Families often believe that once a loved one is eligible and a recipient of long-term Medicaid that the remaining family assets are protected. This is not entirely true due to various Federal and state Medicaid repayment laws. In 1993, the Omnibus Budget Reconciliation Act was enacted, and it required all states to implement a Medicaid Estate Recovery program (MER) and to seek reimbursement of long-term care costs for persons who are 55 years of age or older. Long-term care expenses include but are not limited to nursing home care, home and community-based services to prevent premature residence in the nursing home facility, and hospital/prescription drug costs. MER rules allow Medicaid to seek reimbursement for long term care expenses through the Medicaid beneficiary’s probate estate. Probate matters are those strictly in the deceased Medicaid beneficiary’s name only or property held as tenants in common where the deceased Medicaid beneficiary’s interest does not automatically transfer to the other owner. While all states allow Medicaid to seek reimbursement for costs through a decedent’s probate estate, some states also allow Medicaid to go after the deceased Medicaid beneficiary’s non-probate assets.
The Expanded Estate Recovery program (EER) is an optional program that states may adopt that will allow Medicaid to seek reimbursement for long-term care expenses through the deceased Medicaid beneficiary’s non-probate assets. Assets that do not go through probate are typically assets jointly held other than by tenants in common, life estates, and assets in a living trust. Virginia is an EER state, and as such, Virginians are subject to (EER) payback provisions.
Consider the following common scenario: Mom is a resident of a local nursing home and is a Medicaid beneficiary. All of Mom’s interest in the home is transferred into Dad’s name alone under the Medicaid spousal transfer rules. Dad is now in the nursing home too. Without careful planning, Dad’s Medicaid eligibility could be in danger if the children hastily decide to sell the home to remove it from Dad’s estate. If the children sell the home, a portion of the proceeds from the sale will go to Dad, and this will adversely impact his Medicaid eligibility causing him to become disqualified for many months. Dad’s disqualification will force the children to pay out of pocket for his care until he becomes Medicaid-eligible again. If Dad’s interest is a life estate interest, then selling the home will also cause adverse tax consequences for the children. If the children sell the house as remaindermen of Dad’s life estate interest, then they are going to be subject to the capital gains tax because they did not reside in the home and are considered remaindermen of Dad’s interest. They will not receive the capital gains tax exclusion, thus creating a large tax bill for the children. Finally, in Virginia, anything in Dad’s probate estate and non-probate estate could become subject to Virginia’s EER rules, leaving the children less of an inheritance, if any at all.
If you or a loved one are considering long-term care planning, contact our office to meet with our Elder Law attorneys to protect your home and estate from Virginia Medicaid’s Expanded Estate Recovery.
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