NY State’s expanded estate recovery has cast a wide net.  Many of my clients whose parent or parents received benefits before the law’s effective date in September 2011, and where death occurred before September 2011, have already received letters of ‘condolence’ with a Medicaid Estate Recovery Questionnaire from the NYS collection agency based in Texas. Note that emergency recovery regulations have lapsed, but NY State is expected to publish new regulations shortly.

Before you complete and submit the questionnaire, if you are a former or present client of this office, you can consult with my law firm as to whether or not it is legally appropriate to do so.

For others, it is important to note that the expanded recovery has exceptions:

• The first ‘exception’ is deferral or postponement of the recovery.  My next blog will discuss waiver of the recovery.
• There is no recovery during the lifetime of the surviving spouse, or at any time there is a child of the Medicaid beneficiary under the age of 21 years, or a child of any age who is blind or disabled (receiving social security disability or SSI).  When the prohibited period ends (the spouse dies, the minor becomes age 22 or older), the recovery will be pursued by NYS. 
• A sibling with an equity interest (ownership share) in a home in which he or she lived with the Medicaid recipient at least one year before the recipient’s nursing home placement, and who continues to live in the home, will have the claim postponed until the home is sold or the sibling in equity dies.
• An adult child who lived in the home for at least 2 years before the Medicaid recipient parent entered a nursing home, and who continues to live in the home, will have the claim postponed until the home is sold or the adult care giver child dies.
• For both the sibling in equity and the adult care giver child, Medicaid is permitted to place a lien on the home and record the lien in the county clerk’s office.  This lien may affect the ability of the sibling or adult child to obtain a mortgage or refinance a mortgage if necessary after the death of the Medicaid recipient.
• In some situations, a request that recovery be waived in full or in part should be made if payment of the lien will result in undue hardship.
• In addition, Medicaid has indicated it will postpone/defer recovery on real property (even if not the homestead) if an heir or survivor of the Medicaid recipient has lived in the property from just prior to the Medicaid recipient’s death and is unwilling to sell the real property; the claim cannot be paid unless the property is sold because there are no other liquid or cash assets; and the heir or survivor can demonstrate he or she is unable to obtain financing (such as a mortgage) to pay the claim.  In addition, the heir or survivor must enter into a reasonable payment schedule with Medicaid, and agree to pay ‘reasonable’ interest. 

For example, assume an adult child and his or her family move back to the parent’s home to provide care and management for the parent.  They reside with the parent for one year while the parent receives Medicaid for care and then the parent dies.  The adult child is not a ‘caregiver’ adult child because he or she did not live in the home for 2 years and therefore cannot apply for a deferral of recovery. 

Instead, if the adult child is unwilling to sell the home, no other assets were owned by the senior to pay the claim, and the adult child does not qualify for a loan or financing to pay off the claim due to their personal lack of employment or credit issues, Medicaid should then permit the adult child to enter into a reasonable payment schedule with reasonable interest, and/or should defer the claim. It is hoped that future regulations will make more clear this option for the adult child.

Next week’s blog – Waiver of Recovery by Medicaid

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Let’s start with an explanation of estate recovery. 

For years, New York State Medicaid has lawfully filed claims with the Surrogate’s Court asking to be repaid from an estate by will or without a will (called “intestacy”) for care at home or in a nursing home paid during a beneficiary’s lifetime. Medicaid files its notice of claim with the total amount paid. Note that Medicaid may only recover for benefits paid for an individual age 55 years and older.

The estate representative (executor or administrator) has a duty to pay the claim – or negotiate the claim – or face serious consequences, including personal liability for the claim amount, if Medicaid is not repaid before the estate is distributed to the heirs. 

If an estate representative claims ‘ignorance’ about Medicaid benefits paid, the court uses the standard that the representative ‘knew or should have known’ the deceased individual was receiving Medicaid to pay for nursing home care or home care.  

The process for expanded recovery is more complex and will create a difficult burden for joint account owners and beneficiaries of accounts, remainder owners on life estate deeds, and annuity beneficiaries.

For remainder owners on life estate deeds, expect to receive a notice that a lien will be filed against the property. The notice must provide the remaindermen with an opportunity to defer (postpone) or waive the claim, or to establish undue hardship. NY State will also file a notice of lien in the local county clerk’s office. 

It is not yet known how NY State will pursue recovery against other assets such as joint accounts, beneficiary accounts, and annuities.   Revised regulations are expected in the near future.

My next blog will discuss the deferral and waiver of recovery under the new law.

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In my prior blogs, you learned  that NY State has expanded its right to recover after a beneficiary’s death for the Medicaid expenses paid for the beneficiary. The expected regulations and draft administrative directive also describe circumstances for deferred or delayed recovery, waiver of recovery and undue hardship to reduce or eliminate recovery.

Assets or property which are affected by the expanded recovery include:

• Life estate deeds;
• Jointly owned bank or investment accounts (and those with designated beneficiaries);
• Other jointly owned real estate – other than the homestead which has special rules as discussed in a prior blog;
• Annuities with designated beneficiaries other than if the beneficiary is a spouse or NYS Medicaid or adult disabled child;
• Assets and income in a Revocable Living Trust, which are now fully recoverable after the death of the recipient and their spouse. 

Of concern is whether retirement funds – IRAs, 401k, Roth IRAs, etc. – will be subject to expanded recovery.  There are several other laws which usually prevent creditors from attaching retirement monies, including the federal ERISA anti-alienation statute, federal bankruptcy, and New York’s statute exempting collection against certain retirement monies by judgment creditors.

I am pleased to report that the New York State Bar Association’s Elder Law Section will be tracking recovery efforts for possible legal challenge.

Of particular interest is the fact that life insurance proceeds payable to a beneficiary will not be subject to estate recovery.  As well, other special assets, such as Holocaust reparation accounts, are not subject to recovery.

How will NY State recover against these non-estate assets?  Watch for my next blog.  

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Good news: New York State’s expanded estate recovery against life estate deeds and other assets owned by the Medicaid recipient or their spouse, even if there is a joint owner or beneficiary, will not affect the legality of planning to preserve assets with an irrevocable living trust (Medicaid Trust).

Irrevocable living trusts enable you to transfer your assets to the trust; legally shelter trust assets from Medicaid claims or recovery after your death; and permit Medicaid benefits to be paid during your or your spouse’s lifetime if the penalty of 5 years has expired. Note that for home care only, there is currently no penalty for transfers made to qualify for home care.

When properly done, the irrevocable trust also:

• Retains real estate tax reductions;
• Provides a sound method for management of trust assets without the risk that an adult child or other beneficiary might jeopardize your assets due to their divorce, bankruptcy, or other creditor issues;
• Minimizes capital gains income tax on the sale of trust assets with a step up in tax basis following your death under current tax law; and
• Distributes trust assets after your death without the expense of probate.

Under the expanded estate recovery rules, the principal of the trust is protected from recovery after the death of the trust owner/beneficiary or their spouse.  If the trust document distributes ‘income’ to the senior beneficiary, Medicaid is now permitted to recover against accumulated income.  

However, all Medicaid recipients in a nursing home or receiving home care are required to receive and pay over income from all sources – including a trust – towards the cost of their care, with Medicaid paying the balance.  Thus, the likelihood of income accumulating in the trust and subject to recovery would be a small burden.  And, if a home has been transferred by deed to the irrevocable living trust, and is not used as a rental property, there may be no accumulated income at all for recovery. 

In other words, the best option for preserving the largest asset you may own – for many seniors this is their home – is an irrevocable living trust.

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My Dec. 11, 2011 blog discussed Medicaid’s expanded recovery against life estate deeds. 

For my clients who have prepared such deeds, consider these suggestions before you panic about what could happen to your estate and Medicaid plan:

• It may be more beneficial to keep the existing deed in place because the transfer or gift of the life estate to the remaindermen (persons to whom the home is transferred) will create a new penalty period for nursing home care if Medicaid is needed.  And, if there is no power of attorney, a legal guardianship proceeding may be needed to lawfully transfer pr extinguish the life estate interest.
• The value of lower real property taxes from enhanced STAR, senior exemption and/or Veterans exemption may be worth more than the recovery against the life estate value based upon the senior’s age and life expectancy and the value of the home.
• If an adult child has resided with the parent at least 2 years before the senior received Medicaid (called the “care-giver child”), consider a transfer/gift of the life estate to that adult child  if he or she can afford the increase in the real property taxes.
• If an adult child is disabled, consider the transfer of the life estate to that child.  Remember that their real property taxes may increase. 
• If no change was made to the life estate deed, and the Medicaid recipient dies, there may be compelling circumstances or hardship to the remaindermen on the deed which would reduce or waive recovery against the life estate by Medicaid. Consult my office to determine if your circumstances qualify for this exception.
• Typical life estate deeds are created when the senior transfers the remainder of the home to family and the senior still retains the life estate. Medicaid will also recover against a life estate interest that was granted for the benefit of the senior if the life estate owner dies within 5 years of the grant of the life estate. 

As I always tell my readers, the best plan is to have a plan. 

If you are a past client of this law firm with a life estate deed, contact the office to determine which option is best for you and your family.

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 My Dec. 11, 2011 blog discussed Medicaid’s expanded recovery against life estate deeds. 

For my clients who have prepared such deeds, consider these suggestions before you panic about what could happen to your estate and Medicaid plan:

• It may be more beneficial to keep the existing deed in place because the transfer or gift of the life estate to the remaindermen (persons to whom the home is transferred) will create a new penalty period for nursing home care if Medicaid is needed.  And, if there is no power of attorney, a legal guardianship proceeding may be needed to lawfully transfer pr extinguish the life estate interest.
• The value of lower real property taxes from enhanced STAR, senior exemption and/or Veterans exemption may be worth more than the recovery against the life estate value based upon the senior’s age and life expectancy and the value of the home.
• If an adult child has resided with the parent at least 2 years before the senior received Medicaid (called the “care-giver child”), consider a transfer/gift of the life estate to that adult child  if he or she can afford the increase in the real property taxes.
• If an adult child is disabled, consider the transfer of the life estate to that child.  Remember that their real property taxes may increase. 
• If no change was made to the life estate deed, and the Medicaid recipient dies, there may be compelling circumstances or hardship to the remaindermen on the deed which would reduce or waive recovery against the life estate by Medicaid. Consult my office to determine if your circumstances qualify for this exception.
• Typical life estate deeds are created when the senior transfers the remainder of the home to family and the senior still retains the life estate. Medicaid will also recover against a life estate interest that was granted for the benefit of the senior if the life estate owner dies within 5 years of the grant of the life estate. 

As I always tell my readers, the best plan is to have a plan. 

If you are a past client of this law firm with a life estate deed, contact the office to determine which option is best for you and your family.

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As a reader of this law blog, you know that in April 2011, New York State enacted a significant change to existing Medicaid laws. This change expands the reach of recovery for benefits paid on behalf of a Medicaid recipient from only the recipient’s estate (or that of their spouse) to now encompass non-estate property and assets. These may include a life estate in a deed, jointly owned accounts, and accounts with designated beneficiaries.  Life insurance is exempted from the statute.

The New York State Bar Association’s Elder Law Section has been working hard to clarify the law’s reach and to also address constitutional issues on whether the law would be retroactive to before April 1, 2011. 

Good news…

I am pleased to report that last week the Chair of the Elder Law Section announced that New York State intends to issue regulations (following a required statutory comment period of 60 days) to make the newly expanded Medicaid estate recovery effective as of the death of the Medicaid recipient (or their spouse, as applicable) on or after July 1, 2012 for assets and accounts other than life estate deed transfers.  These proposed regulations will also present a listing of the types of property that will be eligible for Medicaid recovery upon the death of the Medicaid recipient (and their spouse, as applicable).  

Unfortunately, there is still no clarification or change, as of this writing, on recovery against life estate deeds recorded before April 1, 2011 (the statute’s effective date) or the retroactivity for payment of Medicaid benefits if the recipient dies on or before July 1, 2012.  Additional details will be provided to you here in this blog whenever this office is informed.

Yet to be resolved…

Another unresolved part of the expanded recovery is the proposed treatment of retirement accounts.  Unless you as the consumer are successful in your efforts to change the opinions of our elected officials in the NYS Assembly and Senate, retirement accounts (IRA, 401K, etc.) may be subject to claims of repayment for Medicaid paid during the life of the recipient. 

This is troubling because current Medicaid law permits the Medicaid recipient and their spouse to own retirement accounts that are ‘exempt’ as resources, as long as the accounts are in ‘pay status’ (meeting the required minimum distributions for married persons, and higher distribution levels for single individuals), and to designate a beneficiary of those retirement accounts. 

By contrast, other laws ­– including NYS judgment and collection laws, federal bankruptcy laws, and federal ERISA (pension protection) laws – limit or prevent claims from being made against retirement monies.  

We will keep you informed here as we learn more about these issues.

Wishing you and your loved ones a very happy and healthy new year.

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Many seniors transfer their homes or other real estate to family members and retain the right to reside in, use and occupy the home or real property. This retained right is called “a life estate”. The life estate permits the senior to also retain real property tax reductions (STAR, Veterans exemption) if they live in the home – called “a homestead”. 

Under Medicaid law prior to at least September 2011, at the death of the life estate owner, no recovery was permitted to Medicaid for benefits paid on behalf of the recipient. This was because the life estate was considered to have ‘died’ along with the deceased senior. 

Now Medicaid can recover against the life estate and seek repayment from the remainder family members listed on the deed after the recipient and their spouse have both died. 

To do this, Medicaid must determine the life estate interest value based upon:

• The home’s value as of the date of death of the Medicaid recipient
• Age of the Medicaid recipient the day before their death; and
• An Internal Revenue Service table which combines an interest rate for the month of death and age of the life estate owner to calculate a percentage or factor of the life estate owner compared to the whole property. 

For example, according to the IRS, an 86 year old who dies in November 2011, will own about 7% of the home at the time of their death.  If the home is worth $450,000, the maximum Medicaid may recover is about $34,000, even if the actual Medicaid benefits paid during the recipient senior’s lifetime exceed this sum.

Recovery is postponed (deferred) against a homestead in any of these scenarios:

• There is a surviving spouse; or,
• A sibling of the recipient with an equity (ownership) interest has lived in the home at least one year; or
• A care giver child has lived in the home at least 2 years; or
• While a disabled child of any age lives in the home; or
• While a minor under the age of 21 years lives in the home.

On September 26, 2011, New York State issued its administrative explanation (called an ADM) and regulations on the expanded recovery against deceased Medicaid recipients and their spouses. This ADM came nearly six months after Governor Andrew Cuomo and the NYS Legislature passed sweeping proposals to alter Medicaid and implement cost savings measures on April 1, 2011. 

One of those measures expands “estate recovery” beyond estates in probate (dying with a will) or intestacy (dying without a will). Expanded recovery for Medicaid benefits will now be against:

• Jointly owned assets between a Medicaid recipient and a spouse or other third party such as joint bank or financial accounts or in trust for a designated beneficiary;
• Real estate owned as tenants in common or jointly; and
• Real property deeds with retained life estates owned by the Medicaid recipient or their spouse.

Revocable Living Trusts – another way for spouses of Medicaid recipients to avoid probate estate recovery and thus avoid Medicaid claims – are no longer a viable Medicaid planning tool to prevent recovery once the recipient or the spouse die.

The ADM and regulations appear to be effective for recoveries made on or after September 8, 2011.  The most troubling aspect of the new regulations is that NYS is expected to file claims against life estate deeds which pre-date the effective date of the regulations.

My next blog will discuss Life Estate deeds and expanded recovery. 

Future blogs will discuss other recovery issues, the importance of irrevocable living trusts, and deferral and waiver of recovery.

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Changes to New York State’s programs for community care and assistance are pending approval from the federal government, called a ‘federal waiver’.  Some of the proposed changes affect the level of services seniors and the disabled (over age 21) may receive.  While it is too soon to worry, it is time to consider consequences and options:

Personal Care Aide/home attendant program:

• After an application for community Medicaid is accepted, typically a Medicaid nurse comes to assess the tasks the senior or disabled person require. This assessment results in a total number of hours of care and assistance at home.  These tasks are governed by regulations and typically classified as ‘Levels’. 
• Thus far, the proposal for Level 1 tasks (housekeeping and meal preparation/nutrition) reduces services from 12 hours per week to 8 hours per week if the recipient only receives this level of services.  
• Additionally, expect the task evaluation to be performed by a managed care agency and not by the local DSS Medicaid nurse, as NYS transitions virtually all recipients into managed Medicaid or managed long term care Medicaid.
• At present, the change for personal care aides should only affect persons who do not have Medicare and only receive Medicaid (referred to in the law as ‘non-dual eligibles’).
• Also expect that 24-hour (sleep- in) care could be reduced or subject to stricter standards, with definitions of those standards still pending.

Consumer Directed Personal Assistance Program (CDPAP):

• Allows the Medicaid recipient to have his or her own aide – who must be a U.S. citizen or have a green card, and have no criminal history – register with a CDPAP agency. 
• The consumer/recipient is responsible for training their own aide(s).  Medicaid pays the aide.
• Typically, these aides are not restricted as to types of care provided (Levels, feeding tubes, etc.) because the consumer, not Medicaid, is responsible for the aide.
• This program could be affected by the changes described above.

Managed Long Term Care (MLTC): 

• Managed care of any type is designed to control costs in the delivery of services to seniors and the disabled (over age 21) in the community. 
• It is expected to affect the Personal Care Aide program, certified home health agency (CHHA – such as Lombardi) and CDPAP. This affects the delivery and extent of services. 
• Certain groups will not yet be required to enroll in MLTC even where care in the community exceeds 120 days. These groups include, but are not limited to:
  • Breast Cancer Treatment Program
  • Native Americans
  • Services for developmentally disabled persons under OPWDD and for brain injured persons through TBI waivered programs  – until certain features and reimbursement rates are approved by NYS DOH and OPWDD
  • Hospice.  

The discussion for MLTC continues in my next blog.

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