Medicaid can provide payment of costs for medical care and nursing home care. The value of qualifying for Medicaid can be significant, especially for a person who has become disabled and who needs costly care. However, receiving Medicaid benefits does not always come without strings attached. When you obtain Medicaid benefits, it is possible that the state may try to recover some of the money spent on your care from your estate. This can affect your ability to leave a legacy behind for your loved ones.
Unsworth Law understands the rules for Medicaid recovery and can provide assistance with special needs planning designed to ensure you can qualify for Medicaid benefits and protect your assets when possible. Give us a call to speak with an Essex Junction estate planning attorney to learn about Medicaid recovery, special needs trusts, and effective Medicaid planning.
Medicaid Estate Recovery
Medicaid is a federal program administered by individual states. The federal government provides funding to offer benefits to those who qualify for Medicaid. However, states must comply with certain federal rules.
For example, 42 U.S.C. § 1396a(a) is a federal law stipulating that a state’s plan for medical assistance must comply with certain requirements with respect to “liens, adjustments and recoveries of medical assistance correctly paid, transfers of assets, and treatment of certain trusts.”
The requirements that state plans must comply with are found in Section 1396(P). These requirements stipulate that:
- States have to try to recover from all real property, all personal property, and other assets that are included with an individual’s estate as defined by state laws on probate.
- States have the option to seek recovery from other assets that an individual who received benefits had an interest in at the time of his or her death. This can include assets that were conveyed by the individual who received benefits to heirs or survivors through a joint tenancy, survivorship, tenancy in common, living trust, life estate or certain other arrangements.
Because of these provisions of federal laws, there are estate recovery programs operating throughout the United States. The government tries to collect available assets when a deceased passes away if Medicaid benefits for nursing care and other types of care were paid out.
Special Needs Planning and Medicaid Coverage
Qualifying for Medicaid can require that you have limited assets and a low income. In some cases, a person who is disabled will receive assets or income from a personal injury settlement, an inheritance, or another source. The receipt of money and assets could disqualify the individual from getting continued Medicaid benefits.
However, federal and state laws allow for the creation of special needs trusts, or Medicaid payback trusts. The trust has to meet requirements that are set forth under section 1917 of the Social Security Act in order to be able to protect assets while allowing a special needs individual to qualify for Medicaid.
The Omnibus Reconciliation Act of 1993 (called OBRA ’93) addressed the creation of special needs trusts. These trusts must be irrevocable in order to make the assets held in the trust no longer count as an asset for Medicaid eligibility purposes. However, the rules for these trusts establish that the state Medicaid agency has a lien against the assets held in the trust. The state Medicaid agency can recover costs that were spent through the Medicaid program to provide for the medical needs of the disabled individual.
The state is able to try to recoup any assets remaining in the trust upon the death of the disabled individual, up to the amount of Medicaid benefits paid out during the disabled individual’s lifetime.
When a special needs trust is created, it should be funded only with assets that belong to the person who is eligible for Medicaid, not with third party assets. These types of trusts are commonly funded with medical malpractice settlements, personal injury settlements, inheritances, and other assets that the special needs individual has an ownership interest in. A trustee is named to manage the assets that are held in trust and that are made available to supplement medical assistance and enhance the quality of life of the special needs individual.
Getting Help With Special Needs Planning
If you need to preserve Medicaid eligibility for yourself when you have received an inheritance or settlement or if you have a loved one who is disabled, you need to get help with special needs planning. You also need to understand how estate recovery rules will affect the assets put into a trust. Contact Unsworth Law at (802) 879-7133 or contact us online today to learn more.
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