What is Medicaid Estate Recovery?
Long-Term Care Medicaid in Arizona, also known as ALTCS, provides long-term care services for low-income seniors or the disabled. Under federal law, each state is required to implement a system to recover funds from the estate of a deceased Medicaid recipient. During the application process, you will have to acknowledge the state’s right to remaining funds or real property at the time of death. For many people, they have no funds to their name or do not own a home so this is not even a consideration. For others though, with larger estates (but not enough to privately pay for years of care), this becomes a bigger issue. Before applying, the first question many people ask is ‘does Medicaid take your house?’
Estate recovery is the main fear many people have before they apply to ALTCS. Many people forego ALTCS altogether because they do not want to lose assets. This is why it is important to consult with experts like Senior Planning before beginning your application. With careful planning, you can avoid much of the headache surrounding estate recovery.
ALTCS routinely pays out thousands of dollars for each person they enroll. Many people use the program for years, receiving care they would never have been able to afford had they not enrolled in ALTCS. It makes sense then that the state would attempt to recover some of this money at time of death. However, this still comes as a shock to loved ones who understandably were hoping to receive some type of inheritance from their family member.
What Happens Once an ALTCS Recipient Dies?
- You must notify the state of the ALTCS recipient’s death so they can stop all future benefit payments.
- Once notified, the state will begin the estate recovery process to reimburse costs. As with any other creditor at time of death, the state must file a claim during the probate process.
- For those with Miller Trusts, all remaining funds in the trust go to the state.
- In some instances, a Medicaid recipient’s house can be taken after death to recoup care costs. Sometimes ALTCS will put a TEFRA Lien on a home before the recipient’s death.
What is an ALTCS Lien (TEFRA Lien)?
A TEFRA Lien, or pre-death lien, is a type of lien that can be placed on an Medicaid recipient’s house before their death. Certain conditions must be met for this to happen. Not all ALTCS recipients will have TEFRA Liens placed on their houses. An ALTCS recipient must be permanently institutionalized (90 consecutive days) at a nursing home, mental hospital, or other long-term care medical facility such as a rehabilitation facility. The state will send Notice of Intent to File a Lien against Real Property to the ALTCS beneficiary or the authorized representative. A TEFRA lien will be filed if none of the above exemptions are met or if there is no response.
A TEFRA lien will not be placed on an Medicaid recipient’s house if they are living in an assisted living facility, a residential group home, or a memory care community. If the Medicaid recipient returns home or is transferred to a non-medical long-term care facility, the lien must be released. For the lien to be enforced, the ALTCS recipient must die or sell/transfer their property before time of death. This is important because with a TEFRA Lien, property cannot simply be transferred out of one person’s name and into another’s. If a Medicaid recipient wishes to fight the lien, they must request a state fair hearing within thirty days of receiving the lien notice.
A non-TEFRA lien is post-death, meaning the state can record a lien on property owned by the ALTCS recipient after their death. Many people mistakenly believe that delaying probate or transferring the home after their loved one’s death will help them avoid a lien, but this is not true. Medicaid can still attach a lien to a house after death to recoup the debt.
In Arizona, can Medicaid Take the Home After Death?
Yes, but only under certain circumstances. They cannot take the house/property if:
- The ALTCS recipient died before they were 55 years old.
- The spouse is still alive, even if they don’t happen to live in the house at the time of death.
- The ALTCS recipient’s child was their caregiver for at least two years before the date of death. In this instance, the child must live in the home and they must show proof of care.
- There is a child who is disabled, blind, or under 21, Arizona cannot take the home, no matter where the minor or disabled child is living.
- A sibling provided care to the deceased ALTCS recipient for the year before death and has equity in the home.
- Taking the house will bring hardship to the surviving family. The reason for undue hardship must be argued in writing along with financial proof.
Medicaid Estate Recovery FAQs
If ALTCS takes the home, do they take the entire home?
Generally no. The state will only attempt to recover the amount they spent on the ALTCS recipient’s care. If the care costs exceed the value of the home, Medicaid may take 100% of the home. However, in most cases, they take a smaller percentage. This is also true if the property is jointly owned; the most the state can go after is the percentage of the home owned by the ALTCS recipient.
Wait, but I thought the house was an exempt asset?
During the application process the house is an exempt asset. However, once someone dies the house is counted as part of the estate. If the ALTCS recipient’s interest in the home was not transferred to their spouse, there is no right of survivorship, and none of the exemption requirements above are met, the state will place a lien on the home after death. This is why it is important to consult with a professional before you begin the ALTCS application. Correctly organizing finances before beginning the application can help you avoid much of this.
What other assets are subject to Medicaid estate recovery?
As mentioned, funds in a Miller Trust will go to the state. A Miller Trust is only used when an applicant is over the income limit; this does not apply to everyone. When an ALTCS applicant is over assets, a popular way to get approved for ALTCS is by using an annuity. If the ALTCS member owns an annuity that must go through Small Estate Affidavit or Probate, the state has the right to recover funds from the annuity. Again, this will not apply to every ALTCS recipient.
How do I keep the estate after an ALTCS recipient dies?
If you plan ahead, you can potentially avoid most, if not all, of the state’s estate recovery. If you’ve waited until after the ALTCS beneficiary’s death to think about any of this, it may seem hopeless, but all is not lost. You can still potentially keep some of the estate, though not all of it. In this scenario, you should consider hiring an expert to ensure you save as much money as possible.
We can help, whether you’re just starting the ALTCS application or if you’re currently going through the probate process. Each situation is unique, but call us today and we can hopefully answer any questions you may have.