Exceptions to Medicaid Estate Recovery

Newsletter | Feb 20, 2017 | Shannon Laymon-Pecoraro, CELA

A large number of clients worry about the consequences of utilizing Medicaid to pay for long-term care. Most importantly, they have received information from non-legal professionals that Medicaid will take their home or that the spouse will be impoverished. The good news is that with proper planning your entire estate may be free from estate recovery.

When an individual age 55 or older dies, states are required to seek recovery of payments from the individual’s estate. Since the assets of an individual must have countable assets valued below $2,000, collectability is often an issue. Good planning and inherent exceptions to estate recovery further complicate recovery.

Some estate will be exempt from Medicaid estate recovery. The most common exemption is the existence of dependents. The state is prohibited from initiating estate recovery if a spouse, a child under age 21, or a disabled child survives the beneficiary.

Another exception to Medicaid estate recovery exists when recovery would case an undue hardship on the heirs. Undue hardships include cases where the survivors make a living from the asset, such as a family farm or other family business, when assets are illiquid, when a home is of modest value, or when recovery would not be cost effective.

Additional exemptions may also apply depending on what type of planning was done. For example, savings bonds, which are governed by the regulations imposed by the U.S. Treasury, may be exempt from estate recovery under certain circumstances. Additionally, real property for which the recipient held a life estate, or real property that was transferred out of the recipient’s name, would not be included in the estate, and therefore would not be subject to estate recovery.

While not all estates will be completely exempt from Medicaid estate recovery,, knowing what will happen to your estate during the planning so that you can minimize potential consequences both during lifetime and after death is imperative. The staff of the Hook Law Center not only help address a family’s concerns related to the potential risk of losing assets, but also help families assess other consequences, such as the tax implications of transferring a home or low-basis investment.

Ask Kit Kat – Misnamed Rat

Hook Law Center:  Kit Kat, what can you tell us about the origin of the Norway rat?

Kit Kat:  Well, this ubiquitous rat of the United States is incorrectly named. It is known as the Norway rat or brown rat, but oddly enough, it did not come from Norway. The mix-up occurred around 1769 (18th century) when the British naturalist, John Berkenhout, wrote of its arrival in England from Norwegian ships. However, this was incorrect. Other records show that the brown rat arrived in Europe at the start of the 17th century attracted to cities with its brick and stone construction. But, somehow, the name persisted. The Norway/brown rat then made its way to North America on boats with the legions of immigrants who would settle the new lands. Today, rats can be found on every continent except Antarctica. Its cousin, the black rat, is generally smaller and is sometimes known as the ‘roof rat.’

Other myths about rats are now being re-examined. The Norway rat seems to be in the clear as to its role in the bubonic plague. The black rat may have had a part to play in the plague, but not so much as previously thought. Current research into the matter leads us to the possibility that the plague was transmitted via gerbils and/or through the air. As merchants traveled to the East along the ancient Silk Road, they may have picked up the deadly disease through a combination of factors.

So let’s refer to this resourceful creature as the brown rat. It can reproduce quite easily. Females are fully mature at three months, and the gestation period is only three weeks long! So, they are quite numerous. They are very content to feast on garbage and other leftovers they find in their environment. They’re not out to hurt their fellow humans. Isn’t it interesting to know more about the creatures in our midst? (Dave Taft, “A Rat with a Bum Rap. And It Isn’t Even Norwegian,” The New York Times, NY Region, Jan, 31, 2017)

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