only available in certain jurisdictions. Consulting an experienced Medicaid planning attorney is essential to determine whether this strategy applies.
The Importance of Medicaid Planning Before Crisis Strikes
Many families delay Medicaid planning until a loved one already needs long-term care. Unfortunately, waiting too long can limit legal options and make it more difficult to protect assets like the family home.
By planning in advance, you can:
- Avoid Medicaid penalties for last-minute asset transfers.
- Ensure eligibility for Medicaid without spending down all assets.
- Keep the home in the family and prevent Medicaid recovery.
- Provide financial stability for a surviving spouse or heirs.
What to Do If a Medicaid Lien Has Already Been Placed
If a lien has already been placed on a home, there may still be ways to reduce or eliminate the claim:
- Negotiation with Medicaid - Some states allow heirs to settle Medicaid's claim for less than the full amount.
- Hardship waivers - If selling the home would cause undue hardship to the heirs, a waiver may be available.
- Proving exempt status - If a protected individual (such as a disabled child) resides in the home, Medicaid recovery may not apply.
Every situation is different, so seeking legal guidance is essential to understanding your rights and options.
Contact a Medicaid Planning Attorney Today
Protecting your family home from Medicaid estate recovery requires careful legal planning. Whether you need to create a trust, transfer ownership, or explore exemption options, working with an attorney can help ensure your home stays in your family.
At Heritage Law Office, we assist families with Medicaid planning, asset protection, and estate planning strategies. Contact us today by calling 414-253-8500 or filling out our online form to schedule a consultation.
Frequently Asked Questions (FAQs)
1. Can Medicaid take my home if my spouse was in a nursing home?
Medicaid cannot force the sale of your home while a surviving spouse is still living there. However, after the surviving spouse passes away, Medicaid may seek to recover costs through estate recovery unless proper planning has been done to protect the home.
2. How does the five-year lookback period affect Medicaid planning?
Medicaid's five-year lookback period means that any transfers of assets, including a home, within five years of applying for Medicaid may result in a penalty period of ineligibility. This is why early planning is crucial to protect assets while ensuring Medicaid eligibility.
3. Is putting my home in a trust a good way to avoid Medicaid liens?
Yes, placing your home in an irrevocable trust can protect it from Medicaid estate recovery. However, the transfer must occur at least five years before applying for Medicaid to avoid penalties. Revocable trusts do not protect against Medicaid liens.
4. Can I transfer my home to my children to avoid Medicaid recovery?
While you can gift your home to your children, doing so within five years of applying for Medicaid can lead to a penalty period of ineligibility. Certain exemptions, such as the caregiver child exemption, may allow for a transfer without penalty if the child lived in the home and provided care for at least two years before the Medicaid recipient entered a nursing facility.
5. What happens if a Medicaid lien has already been placed on my home?
If a Medicaid lien has already been placed, you may still have options, such as applying for a hardship waiver, proving that a protected individual resides in the home, or negotiating a settlement with Medicaid. Consulting an attorney can help you explore possible solutions to minimize or eliminate the lien.