In a previous post, I indicated that I would be following up on the process when a Medicaid Estate Recovery claim can't be or isn't waived. Time to follow up! Once it is determined the claim can't be waived, the estate of the deceased Medicaid recipient has a claim against it that the State of North Carolina would like to have satisfied.
However, just because they have a valid claim doesn't necessarily mean that it's going to get paid. The same could be said of any claim made against an estate. In order for claims to be paid, there must be assets in the estate with which to satisfy said claims. No assets in the deceased recipient's estate? Then most likely, Medicaid (and any other creditor) won't get paid back.
Let's look at the process, but let me start by making an important point: estate recovery liability does not, in North Carolina, extend beyond the Medicaid recipient. If your husband, mother, father, brother, or best friend was receiving Medicaid, and you are named as executor of their estate or get appointed as administrator, and you get an estate recovery notice, do not panic. Medicaid will not be coming after you personally. They are only coming after the estate. Your job is to just make sure things get done correctly.
So what happens? The deceased person's estate is opened (more on that in a later post), and the executor or administrator takes stock of what the person owned. If they were receiving Medicaid, chances are they didn't own much (for an overview of what a Medicaid recipient can have, click here), and if they owned anything of significant value, it was most likely real property. Real property that passes to heirs by virtue of either a will or intestacy is considered part of a person's estate, and can be claimed by creditors for payment of debts. However, because of the way the law treats real property upon death, it must be "reclaimed" (for lack of a better term) by the estate to be sold to satisfy those claims.
The executor or administrator would therefore be responsible for filing the proper petitions and paperwork for reclaiming the real property so that it can be sold. Once this process is complete, the real property is sold, the proceeds from the sale are added to the estate, and debts can be satisfied.
Quick example: Bob received Long Term Care Medicaid Assistance for three years prior to his death. He is a widower, and his will names his two children, Lauren and William, as beneficiaries. Lauren is the Executrix. Bob passes away, and Lauren opens her father's estate. Her father's estate consists solely of his home, valued at $125,000.00. Not long after opening the estate, Lauren receives an Estate Recovery Claim in the amount of $70,000.00. Her father also has a credit card bill totaling $12,000.00.
Lauren realizes she has $82,000.00 in debts that must be paid, and the only asset with which to pay those debts is the home. Lauren hires an attorney, who files the necessary paperwork and follows the necessary process to reclaim her father's home for the estate. This means that the home, which was supposed to go to Lauren and William, no longer belongs to them, but rather belongs to the estate.
At this point, Lauren hires a realtor who lists the home for sale. After a month or so, Lauren receives a couple of offers, the highest of which is for $80,000.00. Lauren, on the advice of the realtor, accepts the offer. The offer is approved by the court, and the sale takes place, meaning that Bob's estate now has $80,000.00 in cash with which to pay debts. As you can see, this isn't enough money to pay both debts. So what must Lauren do?
North Carolina's General Statutes outline how debts are to be satisfied in situations where there isn't enough money to pay them all in full (that statute can be found here). I will try and cover priority in a later post, but under the law, the Estate Recovery Claim has priority over the unsecured claim of the credit card company. When a claim has priority, it gets satisfied in full (if there are enough funds to fully satisfy it) before the claims over which it has priority get satisfied.
In this case, Medicaid's Estate Recovery Claim would be satisfied in full, and the credit card company would receive the remaining $10,000.00. The credit card company must take this amount in satisfaction of its claim in full -- it has no other recourse.
There are ways to avoid the inclusion of real property in a decedent's estate, even after a person has qualified for Medicaid. Additionally, there are details related to the probate process that I either glossed over or skipped in the interest of making the post as brief as possible. As always, consult with an attorney (like me!) if you are facing any of these situations.
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