Medicaid Repayment: All Good Things come at a Price

Posted on: September 10th, 2015 by Mark R. Friedman

We have written a lot on this blog about the benefits of the Medicaid program, which is a lifeline for many poor families and people with disabilities and is the only program that pays for long term care, in a nursing home, assisted living facility, etc.

But all things come with a price tag, including Medicaid.

Medicaid keeps a running tally of all of the money it spends on each beneficiary. (A beneficiary is a person who receives Medicaid.) When a beneficiary dies, their estate must repay Medicaid for all expenditures made after the beneficiary reached age 55. In other words, if you receive Medicaid, then when you die, you have to repay Medicaid for anything it spent on you when you were 55 or older. Medicaid has to be repaid before your estate can distribute your assets to anyone else, such as family or other creditors.

With a first-party special needs trust, the trust must repay Medicaid from the remainder when the beneficiary dies. However a trust has to repay Medicaid for the beneficiary’s entire lifetime Medicaid costs, not just costs after age 55.

Of course, you can’t get blood from a stone. Most Medicaid beneficiaries have no assets (since you must have less than $2,000 to qualify for Medicaid), and many trusts spend their full assets during the beneficiary’s lifetime. Medicaid can’t collect if there’s nothing to collect against.

However, Medicaid repayment is often an issue in certain situations, like real estate. You can own one home that you live in and still get Medicaid, since a principal residence is exempt. Likewise a special needs trust will often purchase real estate for the beneficiary to live in.

It’s problematic if a Medicaid beneficiary or special needs trust owns real estate, since the house may have to be used to repay Medicaid when the beneficiary dies. If the beneficiary’s family was living at the house with him, then the family may lose their home.

It’s important to be aware of Medicaid repayment issues, and to plan for them where appropriate. For more information on Medicaid, repayment, real estate, etc., call or email FriedmanLaw today.

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Homepage photo: Cows grazing at Meadowbrook Farm, Bernardsville, NJ by Siddharth Mallya. October 23, 2012.
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