Four Things Families Can Do Now to Prepare for the New Medicaid Estate Recovery Laws

Daily OrganizerNow that the new Medicaid laws are in effect, what can be done? I’m going to talk about that over the course of the next several weeks. This post will deal with the estate recovery part of the new law.

It remains to be seen what, if any, policies will be put into place by the Department of Health Services (DHS). So, I don’t think anyone has a complete set of answers on what families should do, yet. However, some things can and should be done now. Here are four of those things:

1) Marital Property Agreement: If you are married and one spouse is already on Medicaid, execute a Marital Property Agreement. The proper Marital Property Agreement will minimize the amount of interest retained by the Medicaid spouse.

Why do this? The new laws have presumptions that the property of a non-Medicaid spouse is completely recoverable if she or he dies after the Medicaid spouse. However, presumptions can be rebutted. That is why they are “presumptions” and not “conclusions.” Setting up clear agreements as to the nature of the property owned by the non-Medicaid spouse will help minimize the amount of recoverable property.

2) Consider whether to update your living trust: If you have a revocable living trust, consult with an attorney about amending the trust to address possible options for the trustee to take action to terminate the trust if estate recovery becomes a threat, or to change the governing law of the trust.

Why do this? Revocable trusts used to have some benefit with respect to estate recovery. However, that benefit may now be lost in some cases. Therefore, it makes sense to give your trustee the tools to make a decision whether property should pass through the trust or through traditional probate in Medicaid cases.

3) Know your options in a second marriage: If you are in a marriage where either spouse has children from another relationship, consult with an elder law attorney before long term care becomes imminent. If you are an older couple considering remarriage, meet with an elder law attorney to see how this decision would affect your ability to provide for your children if one of you needs Medicaid. You can execute a pre-nuptial agreement that will clarify each spouse’s interest in the property that comes into the marriage and the property that may be acquired during the course of the marriage. While this does not provide an advantage at the time a person is applying for Medicaid, it could help prevent estate recovery from the assets intended for the well spouse’s children.

Why do this? Because of the presumption that all property of a surviving non-Medicaid spouse is recoverable, it is important to preserve documentation as to the nature of the couples’ property to minimize the effect this might have on existing plans to provide for a spouse’s children from a prior relationship. In some cases, it will be best for couples not to marry.

4) Be savvy about claims liability: If you are the heir of a deceased person who received Medicaid or whose spouse received Medicaid, think twice before paying for funeral services or other medical bills. Relatives are not required to make these payments (unless they signed something agreeing to do so) but many do so out of a sense of responsibility. This is not a good idea in Medicaid estate recovery situations. The new estate recovery law allows the state to claim all assets owned by an individual up to the amount of Medicaid that is owed.  It then provides that anyone who has a claim on the person’s property for priority expenses (such as funeral or costs of last illness) must submit a claim to the Department of Health Services Estate Recovery Unit within one year. The department must pay higher priority claims to the extent that it receives the decedent’s assets.

This process leaves quite a bit of power in the government’s hands to decide if a bill you submit is a higher priority. Therefore, instead of paying first and hoping to get reimbursed for funeral expenses you pay, or miscellaneous medical expenses of the decedent, such as the person’s co-pay to the nursing home, or for prescriptions, it is better to submit the bills to the Department for payment, because a funeral bill or medical expense of the person’s last illness is a higher priority claim than the Medicaid payment. Not all bills have priority over the Medicaid claim, but some do. If you do pay these bills, submit them along with the proof of payment, to the Department for reimbursement.

While the Department may at some point create new addresses or contact information for filing these claims, until then, the address where you could mail the unpaid bill or your request for reimbursement of a bill you paid (I suggest you send it certified mail) is: Estate Recovery, 313 Blettner Blvd, Madison WI 53714-2405. Be aware that if the state’s estate recovery personnel are not cooperative, and your out of pocket costs are significant, you might need to start a probate case to get a court order for  your claims to be paid. That is why it is better not to get into that position in the first place.

Why do this? Where estate recovery is imminent, if you submit these priority bills to the state instead of paying them, or better yet, simply direct the creditors to send them in, it puts you, the heir, out of the middle and reduces the chance that you are stuck with the bills. The state does not get to have its cake and eat it too.  In other words, where the state exercises its newfound very broad authority to take all of a Medicaid recipient’s funds, it also assumes responsibility to pay the claims with higher priority to that same extent, and heirs should not make it easier by doing this for the state when it is not necessary.

What else? In addition to these practical steps, there are more complex planning options that make sense now. The key to benefiting from these options is to exercise them early!

The attorneys at Nelson Irvings & Wessels SC are able to provide guidance on these issues. While nobody has all the answers at this point, we can help you understand how these laws may affect you, and what your options are. If you would like to consult with us, please feel free to call us at 414-777-0220 to make an appointment.


About Carol J. Wessels

I am an Elder Law Attorney practicing in Wisconsin. I am the owner of Wessels Law Office LLC in Mequon, WI. I handle Medicaid, Long Term Care planning, special needs trusts, guardianship, advance directives, elder abuse and other related issues for elderly and disabled clients and their families. My Mother Velma lived with Alzheimer's for fifteen years until she died on Jan. 24, 2015, which has given me a personal perspective on elder law issues as well.
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