Although Medicaid can be very beneficial in helping the elderly and disabled receive medical benefits, the local Department of Social Services may also try to regain the money provided to these people by attaching liens to their homes and other types of assets. In order to avoid liens, planning ahead is essential. Ways in which liens may be avoided include making gifts and transfers, designating beneficiaries making accounts or assets joint, or setting up trusts.

Most Medicaid recipients assume hat just because they receive Medicaid benefits they are free and clear of financial commitments. However, many relatives of these recipients find out too late that a lien has been attached to the recipient's estate. Medicaid will attach a lien for improperly paid assets or after death for payments made for institutional care.

It is important to note that Medicaid can only attach the probate estate of a recipient. That means assets that pass through a person's will or, if there is now will, Assets that pass by law. Buy avoiding probate, the lien can be avoided. All of the methods mentioned above will avoid probate. For example, a bank account held jointly with another individual with a right of survivorship automatically will pass to that person when the first joint tenant dies, no matter what the will states. Such an account is not subject to a lien. Also, if an individual retains a life estate in real estate, on their death their interest terminates and the person named as remainderman the deed takes full title. Since the life estate terminates on death, there is nothing for Medicaid to attach a lien to. Also, assets are not part of a probate estate and will not be subject to Medicaid estate recovery if these assets have been gifted or have been put in an irrevocable trust fund.

There are two issues for spouses to keep in mind when trying to avoid liens. The first is whether the spouse of the Medicaid recipient has assets above or below the resource allowance when the ill spouse dies. If the assets are below, then there is no recovery against the spouse's estate. If it is above, then the state will attempt to recover the entire amount of medical assistance provided to the recipient spouse. The designation f beneficiaries of assets and the use of trust funds increases the possibility of avoiding estate recovery and liens.

The second issue is when the "well" spouse dies first. At this pint, the Medicaid recipient spouse is entitled to an elective share of the assets of the deceased spouse, which can be one-third or one-half of the total assets. This share usually will disqualify the spouse for continued Medicaid benefits and will have to be spent before reapplying. This undesirable result can be avoided if the well spouse is prepared to make gifts or set up a trust fund during his or her lifetime.

Medicaid recipients and their spouses should not be lulled into a false sense of security once benefits are obtained. Thy must be aware that their assets still are in danger and take the proper planning precautions.

Reprinted with permission of the Suffolk Times © 1999

The Law Offices of John M. Bigler, Attorney At Law
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