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If Dad Needs Nursing Home Care will the State take Mom’s Home (Part 2)?

Last week we ran through the basics of estate recovery, when the State will – and won’t – seek reimbursement for benefits paid out.  This week we’ll look at how that process actually works in real world situations – and doesn’t work.  For example, what does the “estate” consist of?  Well, that varies from state to state.

Some states define it narrowly to mean the probate estate, that is property that passes by way of the estate administration process.  But other states (New Jersey is one) have expanded that definition to include any property that belonged to the Medicaid recipient at the time of death, including jointly held property and assets held in trust.  Life insurance proceeds would not be included where there is a specific named beneficiary.  On the other hand they would be included if the estate is the beneficiary.

What if there aren’t enough assets in the estate to pay the lien and other expenses?  Medicaid gets a priority right after reasonable funeral expenses and costs of estate administration, along with taxes and ahead of other creditors and heirs.  The law requires the executor or administrator to contact the state to find out if any money is owed.

But, as with many laws and regulations, the estate recovery laws may not work so smoothly in practice.  Let’s say Dad is on Medicaid and Mom owns the home.  Dad dies but Mom is still alive.  No estate recovery yet.  The State must wait till she dies.  But, what if Mom lives another 5, 10 or 20 years?  The home may no longer be in Mom’s name.  If she sold it and spent the money on her own care then, no problem.  That’s what the State wants.  However, what if she transfers the home out of her name?  Can the State enforce a lien in that case?  And, how would they even know when to file a lien?  Maybe they would know if there is a will probated or an estate administration action.  But, if that’s not the case then most likely, the State won’t be aware of Mom’s death.  And there doesn’t appear to be any requirement to notify Medicaid of Mom’s death unless she too received Medicaid.

So, what would happen in that case?  Many of these questions may take time to answer as these different scenarios play out over a number of years.  Just another example of why it is so difficult to navigate the long term care system.