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Will my estate be subject to Medicaid estate recovery?

In our last article, we took a brief look at Medicaid estate recovery and noted that beneficiaries may be subject to recovery of once they're gone. As we noted, it can be difficult to determine when an estate will be subject to recovery, but there are some brief comments that can be noted, particularly with respect to life estates.

One thing that can be said for sure is that Medicaid benefits which were correctly paid and receive on or after the recipient turned 55 will be subject to recovery. In general, the government has the right to recover benefits from a deceased beneficiary's estate unless there is a surviving spouse, a child under the age of 21, or a permanently disabled or blind child.

In New Jersey, Medicaid claims have priority and will be paid before other claims during the probate process. That said, reasonable funeral costs are permitted, along with administration fees and IRS liens. But most other claims will not be paid out until the Medicaid claim is handled.

One point to note is that, in New Jersey, Medicaid is generally not able to recover funds from an estate with respect to a life estate interest, since that interest is no longer there once the Medicaid beneficiary dies. This is certainly an advantage, but there are drawbacks to life estates as well.

There may be situations in which Medicaid may not recover on a life estate interest, but depending on the circumstances, Medicaid may be able to assess penalties because of the way the property was transferred. As always, it is important to work closely with an attorney when attempting to navigate various areas of law with respect to your estate plan.

In our next post, we'll take a final look at Medicaid estate recovery in terms of how it can affect a spouse of a Medicaid beneficiary.

Source: nj.com, "Your Legal Corner: Life Estate and Medicaid Estate Recovery," Victoria Dalton, December 4, 2011.

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