Raleigh Elder Law | How Does Estate Recovery Work?

At least once a week, I have a Client that will ask about Medicaid's Estate Recovery Program.  Admittedly, they don't use those words.  It's more commonly phrased in the way in which they've heard about it: the government selling the house or taking everything you've got.  This generalization isn't necessarily incorrect, but it oversimplifies the issue.  Hopefully this post will provide some clarification.

Estate recovery is the law, and it's codified in the North Carolina General Statutes in Chapter 108A.  A link to the statute is here.  What the statute says in simpler terms is that anyone who receives one of six types of medical care that is paid for by the North Carolina Medicaid Program will open themselves up to a claim being filed by the Program to recover the amount paid for those services on behalf of the individual.  This includes nursing home services and home and community-based services.

So how does this work in practice?  Once a person is approved for and begins receiving medical assistance that is paid for, in part, by the North Carolina Medicaid Program, they start running up a tab with the Program.  The program tracks expenditures made on behalf of the individual, and when the person receiving services dies, a letter is sent to the recipient or person responsible for the recipient that basically says "you were made aware that estate recovery was a possibility when you applied for services. Since you have passed away, your estate may be subject to estate recovery."  That letter will also normally set out the amount paid on behalf of the recipient, and what the State believes is in the estate of the recipient.  This letter is not the actual claim, however.  The actual claim will follow, and will include a copy of the tab the recipient ran up during their time in care.

Now, there are a few key points to remember.

1. If the deceased recipient's estate has a value of less than $5,000.00, the State will waive its right to estate recovery.
2. If the recipient's tab is less than $5,000.00, the State will waive its right to estate recovery.
3. If the recipient is survived by a spouse, the State will waive its right to estate recovery.

If any of these situations applies, you do not need to be concerned about estate recovery.  It is important to send a response to the State, however, outlining why they should waive their claim if the reason is either 1 or 3 above.

If one of these exemptions does not apply, you will face an estate recovery claim that will have to be satisfied.  I will outline the process for satisfying those debts in a later post, but the final important point to remember about estate recovery is this: the state cannot get any more out of your estate than it paid on your behalf.  So if your home sells for $300,000 after your death, and the State paid $50,000 on your behalf for medical services, the State is only entitled to $50,000 -- not the full amount.

So back to that oversimplification: the state will take your house, or the state will take everything you have.  The State will not take your house.  The State's claim will likely result in it being sold (depending on the decision of your Executor -- which will be discussed in my next post), but it cannot take the full amount of sale proceeds unless the sales price is only equal to or is less than the amount it paid on your behalf.

There are ways to avoid estate recovery completely with proper planning.  Call our office today and set up a time to discuss your options if you're facing a long-term care situation.