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Avoiding Medicaid Estate Recovery: 3 Ways to Save Your Assets From the State

Avoiding Medicaid Estate Recovery: 3 Ways to Save Your Assets From the State
Medicaid Planning
Jason Neufeld
April 20, 2023

Are you or a loved one receiving Medicaid benefits? If so, you're probably wondering about what Medicaid might do to try to claw back some of the money it has spent. 

The Medicaid Estate Recovery program is a way for states to recoup some of the money they spend on care for Medicaid recipients 55 and older. 

So what does it have to do with you? 

Well, if your estate has to be probated, the state can try to recover some of its money (spent through the Medicaid program) after a Medicaid recipient passes away. But don't worry: there are a few ways to avoid this happening! 

Let's dive into the specifics of the Medicaid Estate Recovery Program, some solutions for avoiding your assets taking a hit, and how you can get help. 

The Realities of Long-Term Care — Why This Issue Will Become More Common

According to the National Institute on Aging, addressing the needs of older adults will become an increasingly important responsibility for individuals and society alike. The number of adults aged 65 and older is expected to skyrocket while family structures have shifted to leave those older adults with fewer options for care. 

Throughout human history, the number of children has outnumbered the number of older people, but these patterns are set to reverse. Declines in fertility rates coupled with increasing life expectancies have changed typical trends for managing the care of older adults. 

Within this population of older adults, those aged 85 and older are among those most likely to need ongoing long-term care. In high-income countries, including the United States, non-communicable diseases (especially Alzheimer's) already make up a vast majority of the burden of disease—collectively costing billions of dollars a year, a number that is expected to rise alongside the increasing population of older adults. 

What this means for individuals and families preparing for long-term care is that it is very likely that an individual will live past an age and condition in which they can adequately care for themselves independently. Many of us will require long-term care either through in-home services, relocation to an assisted living facility, or some combination of long-term care solutions. These services can be very costly. 

The median monthly rate for an assisted living facility is $4,500 per month nationwide. In Florida, the average cost for a nursing home care is about $11,000 per month. Meanwhile, the median daily rate of in-home care is $169. 

About 50% of older adults use Medicaid to help cover these expenses, and long-term care expenses account for 70% of the total Medicaid expenses used nationwide.

What Is the Medicaid Estate Recovery Program? 

The Medicaid Estate Recovery program is a provision of Florida’s Medicaid Estate Recovery Act that allows the government to recover benefits paid for by Medicaid, like nursing home care and healthcare expenses. The statute indicates that accepting Medicaid government benefits automatically creates a debt owed by those over the age of 55.  

The realities of Medicaid estate recovery mean that an individual's house, financial accounts and revocable trust funds are potentially at risk of being taken by the state rather than passed along to family members.

Although Medicaid is an effective means of providing long-term care and healthcare benefits, after the Medicaid recipient dies, they expect the Medicaid recipient's estate to reimburse them for expenses, subject to some limitations. 

Medicaid estate recovery potentially poses a big problem for heirs and beneficiaries of an estate—but there’s hope.

Three Solutions for Avoiding Florida Medicaid Estate Recovery That Medicaid Doesn't Want You to Know

There are a few ways to avoid Medicaid estate recovery efforts. 

In general, if the Florida Medicaid recipient has a surviving spouse, a child under age 21, or a child that is permanently disabled or blind, Medicaid won't come after your estate. Additionally, Florida law prohibits them from coming after your homestead—or principal home so long as the home goes to an heir-at-law..

But what happens if none of these things apply to you? What if your spouse passes away before you do, your children are older, and you have a good sum of money in the bank? 

Here are three ways you or your surviving loved ones can protect your estate.

#1 Take Assets Out of Your Name

In Florida, only probatable assets are subject to Medicaid recovery. Probatable assets are owned solely in your name or in the name of your estate. So, jointly owned assets or assets that designate a beneficiary don't count. 

To avoid Medicaid getting a hold of these assets, you can take them out of your name by placing them in a "Family Asset Protection Trust" or, quite simply, a "Medicaid Five Year Trust." In situations like this, it’s best to have transferred all property and assets that need protection into this trust at least five years prior to the anticipated need for Medicaid funds. 

This is because Medicaid has a "look back" period of five years. Moving these assets into a protected trust long before you anticipate the need for Medicaid can go a long way toward protecting your family as you age while also keeping them safe for your use during your lifetime. 

If you need help setting up a protective trust as you look to long-term care plans and your own future, let us know. An experienced Medicaid planning law firm will be able to advise you on the best possible way to plan for your future.

#2 Consult an Elder Law Attorney

The best way to prevent Medicaid estate recovery is by being proactive. But, many of our clients do not have five years to wait. Most of our clients want help obtaining Medicaid long-term care benefits (at home or in a facility) right now, which means the five-year Medicaid asset protection trust is not an option. 

Our elder law attorneys can help you obtain long-term care, assist with asset protection, and draft an estate plan that leaves a legacy for your surviving loved one — all within five years using legal and ethical planning strategies. 

When you don't have an estate plan, default state laws dictate how your assets are distributed upon death—and these laws aren't favorable for beneficiaries of Medicaid patients. Speaking with an estate planning lawyer will ensure that all the pieces fit into place so that Medicaid doesn't come after your property when you're gone. 

#3 Submit an Undue Hardship Waiver Request

If you're the personal representative of your loved one's estate and worried about having it depleted by Medicaid, you may be able to apply for an Undue Hardship Waiver Request. If estate recovery would cause qualified heirs of an estate undue hardship, then Medicaid can't collect. 

Unfortunately, hardship doesn't exist just because you say so or because you'd lose out on an inheritance. 

To qualify for hardship, you would have to show Medicaid that at least one of these things is true: 

  • You live in the decedent's residence, lived there at the time the decedent died and at least 12 months prior, and you don't own any other residence
  • You would be deprived of shelter, clothing, food, or medical care necessary to maintain your life or health
  • You provided full-time care to the decedent
  • The cost of the sale of the property would exceed or be equal to the property's value

But unfortunately actually getting Medicaid to accept your claim for hardship is rare and may not be an option for most people. 

#4 (Bonus): Don’t Open the Probate in the First Place

When you or your loved one opens up a probate, every judge in Florida will require you to put Medicaid on notice to give them a chance to submit a claim. But, many don’t know that Florida law places a complete bar on creditors submitting claims two years after someone has passed away. 

In other words, if you can wait two years to access your loved-one’s assets, doing nothing may be the best strategy!

Understand that this isn’t fool-proof. While most of the time, it is the personal representative/executor who initiates a probate proceeding in Florida, this is not sacrosanct. Anyone, including creditors, can open up a probate on behalf of a deceased individual.  This means that Medicaid itself can initiate the probate if they so desire - and as long as they do so within two years of the Medicaid-recipient passing away, they can assert their rights to the debt. 

Are you a Medicaid recipient in Florida? Would you like to qualify for Medicaid in Florida? 

Speak to a lawyer today about how Medicaid estate recovery applies to you (or any other questions you might have) — we’re here to help.

FAQ: Florida Medicaid Estate Recovery 

What's the deadline for filing an undue hardship request for a Medicaid estate recovery claim? 

As the personal representative of the decedent's estate, you have 30 days under Florida law to respond to any creditor's claims. If you have not opened the probate yet, we can assist with this as well.

How do I know how much the estate owes to Medicaid? 

After notifying Medicaid of the recipient's death, Medicaid will file a claim with the probate court. That Medicaid estate recovery claim will include the amount owed, which will be forwarded to you by the courts.

I need to pay other expenses with estate funds. What expenses can be paid with the assets of the deceased?

While administering the estate, attorney fees and fees for administering the estate are priority. Immediately after are funeral and burial expenses—up to $6,000—and then Medicaid has the run of your estate before any lower-priority creditors.

Jason Neufeld

Jason Neufeld is the Founder and Managing Partner of Elder Needs Law, a Florida estate planning and elder law firm he created in 2017. With more than 15 years of experience practicing law, he represents clients in a wide range of legal matters, including Medicaid planning, estate planning, elder law, probate, Medicare, and life insurance.

Jason received his Juris Doctor from the University of Miami — School of Law and is a member of the Florida Bar and the Broward County Bar Association. He has received numerous accolades for his work, including being named a Rising Star and Super Lawyer by Super Lawyers and among the Florida Legal Elite by Florida Trend in 2024.

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