New Medicaid Rules

Last Summer, the State enacted new Medicaid rules that significantly expanded the State’s ability to recover assets owned by someone enrolled in the Medicaid program after that person passes away. The Medicaid rules exempt certain assets when someone applies for medical assistance. However, the State may make a claim against the retained assets after the recipient’s death. Historically, the State’s ability to recover was limited to probate assets, certain joint and payable on death accounts, and, if a lien was in place, the decedent’s home. Now the State has expanded the ability to recover from nonprobate assets, such as those held in revocable trusts and from real estate in which the decedent held a life estate (the retention of the right to live in the property for life), both of which were frequently used estate and Medicaid planning techniques.

When the new Medicaid rules were enacted, the State was given the ability to recover from revocable trusts and life estates, but it was unclear whether this right applied to revocable trusts and life estate interests created before the law was enacted. Initially, the State indicated that timing did not matter and there would be no grandfathering of existing documents. For example, if, twenty years ago, parents gave their home, cottage, or farm to their children, but retained a life estate, the concern was whether the State could make a claim against the property transferred if the parents passed away after the law was enacted.

Wednesday afternoon, the Department of Health Services issued guidance that specifically addresses these questions. The State will not recover from assets held in previously executed revocable trusts and life estates. These estate planning techniques will be grandfathered. The State has also stated that revocable trusts and life estates created prior to August 1, 2014 will not be subject to later estate recovery by the State.

Therefore, if you currently have a revocable trust or life estate in place, you need no longer be concerned with the State’s ability to make a claim against them. More importantly, until July 31, 2014 you will have the ability to protect your assets using estate and Medicaid planning techniques, like a revocable trust or life estate.

This article is intended for general informational purposes only, and should not be construed as legal advice. Always contact your legal counsel for advice or answers to your questions.

Weld Riley, S.C. was founded in 1991. The firm consists of lawyers across four offices (Eau Claire, Menomonie, Wausau and Black River Falls) and offers a full range of legal services, including labor and employment, business law, estate planning, tax representation, municipal law, mining and mineral rights, environmental law, banking and creditor rights, civil litigation, criminal defense, immigration, and family law.