Many people assume that once they qualify for Medicaid, their assets are protected. Unfortunately, Medicaid has the legal authority to pursue repayment for benefits paid on a recipient’s behalf after the recipient passes away. In Indiana, the Medicaid Estate Recovery Program (MERP) allows the state to seek reimbursement after a recipient’s death, potentially placing family assets at risk. That is why incorporating Medicaid planning into your estate strategy is essential if you wish to preserve your wealth for future generations. To help ensure that your assets are safe, the Indianapolis attorneys at Frank & Kraft explain the Indiana Medicaid Estate Recovery Program.
Medicaid’s Role in Long-Term Care
For many older adults, Medicaid becomes necessary when long-term care is required. Nursing home care in Indiana can exceed $120,000 annually, putting long-term care (LTC) financially out of reach for a large portion of the population. Medicare offers very limited coverage for extended care, and private insurance often includes substantial restrictions if it covers LTC at all. Medicaid, on the other hand, can cover the full cost, but eligibility is limited to individuals with very low income and minimal assets. To qualify, applicants must reduce countable assets below a strict threshold (typically just $2,000), often necessitating a “spend down” of personal savings. While qualifying for Medicaid solves the immediate problem of funding care, it also opens the door to future estate recovery efforts by the state.
How Estate Recovery Works in Indiana
Indiana’s MERP allows the state to recover the costs of Medicaid benefits paid after age 55 or for individuals who were permanently institutionalized. Recovery usually targets the recipient’s probate estate, which includes any property titled in the decedent’s name alone and not set to transfer automatically to another party. If you received Medicaid benefits and leave behind a home, vehicle, or bank account that goes through probate, Indiana may file a claim against your estate to recoup costs. Although Indiana does not currently pursue expanded recovery from non-probate assets, any property that passes through probate is vulnerable.
When Estate Recovery Is Not Permitted
Fortunately, there are notable exceptions to the ability of the Indiana MERP program to reach estate assets. Ffor example, Indiana law prohibits estate recovery when any of the following apply:
- A surviving spouse is still living
- A child under 21 survives the decedent
- A surviving child is blind or permanently disabled
In these cases, recovery is delayed until the exemption no longer applies. Once the protected individual passes away or no longer qualifies, the state may renew its claim.
Requesting a Hardship Waiver
Indiana permits heirs or personal representatives to request a waiver of estate recovery if pursuing recovery would create a “substantial and undue hardship for the surviving beneficiaries of the decedent’s estate.” The Indiana Family and Social Services Administration (FSSA) reviews these requests on a case-by-case basis. A waiver may be granted if the property is the primary source of income for the heir, or if recovery would result in undue hardship due to income limitations or other serious financial burdens. To pursue a waiver, the request must be made within a specific timeframe after the state notifies the estate of its intent to recover. Supporting documentation must be submitted, and the decision ultimately rests with the state agency.
Using Liens to Secure Claims
Indiana may use real estate liens to secure Medicaid repayment and if a home is part of the probate estate, the state may file a lien to recover expenses after the owner’s death. The property cannot be sold or transferred until the lien is satisfied or released through an exemption or payment plan. Sometimes, Indiana allows a delay in collecting the debt if the person inheriting the property demonstrates financial hardship or has lived in the home for an extended period. A structured repayment plan or deferred recovery agreement may be available in that case.
How to Protect Your Estate from the Indiana Medicaid Estate Recovery Program
Proactive planning is the best defense against the loss of family assets due to MERP. Working with an experienced Medicaid planning attorney in Indiana allows you to build a comprehensive strategy that preserves assets while maintaining eligibility for long-term care assistance. Common Medicaid planning tools and strategies include:
- Creating an Irrevocable Trust: Assets transferred to an irrevocable trust at least five years prior to applying for Medicaid may be excluded from both eligibility calculations and estate recovery.
- Making Exempt Transfers: Gifting assets to a spouse or a permanently disabled child, when done in accordance with Medicaid rules, avoids penalties and future recovery.
- Spending Down Strategically: Using excess assets to pay off debts, making home improvements, or fund prepaid burial plans can reduce countable resources while retaining value for your family.
- Reviewing Asset Ownership: Titling property in ways that allow it to pass automatically to heirs, such as joint ownership with rights of survivorship, may help avoid probate and recovery.
Because estate recovery rules are complex and frequently misunderstood, working with an experienced Indiana Medicaid planning attorney is the best way to protect yourself and your estate.
Do You Have Questions about the Indiana Medicaid Estate Recovery Program?
For more information, please join us for an upcoming FREE seminar. If you have additional questions about the Indiana Medicaid Estate Recovery Program, contact the experienced Indianapolis Medicaid planning attorney at Frank & Kraft by calling (317) 684-1100 to schedule an appointment.
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