In our November 2008 Elder Law Today newsletter we discussed the latest news regarding Michigan’s estate recovery law. At that time, we explained that after years of speculation, our state had finally enacted its own estate recovery legislation on September 30, 2007. However, before the new law could be implemented, it first had to be approved by the federal government. Due to the volume of misinformation and nearly daily questions we receive about Michigan’s estate recovery law, this newsletter addresses the facts regarding the law and its current status. Here again are the pertinent details regarding Michigan’s estate recovery law:
1. What is it?
The estate recovery law allows the State of Michigan to recover the nursing home costs paid for by Medicaid from assets owned by the Medicaid recipient at his or her death.
2. What assets are at risk?
Only assets that are part of an estate that passes through probate court following the owner’s death will be subject to estate recovery. Assets that are held in a revocable trust, owned jointly or have a named beneficiary will not be reachable.
3. What assets are exempt?
The family farm or business is exempt if it is the primary income producing asset of the surviving family members.
4. Is the homestead protected?
Estate recovery against the homestead is limited only to the portion of the value of the homestead that exceeds 50% of the average price of homes in the same county. For example, if a nursing home resident’s homestead is worth $50,000 and the average home value in the same county is $100,000, then the entire value of the $50,000 home would be exempt from estate recovery. Additionally, the entire homestead is exempt from recovery if any of the following are met:
a. The homestead is occupied by the surviving spouse or a child if the child is blind, disabled or under age 21.
b. The homestead is occupied by a caretaker relative who provided care to the Medicaid recipient for a period of at least 2 years prior to the Medicaid recipient’s nursing home admission. The care provided must be proven to have kept the person out of the nursing home during that 2 year period.
c. The homestead is occupied by a sibling who has lived in the home at least one year immediately before the Medicaid recipient was admitted to the nursing home and has an equity interest in the home
5. What is its current status?
On September 2, 2008, the Centers for Medicare and Medicaid Services (CMS) denied the Michigan Department of Community Health (MDCH) request for a state plan amendment to allow for an estate recovery program as set forth under the law. MDCH has appealed that denial and no final decision has yet been made by CMS. Clearly under the current circumstances, significant doubts exist whether the law will be approved. If it is not approved by CMS, a new estate recovery law will have to be enacted which could be even more aggressive than the current law.
These are precarious times for the elderly and their loved ones who are worried about having to spend all of their hard earned assets on nursing home expenses. Additionally, they are often terrified of losing their homes. With the current uncertainty involving Michigan’s estate recovery, it can be very difficult to determine what is the best strategy when the estate recovery law may yet have to be modified. In order to determine the best solution for your specific situation, it is best to consult with an experienced elder law attorney.