Your father, the last of your parents, passed away several weeks ago. He had spent his last years in a nursing home. It wasn’t the best, but due to decent planning, it wasn’t the worst. Medicaid paid for quite a bit, and while your father’s estate is pretty drained, the family home is still there, safe and secure like always. Or is it?
Unless your father’s estate plan included a method of passing the home to you outside probate, there is a chance that Medicaid may be able to claim the home and sell it to help offset the costs of his care these last few years. What allows them to do this?
In 1993, Congress passed the Omnibus Budget Reconciliation Act, now known as OBRA ’93. As part of an effort to reduce the ever-increasing costs of healthcare (seems like that phrase will never go away!), Congress required each state that participated in Medicaid (which is all of them) to recover costs associated with the long-term care of some Medicaid recipients. The states were allowed to determine how MERP was executed, but the requirements are similar across states. In Texas, MERP is implemented by the Texas Department of Aging and Disability Services.
There are two different scenarios in which your estate may be exempt. If your loved one began receiving long-term Medicaid benefits prior to March 1, 2005, than the estate is exempt from MERP. If your loved one began receiving long-term Medicaid benefits on or after March 1, 2005, Medicaid funds may be recoverable by the state, but only for those services received when the loved one is 55 or older.
MERP in Probate
Under MERP, the state’s only tool to recover is as a claimant in probate court. A requirement of probate is that all creditors be notified of the estate’s probate, the name of the executor or administrator, and how to file a claim. This is usually a notice published in the local paper where the probate occurs. Upon notification that a Medicaid recipient has died, the state will file a claim as an unsecured creditor. Before the house can be transferred, all debts must be paid. This means that if the estate doesn’t have enough liquid assets, and none of the heirs can pay the debt in cash, the home will need to be sold.
What Can We Do?
While avoiding a MERP claim is difficult, it is not impossible. There are several exemptions, as well as some ways of defeating a claim. The exemptions typically relate to the decedent’s survivors. If the decedent is survived by a spouse, a disabled adult child, a child under 21, or an unmarried adult child who has resided in the residence for one year prior to the decedent’s death, than the state will not make a claim. If a claim is filed and one of the above statements is true, than the claim can be successfully defeated. Keep in mind that the state must follow the probate code as unsecured creditors as well. So it may be possible to bar a claim by sending a certified notice letter to the Texas Department of Aging and Disability Services. If this is done, it will shorten the amount of time the state has to make a claim on the estate to 30 days, from the standard 4 months. If they fail to make a claim within the requisite time, the claim will be barred from recovery.
The best way, however, is to plan properly. It is great that dad was able to spend his time in a decent nursing home without needing to sell his home, but if it won’t go to the people he wants it to after he dies anyhow, than what was the point of all that planning? Planned properly, you should never be in this situation in the first place.