As of 2019, the average cost of a year in long-term care (LTC) nationwide was over $100,000. In Indiana, LTC costs have hovered right around the national average in recent years. Unless you can afford to cover that kind of an expense out of pocket, you will likely need to depend on Medicaid to help you if you need LTC in the future. One of your biggest fears, however, may be the commonly held belief that to qualify for Medicaid you will have to give up your home or other valuable assets. The good news is that your home is usually an exempt asset for purposes of determining your initial eligibility for Medicaid programs. The bad news is that the Medicaid Estate Recovery Program (MERP) could still be a threat to your home after your death. Indianapolis Medicaid planning attorneys at Frank & Kraft explain the Medicaid Estate Recovery Program.
Medicaid Eligibility
Because Medicaid is a federally funded (primarily) “needs based” program, the program uses both income and assets limits when determining eligibility. This means that an applicant cannot have “countable resources” valued in excess of the program limit to be eligible. In most cases, the countable resources limit is as low as $2,000 for an individual. Some assets, however, are exempt from consideration when applying for Medicaid, such as your primary residence. If an applicant’s non-exempt assets exceed the limit, the application will be denied, and the applicant will then need to “spend-down” the excess assets before he/she is eligible for benefits. As you can see, an entire retirement nest egg could be depleted in record time if the applicant failed to plan ahead using Medicaid planning strategies and tools. The purpose of including Medicaid planning in your overall estate plan is to ensure that your assets are protected when it comes time to apply for Medicaid. Getting approved for Medicaid benefits does not mean you are completely out of the woods. Your exempt assets could still be at risk once they become part of your estate after your death.
Indiana MERP
Medicaid Estate Recovery is the process by which the State of Indiana seeks to recover amounts paid by Medicaid on behalf of a qualified individual. When a Medicaid recipient dies, the State of Indiana is required by federal and state law to seek recovery from their estate funds equal to the amount used to pay for their medical expenses, including capitation payments made to a managed care entity on behalf of a member of the Healthy Indiana Plan. Any funds recovered through the estate recovery process are then used to help provide for future Medicaid recipients. The Indiana Family & Social Services Administration Estate Recovery Program is the entity that administers the estate recovery process for the State of Indiana. The Estate Recovery Program will seek to recover the total amount Medicaid has paid on behalf of recipients after they turned 55-years-of-age, and in certain other limited circumstances.
Are There Limits to MERP?
Yes, there are some limits to what can be claimed by MERP. In Indiana, the following are exempt from recovery:
- The proceeds of a life insurance policy that names a beneficiary.
- Real property held by a Medicaid recipient that is subject to a life estate.
- Non-probate assets that were transferred out of the probate estate before May 1, 2002.
- The sum due from an annuity contract purchased before May 1, 2005.
- Personal effects, ornaments, or keepsakes of the Medicaid recipient.
- Assets protected by an Indiana Partnership Long Term Care Insurance Policy (see below for link to the Indiana Long Term Care Insurance Program).
- All of a recipient’s assets so long as the Medicaid recipient is survived by a spouse, a child under 21 years of age, or a child is who disabled or blind.
A Medicaid recipient’s house and real estate may be subject to estate recovery. This includes a house owned by a Medicaid recipient which at the time of death was conveyed to another individual through joint tenancy with right of survivorship, if the joint tenancy was created after June 30, 2002.
Undue Hardship
The State will not seek recovery if it will result in a substantial and undue hardship for the surviving beneficiaries of the decedent’s estate. To be eligible for an undue hardship waiver, a beneficiary must be a member of the immediate family of either the deceased recipient or the deceased recipient’s spouse.
Contact Indianapolis Medicaid Planning Attorneys
For more information, please join us for an upcoming FREE seminar. If you have additional questions or concerns about the Medicaid Estate Recovery Program or Medicaid planning, contact the experienced Indianapolis Medicaid planning attorneys at Frank & Kraft by calling (317) 684-1100 to schedule an appointment.
Mr. Kraft assists clients primarily in the areas of estate planning and administration, Medicaid planning, federal and state taxation, real estate and corporate law, bringing the added perspective of an accounting background to his work.
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