The fancy name for the state taking your house to pay for nursing home expenses is called “Estate Recovery.” The Federal government required Michigan to pass an Estate Recovery law, which was signed into law in 2007. Because of some wrangling and red tape between the state and Federal governments, it just started being enforced on July 1, 2011, retroactively to 2007, of course.
Medicaid Program and Effects on Heirs
Since your home is typically the only asset of substantial value owned by those receiving Medicaid payments for nursing home care, it will be the focus of Michigan’s estate recovery program.
You may ask yourself “What does this mean to me?” Well, if you require nursing home care paid for by Medicaid, the state will try to get reimbursed by placing a lien on your house after your death. As soon as the house is sold or transferred, the state must get repaid for your nursing home costs.
Avoiding Probate Avoids Estate Recovery
If you plan to avoid probate and Estate Recovery by having your assets in a revocable trust or owned jointly with your children, you should know that your plan will not work, as you would not qualify for Medicaid in the first place. This is because a house held in a revocable trust or owned with your children is not exempt for Medicaid eligibility purposes, so owning your house this way will disqualify you from Medicaid until you own it in a permissible way, such as individually, jointly with your spouse, as the beneficiary of certain irrevocable trusts, or with a “Lady Bird” deed.
Which one of these is best for you to protect your heirs from losing what you worked so hard to attain? The answer will really depend on your personal, family, and health situation. For most people, a “Lady Bird” deed is the path of least resistance to protecting the home. A “Lady Bird” deed is technically the transfer of your property to “remaindermen” while retaining a “life estate” coupled with the “power to convey.” What this means is that your house is yours to do with as you would like until you die, or if you are married, then until both you and your spouse die. Then it would pass to your heirs or your trust much like a beneficiary designation on your other assets. By reserving the right to convey, you are also reserving the right to get a mortgage or reverse mortgage against the property if you need extra funds to help with other expenses not covered by Medicaid or to help care for the home and your spouse.
Free Estate Analysis Consultation
At Eyestone Law Offices, we can help you protect your assets, including your home, and set your mind at ease. The earlier you take action the more options that are available, so please call us or email us to schedule an appointment today. We will meet with you and help you discover the best way for you to preserve your assets so they can be used to your maximum benefit during your life and still leave something behind for those you love when you are gone.