Estate Recovery

Estate Recovery—10/10/08

INTRO: If you get sick, and need extended care, there's a good chance you'll lose your home. That's right. Under a law called estate recovery, the government can take your home, along with your savings and personal possessions. Years ago on Golden Opportunities, we warned you about this law, and many of you contacted your legislators to urge them to vote no on estate recovery. But unfortunately, here's one that we lost.

1. WHAT'S ESTATE RECOVERY?

A. Estate recovery is a little known law that allows the government to take your home, your cash, even your wedding ring, to pay for any Medicaid benefits you or your spouse received over the years.

2. I THOUGHT YOU HAD TO BE POOR JUST TO GET MEDICAID?

A. Medicaid is a critically important safety net for middle class Americans – it is the only program that will help cover long term nursing home care costs. But you are right: qualifying for Medicaid is real tough. You can't have much in the way of money or property. For a single person (widowed, divorced, or never married), you can't get Medicaid if your assets exceed $1,500. For a married couple, you can keep a little more up to $104,000 of savings, and most important, you can continued to live in your home. Whether single or married, you also are allowed to keep your household goods and personal effects, such as wedding rings, family photos and clothing.

As you can see, a single person can't keep must to qualify for Medicaid. A married person with a spouse in a nursing home can keep more: your home, some savings, and your wedding ring.

But even if you're married, don't expect to be able to leave your home and cash to your heirs. Under the Estate Recovery law, Ohio will send in its bill collector to grab every last cent and your home, to repay the State for any Medicaid benefits you've previously received.

3. IS IT RIGHT TO ALLOW THE GOVERNMENT TO GRAB YOUR HOME AND SAVINGS WHEN YOU DIE?

A. Some people say yes. They note that the government is running deficits and needs money to sustain its programs. They say: if you received benefits from the government, you should pay them back when you die. And on the surface, that makes some sense. But this rule doesn't apply to any other government program.

4. CAN YOU GIVE US AN EXAMPLE?

A. Let's say you own a home with a mortgage. The government gives you a major benefit: you can deduct the interest payments. This tax break may be worth many thousands of dollars over your lifetime. When you die, the government cannot take your house, in repayment.

How about Social Security? Statistics show that many people are getting far more than they paid in. The government cannot take your home to recover the excess when you die.

Millions of Americans are getting Medicare prescription drug coverage. Should their homes be taken to re-pay those benefits at death? Of course not. Many American students have benefits from government subsidized school loans. Their homes cannot and should not be taken to collect the taxpayer's portion of the subsidy.

Millions of American farmers and small business owners receive valuable subsidies and benefits. When folks build their wealth thanks to government assistance, should they be allowed to pass it on to their children?

Medicaid is the only program that allows the government to take your home to repay the benefits at death. Why is Medicaid treated so much differently? Maybe it's because Medicaid recipients tend to be older, sicker, and less wealthy – and they can't hire lobbyists to protect them.

5. LAURIE, YOU'VE EXPLAINED HOW WITH ESTATE RECOVERY, THE GOVERNMENT CAN TAKE EVERYTHING: YOUR HOME AND YOUR SAVINGS. ANY WAY TO PROTECT YOURSELF?

A. Years ago, protecting against estate recovery was pretty easy. If you put your assets into a revocable living trust, you'd protect those assets from estate recovery, because the government could only go after assets which passed through probate at death. Now, estate recovery applies to everything: probate and non-probate assets. So protecting assets at death has become much more complicated.

6. HOW CAN OUR VIEWERS TRY TO PROTECT THEIR HOMES AND REMAINING SAVINGS UNDER THE NEW LAW?

A. Let me give you one strategy we use.

When the spouse in the nursing home goes on Medicaid, we put the home and savings into the name of the spouse that's at home. And the at hone spouse creates a will leaving the remaining assets to the kids, or other intended heirs, not the spouse.

Now here's was happens. If the spouse at home dies first, before the spouse in he nursing home, then about half of the value of the assets will go to the government, but the other half will get to the kids. It's better than nothing.

7. WHAT IF THE SPOUSE IN THE NURSING HOME DIES FIRST?

A. Then we may be able to protect even more. The spouse at home may created a Medicaid plan, which might involve gifting assets to the kids, or creating a Medicaid Trust.

Or the spouse at home might just sell the home and spend the assets on herself. That's allowable too.

8. WHAT IF THE SPOUSE IN THE NURSING HOME DIES FIRST, AND THE SPOUSE AT HOME DOES NOT CREATED HER OWN MEDICAID PLAN?

A. Then at he healthy spouse's death, even if that spouse never needed nursing home care, and even if that spouse died 20 years after the spouse that had been in the nursing home.

You see, the state runs a tab of the Medicaid benefits paid out, and keeps that in their records. When you die years later, the state can and most likely will still go after anything you still own, up to the amount of the Medicaid paid out.

9. DO THEY ADD INTEREST?

A. No.

CLOSE: To qualify for Medicaid, you can't have much. If you're single, $1500 is it. So you won't have anything for the government to grab when you die.

But if you're married, and your spouse needs care, you're allowed to get Medicaid and still keep your home and some modest savings. Until you die. At death, you could lose it all. Unless you do some planning.