Everywhere I go I get asked the question by concerned citizens who have loved ones facing the possibility of long term care: “Can they take the house?” Until recently I could answer “No.” However, that may be changing.
Federal law requires that the state implement a program called “Estate Recovery.” That means that if a person is in a nursing home and receives government funds to pay for the cost, the state can put a lien on the property of that individual and would sell that property to get paid back when the person dies. Usually, the house is the only thing that is at risk because that is one of the few things a person is allowed to keep before getting state funds through Medicaid.
Michigan resisted the federal requirement for many years (all other states have an estate recovery program). However, Michigan is currently in the middle of a budget crisis. Because of that, the state is seeking to implement an estate recovery law. New state legislation has been proposed which, if enacted, could mean that the state would “take the home” through a lien placed on it by the government.
The new estate recovery legislation seems destined to be approved by the Michigan legislature, probably this year. How drastic will the recovery effort be? The proposed legislation says the legislature wants to establish estate recovery “to the full extent permitted by section 1917(A) of title XIX.” That section is now reflected in federal law at 42 USC 1396p(A). There the statute describes the reach that estate recovery can have. The state can limit recovery to just the “probate” estate of the Medicaid recipient, or it “may” go further and extend to all property that the recipient had an interest in at that time of death (including a life estate). Here are the relevant sections from the federal statute:
"(4) For purposes of this subsection, the term 'estate', with respect to a deceased individual--
(A) shall include all real and personal property and other assets included within the individual's estate, as defined for purposes of State probate law; and
(B) may include, at the option of the State (and shall include, in the case of an individual to whom paragraph (1)(C)(i) applies), any other real and personal property and other assets in which the individual had any legal title or interest at the time of death (to the extent of such interest), including such assets conveyed to a survivor, heir, or assign of the deceased individual through joint tenancy, tenancy in common, survivorship, life estate, living trust, or other arrangement."
It appears that Michigan will go with a more aggressive version of the law. I think this is inevitable in light of the current budget crisis. For example, I saw an article in the paper just recently in which Governor Granholm said she was prepared to shut down the state government because of lack of funds. If the state is depleted that much and going to such extreme lengths to get money, one cannot imagine why they wouldn’t adopt the most aggressive estate recovery program possible.
Whatever form estate recovery takes, we need to prepare our clients appropriately. The issue can be addressed effectively through proper planning. Heritage Elder Law remains available to assist in that planning or to answer any questions you may have as this new law goes into effect.
