Understanding Estate Recovery

By: The Greater Wisconsin Agency on Aging Resources Legal Services Team

If you use certain Medicaid benefits during your lifetime, your estate may be subject to Estate Recovery after your passing. The State does this so it can recoup the costs of your care and use those funds to help more people. Although Estate Recovery can be complicated, it is important to understand the basics to prepare yourself, your family, and your legal representatives so that you feel comfortable signing up for Medicaid and accessing any services you need. 

Should you apply for Medicaid?

Some people are afraid to use Medicaid programs available to them because they are under the mistaken belief that anyone who uses Medicaid will “lose their house.” However, it’s important to remember that millions of Americans benefit from Medicaid, receiving key services that help improve health outcomes, quality of life, and personal dignity. Furthermore, not all services provided by Medicaid are recoverable.

Which Medicaid Programs Are Subject to Estate Recovery?

In general, recoverability depends on which services you received, as well as your age and residence when you received the benefit. Medicaid recipients who move into long-term care facilities may be subject to Estate Recovery. This can include nursing homes, skilled nursing facilities, and institutionalization in an inpatient hospital. Some services you receive in your home if you are 55 years old or older are subject to estate recovery as well. This can include skilled nursing services, home health aide services, and more. For more information, please see pages 1-3 of the Estate Recovery Program Handbook here: https://www.dhs.wisconsin.gov/publications/p1/p13032.pdf. 

How Does Estate Recovery Work?

After you pass away, the State will seek repayment for services you received during your lifetime from both your estate and non-probate assets. The State can also seek recovery for services you received from your spouse’s estate and non-probate assets after they pass away. The State is limited in their recovery efforts to assets you, as the Medicaid recipient, had an interest in at your death. If the State is seeking Estate Recovery, they will file a claim against your estate and send a notice to your surviving spouse or Personal Representative. Note that your family may receive this notice 9-12 months after your passing, so they should be careful and work with an attorney before spending those funds. The State will assume that the full claim amount is available--your spouse or Personal Representative must be ready to explain to the State why any amount of the claim is not available. 

The State can recover from your legal assets, including real and personal property, life insurance, revocable trusts, joint accounts, payable on death accounts, any excess in your funeral trust, and annuities. 

The good news is that there are several protections in place to help your surviving family members after you pass away, even if your property is subject to Estate Recovery. Some of your personal items and tangible non-business personal property can be exempted to pass on to your heirs. You can also set up a funeral trust to cover your funeral expenses, and those funds are not subject to Estate Recovery. Further, the State may not bring a claim while your spouse is alive, or if you have a child under 21, or a disabled child of any age. While the State may file a lien on your real estate, the lien will not be satisfied until the property is sold. There are additional protections available against Estate Recovery, so it is important to work with an attorney to protect your assets.

Who can help me prepare for Estate Recovery?

Estate Recovery falls under the purview of Medicaid planning, a complicated area of the law. Some people think that any estate planning attorney can provide advice regarding Medicaid and Estate Recovery. However, Medicaid planning attorneys and estate planning attorneys can have different goals or strategies because Medicaid planning is focused on qualifying for Medicaid benefits, while estate planning is focused on distributing assets to your heirs. Because of this distinction, questions regarding Estate Recovery must be handled by an experienced Medicaid planning attorney.  WINAELA maintains a directory of Wisconsin Medicaid planning attorneys who can help you here: https://winaela.org/