By James F. Scales
Michigan is finally administering a procedure for “Medicaid recovery” of financial support paid under the Medicaid system.
Medicaid is a needs-based program to provide long-term nursing care (among other purposes). To qualify for Medicaid, a single person must have $2,000 or less of “countable” assets. Among the few assets which are not “countable” is the person’s homestead with up to $500,000 in equity (adjusted for inflation). In addition, term life insurance policies without a cash value are not countable assets.
Michigan’s estate recovery program is currently a “probate only” system. This means that the state can recover its costs only from a person’s probate estate. This does not include assets which pass by beneficiary designation, joint ownership, or ladybird deed.
In most cases, the only assets a Medicaid eligible person might still own would be their residence, a paid-up term life insurance policy, or an employee group policy. If those assets pass to his/her heirs through the person’s probate estate, they are subject to recovery by the state for the amounts paid by the state for nursing home care.
A technique used to avoid this is to be sure that those “non-countable” assets which a person is allowed to keep – their residence and term life insurance policies – do not pass through their probate estate. This can be done by making sure that any term life insurance policies name individuals as beneficiaries, not the person’s estate. In addition, a ladybird deed or joint ownership can be used to pass the residence directly upon death, without going through the person’s probate estate.
Jim Scales of this office works with families on planning for Medicaid issues, and would be pleased to discuss this with you. You may contact Jim at 616-632-8047 or moc.sreyemakim@selacsj.
Business Counselor, "August 2012 Business Counselor," 8/16/2012