As we warned our readers last May, estate recovery was finally coming to Michigan. Since July 1, 2011, we are witnessing a new chapter in the long history of estate recovery. Estate recovery occurs when the state seeks to recover Medicaid expenses paid on behalf of a nursing home resident. Since 1993, all states have been required by the federal government to adopt an estate recovery law. Michigan however, waited more than 14 years before it finally enacted the Michigan Estate Recovery Law in September of 2007. Following nearly a 4 year delay, the Department of Community Health (DCH) on July 1, 2011 first began to implement the law. Although we are still in the very early stages of implementation, it appears that DCH, through its collection agent, Health Management Systems (HMS) is being very aggressive. Anyone who fails to protect their estate, especially their home, is taking a serious risk that someday, the state may assert a claim against their assets. To best protect your loved ones, here are just a few things you should consider:
1. 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.
2. How can I best protect my assets?
Although no one solution is best for everyone, there are a few practical things that may be advisable:
a. Living trust. Titling your assets in a trust will avoid probate court. However, you must be careful because a home titled in a trust is a countable asset under the Medicaid rules.
b. Life estate deed. Sometimes called a lady bird deed, this deed allows your home to pass to your loved ones outside of probate after your death.
c. Transfer on death (T.O.D.). If a bank or non-qualified account investment names T.O.D. beneficiaries, the account will pass outside of probate to the named beneficiaries following the death of the owner.
d. Beneficiaries of life insurance, IRAs, etc. Many times, beneficiaries are not properly named on these assets and as a result, end up in probate court.
For the past several years, we have been protecting our clients to avoid the potential impact of estate recovery. Fortunately, because of the steps we have taken with our clients, they do not have to fear that the state will be able to take their home. Many others however, are not so fortunate, Despite repeated warnings regarding estate recovery, they have not protected their estate. But thankfully, it is not too late to act. In order to determine the best solution for your specific situation, it is recommended that you consult with an experienced elder law attorney.