With effective planning, you can reduce your assets and your income so that you qualify for Medicaid. This could allow you to protect your assets while ensuring that you have the resources needed to pay for your medical and long-term care needs, including a nursing home stay. But the process isn’t as straightforward as it seems. This is because the federal government requires MassHealth, the state’s Medicaid program, to make efforts to recoup funds expended for care from a deceased individual’s estate. So, even if you reduce your assets and income to qualify for Medicaid, your estate will still be subjected to estate recovery.
Therefore, if you’re not careful, your assets could be snatched up by the government once you pass away, even if you left those assets to beneficiaries. Although that can be scary and stressful to think about, there are steps you can take to protect your estate from the recovery process.
When does estate recovery kick in?
Not all estates are subjected to the estate recovery process. Before the government can try to claim your estate’s assets, they must demonstrate that your estate has a probate value of at least $25,000. In many instances, an individual’s estate is already reduced below this point when they initially sought to qualify for Medicaid. Using trusts, gifting, and other estate planning methods, many of your assets can skip the probate process, removing them from estate recovery efforts.
What if you have other assets that could be subject to estate recovery
You might have assets that are technically still part of your probate estate but that weren’t counted for purposes of MassHealth eligibility. For most individuals, this includes their home. But you don’t want to lose your house through the estate recovery process. So, what can you do to protect it and ensure that you can leave it to your loved ones? Here are some options that might be available to you:
- Transferring ownership: You can remove your home from your estate by outright transferring ownership to someone else. While this is a viable option, you should be mindful that transferring ownership will disallow you from drawing on the home’s equity, prevent you from selling the home, and eliminate the guarantee of remaining in the home since the new owner could force you out whenever they want. Keep in mind, too, that transferring the property will implicate the five-year lookback period and could lead to a penalty.
- Using an irrevocable trust: Here, you transfer ownership of the home to the trust. Once you do so, you can’t change your mind and reclaim ownership of the residence. So, although this could be a helpful option, it’s also very permanent, even if you end up not needing long-term care.
- Using a life estate: With this type of trust, you’re allowed to reside in the home while ownership automatically passes to your named beneficiary at the time of death, which allows the home to bypass the probate process. A life estate eliminates many of the concerns associated with an outright transfer, making this a viable option for many.
Competently navigate your MassHealth planning
Navigating MassHealth can be complicated and confusing. But you need to make sure you have a solid plan in place if you want to protect your interests in securing long-term and medical care while shielding your assets for your beneficiaries.