For many seniors, their primary asset and sometimes their only asset is their home. They are concerned that they will have to sign away their homes to qualify for Medicaid, called TennCare here in Tennessee. They worry that the state will file a lien against their home if they go into a nursing home and need Medicaid to pay the bill. They may worry that the state will take the home away from a spouse who is still living there when the nursing home spouse dies.
The good news is that a home is an exempt asset for the purpose of determining eligibility for Medicaid so long as the applicant/recipient intends to return there. Even after the recipient dies, the home cannot be taken away by the Bureau of TennCare if the recipient leaves a spouse, a minor child, a disabled or blind child. The home can also sometimes be transferred to a child who has cared for a parent who received Medicaid or to a brother or sister who has an interest in the home.
What if none of these exceptions apply? When can the Bureau of TennCare recover what it has paid out in Medicaid benefits against the estate of the recipient, which often consists only of the home?
The process of reimbursing the state for Medicaid expenditures when a recipient dies is called “estate recovery.” The federal government requires each state to have an estate recovery program. Under the law, however, the states are permitted to define “estate” and choose whether to use a “limited” or “expanded” form of estate recovery.
Limited estate recovery means that a state (here, Tennessee) will look to whatever the state defines as part of the “probate estate” for reimbursement of Medicaid’s expenditures. Expanded recovery means that the state will look to the probate estate, but also to property held with a right of survivorship, property held in a life estate and property held in a revocable (“living”) trust.
So which form of estate recovery does Tennessee use? Presently, the Bureau of TennCare will certainly file a claim against the estate of someone who received benefits. If there are no extenuating circumstances (spouse, minor child, etc.) the claim of TennCare will be satisfied from the sale of the home.
The Bureau of TennCare can also reach assets held in a revocable or living trust. Presently, TennCare cannot recover against property in which the Medicaid recipient owned only a right of survivorship. In addition, if the spouse receiving Medicaid benefits transfers any interest in the home to his or her spouse before dying, the Bureau of TennCare cannot recover against the home/assets of the spouse who did not receive benefits when that spouse later dies.
In 2005, the Tennessee legislature considered expanding estate recovery beyond its present parameters and chose not to do so. That is a pretty powerful argument that the courts can’t unilaterally expand estate recovery.
The take-away lesson of this post, however, is that estate recovery is a complicated subject. If seniors want to protect assets, including their homes, from estate recovery, they would be wise to consult with a lawyer specializing in Elder Law.