The last year has been a roller coaster ride for Elder Law attorneys and their clients. In April of 2012, Governor Cuomo was successful in passing a budget which sought greater recovery from the estates of Medicaid applicants and their spouses. In particular, the new provisions of the law expanded the definition of “estate.” This meant that when an applicant and or his surviving spouse died, Medicaid could seek recovery against any asset in which the decedent held an ownership interest in at the time of death. The expanded definition included interests in joint tenancy, tenancy in common, joint accounts or property with rights of survivorship and life estate interests. In particular, this was a disappointment for many people who retained life estates in their homes with the belief that the real property would be fully protected for their heirs. The only favorable portion of the change was the new method of valuing life estate interests which resulted in a much lower value attached to the life estate. This new method reflected current mortality tables and the lower interest rate environment and meant less to be collected by Medicaid.
The general rule has been that the Medicaid program could be reimbursed ONLY from the probate estate of the Medicaid recipient or his surviving spouse. In reality, many assets in which a Medicaid recipient or his spouse retained an interest were “non-probate” assets. Non-probate assets pass to the beneficiary outside of the last will and testament. For instance, a joint bank account would pass to the other named owner or the bank account would name a beneficiary who would inherit the account at death. Other examples of non-probate assets would be life insurance policies that name beneficiaries, IRA accounts, annuities, as well as jointly owned property. In the context of Medicaid planning, many seniors have transferred their homes to their children and retained a “life estate.” Upon their death, the real property passed to the children, by operation of law, that is, without the need to probate a will. In that instance, as long as the asset did not pass through the probate estate, Medicaid could not seek recovery against that asset.
The good news is that two weeks ago, Governor Cuomo’s new budget repealed the law which sought expanded estate recovery. As a result, the protection of real property with the use of life estate will be restored to its original form. Upon the death of the life tenant, there will be no reimbursement to Medicaid.
In addition to the repeal of expanded estate recovery, there was concern that the new budget would eliminate spousal refusal in Community Medicaid cases where the recipient is living in their home with their spouse and receiving services. It has always been the law in New York State that the “community spouse,” or the spouse not receiving Medicaid services, could claim that they are unable to contribute funds to the care of their spouse because they need the money for their own support. This is especially important on Long Island, where the cost of living is high and spouses would to prefer to live together with services delivered at home. We are happy to say that with the passing of the new budget, spousal refusal is still alive and well in New York State.
It is important to note that recovery is permitted against the states or Medicaid recipients or their surviving spouses. This is because the law is clear that there can be no recovery against the estate if there is a surviving spouse. So for instance, if a husband is in the nursing home and receives Medicaid and his wife is in the community, there can be no recovery against the estate assets, if any, of the Medicaid recipient because he is survived by a spouse. By the same token, if the community spouse dies, there can be no recovery against her estate for the same reason- she is survived by a spouse. When the surviving spouse dies, any monies paid by Medicaid for either spouse, within 10 years of her death, for either spouse, would be recoverable. This is why it is very important for the community spouse to do further estate plan once her spouse has obtained Medicaid.
On a further note, the Medicaid regulations provide that there can be no recovery against any estate where there is a disabled child. Therefore, if a Medicaid applicant or the surviving spouse dies with a disabled child, even if that child is not dependent upon the parent, there can be no recovery against the estate. The law and regulations dealing with estate recovery are complex but at least for today, there are still options and prudent planning opportunities.