You may be worried about applying for Medicaid if you have heard that the state government can take your house away to pay for your benefits. That would scare anyone.
But the actual process, called the Estate Recovery Program, is more complicated than that. There are very specific rules about what the state can take and when. In fact, in many cases they might not be able to take anything at all.
If you’re worried about losing your property, then keep reading (and then get some professional legal advice). You can get the care you need, and maybe protect your house too.
The State Cannot Take Your Property While You’re Alive
It’s important to say immediately that the state government cannot take your house or any other property while you are alive. The Estate Recovery Program only starts after someone receiving Medicaid benefits has died.
In fact, even after that, the process may be postponed. And some people get to keep their property if they qualify for certain exceptions.
But before we talk about the exceptions, let’s discuss what the Estate Recovery Program is and how it works.
What Is the Estate Recovery Program?
The law requires every state to try to get back the money that the state pays for someone’s Medicaid benefits. The state can then use this money to pay for long-term care for other people.
For instance, suppose Pennsylvania pays $100,000 from Medicaid for a person’s care. That $100,000 might include payments for nursing homes, in-home care, hospital stays, or prescriptions. In that case, the government needs to recover $100,000 from that person’s estate.
An estate is just the property left over after a person dies. For most Medicaid recipients, most of the money comes from selling the person’s house. Houses are usually the largest asset a person has if they qualify for Medicaid. Typically, the recovery program is not concerned with your personal possessions.
The process works like this. After a person dies, the person in charge of their will, known as an executor, or some other representative has to tell Pennsylvania’s Department of Human Services (DHS) that they have died. As part of that process, the executor requests a statement of claim. That is just a list of all the Medicaid payments that PA has made for the deceased person.
The DHS then has 45 days to provide that list, or the department cannot collect any money. Property from the estate is then sold to pay back the DHS according to the list. Any money left over after that goes back into the estate.
What if I Don’t Own My Home?
Let’s deal with the easiest question first. The DHS can only collect on the property you own. If you don’t own your house, there’s nothing they can do.
So, if you live with your children, spouse, or other family and only their name is on the deed, then the house is safe from the DHS.
How Can I Keep My Property?
But what if you do own your house? Once people know about the Estate Recovery Program, their biggest question is what they can do to keep their house, money, or other assets.
There are certain exceptions to the program. But, you should not do anything until you talk to a lawyer. You can get free legal advice about your estate, or anything else, from Community Legal Services (CLS) of Philadelphia. We’ll go over some of the exceptions below, but CLS is a great place to start if you have more questions.
Can My Wife/Husband/Spouse Keep the House?
Maybe.
The good news is that your spouse can continue living in a house that you share. And, in certain cases, your family may be able to keep it forever.
If you and your husband or wife live in the same house, DHS will not collect anything until the surviving partner dies. Until that point, they will postpone collecting on the claim. The DHS will wait to collect a claim until:
- The death of any surviving spouse
- Any child turns 21
- The death of any disabled child
There are other reasons the DHS will wait to collect, but these are the most important ones.
Even in these cases the DHS is only pausing things. Eventually, when the spouse dies or the child is old enough, the estate recovery process will start.
But, there is a big loophole. If you own a home with someone else, like a spouse or child, there’s a very good chance it will pass to them free and clear after your death. It depends on how the deed is written. DHS cannot take your house if these terms are part of your deed:
- Joint tenancy with right of survivorship
- Tenants by the entireties
If your deed includes that language, your right to the house goes to any surviving co-owners.
Again, CLS or another lawyer can look at your deed and give you advice on what to do. Do not do anything until you talk to a professional. Changing your deed might prevent you from collecting Medicaid benefits.
Can I Just Sell My House, or Give It Away?
Another strategy people think of is giving their house to their children, or selling it to them for a very cheap price. But these ideas won’t work.
Let’s start with giving things away.
There is a 5-year look back to qualify for Medicaid. That means DHS will check to see if you have given away any large assets in the past 5 years. If you have, that could affect your eligibility. You might not be able to collect the benefits you need for many years.
You cannot give things away after your death either. The person in charge of your will, the executor, has a duty to make sure your assets are used to pay back the state. If your executor does not do that, then they become personally responsible for the difference. In other words, they might have to pay back the state themselves!
Selling your house or other assets too cheaply has the same problems.
Any property, like your house, has to be sold for fair market value. So, your family or children can buy your house, but they’ll need to pay the same price any regular person would. If your property is sold for a price below fair market value, both the person who sells it and the person who buys it are responsible for making up the difference.
Just like when you try to give things away, they might have to pay back the PA DHS themselves.
What if My Family Took Care of Me?
Another big exception to the Estate Recovery Program has to do with your caregivers. If your family was caring for you, then your caregiver may be able to keep the house or other property.
But, there are two conditions.
First, the caregiver must have lived at home with you and provided care for two years while you were on Medicaid. The idea is to reward caregivers who help people stay at home and out of nursing homes.
Second, the caregiver cannot own another house. Your house must be their main and only place to live.
If your caregiver meets these two conditions, then they probably qualify for the caregiver exception.
What if My Property Is Part of a Family Business?
The last big exception to the Estate Recovery Program is the income exception. If your property is the main way your family makes money, then the DHS will not try to take it.
But, like the caregiver exception, there are some conditions:
- Only for a spouse, child, or grandchild
- Must be the family’s main source of income
- Family income would be below 250% of poverty line without it
For most families, these properties are family farms or rental properties, like apartment buildings.
Don’t Avoid Care Because You’re Worried About Your Property
Overall then, there are many cases where your family may be able to keep your house:
- While your spouse lives there
- While a child lives there
- Depending on the language in the deed
- If your caregiver lived with you
- If it’s the main source of income for your family
The important thing, though, is to get the care you need. Delaying care can make problems worse, and force you to leave your home and enter a nursing facility. That will also increase the amount you need to pay back to the DHS.
And if you are really worried, you can talk to a lawyer or get free legal advice from CLS. Never make changes to your deed, or give away or sell significant assets like your home, without getting legal help first.
Get Help through Medicaid
The Estate Recovery Program is just one thing that makes Medicaid so complicated. But Medicaid is also the best way to get help like a home health aide. If you need some help with daily tasks, but you’re not sure where to start, reach out to our care team for help.
