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How Does Estate Recovery Work?

The specter of Estate Recovery causes many couples to consider planning, but what is it and how does it work? Here's an overview:

Every state participating in the Medicaid program is required to implement its own Estate Recovery program. Thus, while some rules regarding Medicaid eligibility will be the same from state-to-state, Estate Recovery programs can differ greatly in their scope and application. Pennsylvania has a relatively "narrow" Estate Recovery program (for now), in that it applies only to the probate (or "probate-able") assets of a deceased person who received Medicaid Long-Term Care during life (or after the age of 55 year old, since the implementation of the program in 1994).

Estate Recovery is only applicable to the solely owned assets of a deceased person who received Medicaid. For example, if a husband and wife own all of their assets jointly, and a husband enters skilled nursing and applies for and received Medicaid during life, after his death, Estate Recovery should not affect the couple's assets so long as the assets remained in joint names, or were transferred into the surviving spouse's name (who did not receive Medicaid). Thus, in most cases, for many couples, Estate Recovery against assets should not occur just because one spouse requires Medicaid, so long as the spouse receiving Medicaid is survived by the other spouse. Careful planning is necessary to ensure that this is the case.

Estate Recovery comes up most often when a single person who owns an asset which is exempt for purposes of Medicaid eligibility (such as a house or a car), requires Medicaid during life and then dies. Once the Estate of the deceased person is opened, the personal representative is required to notify the Department of Human Services of the person's death, and the Department will send a notice of claim which must be paid from the probate assets of the deceased person. Again, jointly owned assets or assets with a beneficiary designation should not be subject to Estate Recovery. However, again, planning with an elder law attorney is generally advised to ensure that this is the case.

Even in the case of a single person, numerous planning options exist to minimize or eliminate application of Estate Recovery. This planning is complex and requires a knowledgeable elder law attorney.

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