What is the process when Medicaid Estate Recovery claim can’t be or isn’t waived? Once it is determined the claim can’t be waived, the estate of the deceased Medicaid recipient has a claim against it that the State of North Carolina would like to have satisfied.
However, just because they have a valid claim doesn’t necessarily mean that it’s going to get paid. The same could be said of any claim made against an estate. In order for claims to be paid, there must be assets in the estate with which to satisfy said claims. No assets in the deceased recipient’s estate? Then most likely, Medicaid (and any other creditor) won’t get paid back.
Let’s look at the process, but let me start by making an important point: estate recovery liability does not, in North Carolina, extend beyond the Medicaid recipient. If your husband, mother, father, brother, or best friend was receiving Medicaid, and you are named as executor of their estate or get appointed as administrator, and you get an estate recovery notice, do not panic. Medicaid will not be coming after you personally. They are only coming after the estate. Your job is to just make sure things get done correctly.
So what happens? The deceased person’s estate is opened , and the executor or administrator takes stock of what the person owned. If they were receiving Medicaid, chances are they didn’t own much, and if they owned anything of significant value, it was most likely real property. Real property that passes to heirs by virtue of either a will or intestacy is considered part of a person’s estate, and can be claimed by creditors for payment of debts. However, because of the way the law treats real property upon death, it must be “reclaimed” (for lack of a better term) by the estate to be sold to satisfy those claims.
The executor or administrator would therefore be responsible for filing the proper petitions and paperwork for reclaiming the real property so that it can be sold. Once this process is complete, the real property is sold, the proceeds from the sale are added to the estate, and debts can be satisfied.
Quick example: Bob received Long Term Care Medicaid Assistance for three years prior to his death. He is a widower, and his will names his two children, Lauren and William, as beneficiaries. Lauren is the Executrix. Bob passes away, and Lauren opens her father’s estate. Her father’s estate consists solely of his home, valued at $125,000.00. Not long after opening the estate, Lauren receives an Estate Recovery Claim in the amount of $70,000.00. Her father also has a credit card bill totaling $12,000.00.
Lauren realizes she has $82,000.00 in debts that must be paid, and the only asset with which to pay those debts is the home. Lauren hires an attorney, who files the necessary paperwork and follows the necessary process to reclaim her father’s home for the estate. This means that the home, which was supposed to go to Lauren and William, no longer belongs to them, but rather belongs to the estate.
At this point, Lauren hires a realtor who lists the home for sale. After a month or so, Lauren receives a couple of offers, the highest of which is for $80,000.00. Lauren, on the advice of the realtor, accepts the offer. The offer is approved by the court, and the sale takes place, meaning that Bob’s estate now has $80,000.00 in cash with which to pay debts. As you can see, this isn’t enough money to pay both debts. So what must Lauren do?
North Carolina’s General Statutes outline how debts are to be satisfied in situations where there isn’t enough money to pay them all in full (that statute can be found here). I will try and cover priority in a later post, but under the law, the Estate Recovery Claim has priority over the unsecured claim of the credit card company. When a claim has priority, it gets satisfied in full (if there are enough funds to fully satisfy it) before the claims over which it has priority get satisfied.
In this case, Medicaid’s Estate Recovery Claim would be satisfied in full, and the credit card company would receive the remaining $10,000.00. The credit card company must take this amount in satisfaction of its claim in full — it has no other recourse.
There are ways to avoid the inclusion of real property in a decedent’s estate, even after a person has qualified for Medicaid. Additionally, there are details related to the probate process that I either glossed over or skipped in the interest of making the post as brief as possible. As always, consult with an attorney (like me!) if you are facing any of these situations.
How Does Estate Recovery Work?
At least once a week, I have a Client that will ask about Medicaid’s Estate Recovery Program. Admittedly, they don’t use those words. It’s more commonly phrased in the way in which they’ve heard about it: the government selling the house or taking everything you’ve got. This generalization isn’t necessarily incorrect, but it oversimplifies the issue. Hopefully this post will provide some clarification.
Estate recovery is the law, and it’s codified in the North Carolina General Statutes in Chapter 108A. A link to the statute is here. What the statute says in simpler terms is that anyone who receives one of six types of medical care that is paid for by the North Carolina Medicaid Program will open themselves up to a claim being filed by the Program to recover the amount paid for those services on behalf of the individual. This includes nursing home services and home and community-based services.
So how does this work in practice? Once a person is approved for and begins receiving medical assistance that is paid for, in part, by the North Carolina Medicaid Program, they start running up a tab with the Program. The program tracks expenditures made on behalf of the individual, and when the person receiving services dies, a letter is sent to the recipient or person responsible for the recipient that basically says “you were made aware that estate recovery was a possibility when you applied for services. Since you have passed away, your estate may be subject to estate recovery.” That letter will also normally set out the amount paid on behalf of the recipient, and what the State believes is in the estate of the recipient. This letter is not the actual claim, however. The actual claim will follow, and will include a copy of the tab the recipient ran up during their time in care.
Now, there are a few key points to remember.
- If the deceased recipient’s estate has a value of less than $5,000.00, the State will waive its right to estate recovery.
- If the recipient’s tab is less than $5,000.00, the State will waive its right to estate recovery.
- If the recipient is survived by a spouse, a disabled child of any age, or a child under the age of 21, the State will waive its right to estate recovery.
If any of these situations applies, you do not need to be concerned about estate recovery. It is important to send a response to the State, however, outlining why they should waive their claim if the reason is either 1 or 3 above.
If one of these exemptions does not apply, you will face an estate recovery claim that will have to be satisfied. I will outline the process for satisfying those debts in a later post, but the final important point to remember about estate recovery is this: the state cannot get any more out of your estate than it paid on your behalf. So if your home sells for $300,000 after your death, and the State paid $50,000 on your behalf for medical services, the State is only entitled to $50,000 — not the full amount.
So back to that oversimplification: the state will take your house, or the state will take everything you have. The State will not take your house. The State’s claim will likely result in it being sold (depending on the decision of your Executor — which will be discussed in my next post), but it cannot take the full amount of sale proceeds unless the sales price is only equal to or is less than the amount it paid on your behalf.
There are ways to avoid estate recovery completely with proper planning. Call our office today and set up a time to discuss your options if you’re facing a long-term care situation.