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Medicaid is a state and federal program that many seniors with reduced assets and income take advantage of to pay for long-term care costs. With proper planning, even seniors with significant wealth may qualify for Medicaid coverage for the exorbitant costs of nursing home care. However, without planning for your future, long-term care costs can hit your hard-earned savings and eventually result in the sale of your family home after your death. It is possible to keep your assets safe and still qualify for Medicaid coverage. Let’s see when Medicaid can take your home and when your assets may stay safe and pass to your heirs instead. 

Medicaid Planning

Strategic seniors prepare for Medicaid coverage by placing their assets in a shielded irrevocable trust five years before they might want to qualify for coverage. In this way, they avoid the Medicaid 5-year look-back period. They qualify for Medicaid without having to spend down their hard-earned assets to receive eligibility. Their assets stay safe, used for their own care. 

Medicaid asset planning also can prepare your estate to leave large inheritances to your heirs. When you plan ahead for long-term care by opening a properly-prepared Medicaid Planning Trust, you qualify for Medicaid AND keep your assets safe. 

Preparing with an attorney who creates a specific type of planning trust prevents Medicaid Recovery efforts from selling your home in North Carolina. 

Qualifying For Medicaid

If you have not planned for Medicaid coverage before the 5-year look-back period, Medicaid may require you to spend down your assets to qualify for coverage. In these cases, you may often keep your home while you are living.

According to the American Council on Aging, “[Medicaid] exemptions include personal belongings, household furnishings, an automobile, irrevocable burial trusts, and one’s primary home, given specific circumstances are met. In order to be exempt, the Medicaid applicant must live in the home or has “intent” to return to it, and his / her home equity interest is not greater than $603,000 (in 2021).” 

If you keep your home and receive Medicaid cost coverage, your family may believe that your home is safe after the spend-down. This belief could not be further from the truth. The Medicaid program in NC lets you keep your home while alive, knowing all the while that they will send a bill for your Medicaid expenses to your estate after your death.  

Your family may be counting on living in or inheriting your home and not realize that the inheritance they hoped to receive is not coming. When you qualify for Medicaid, the state of North Carolina must pay the Federal Government for the Medicaid fees used on your behalf. North Carolina sends the bill for your Medicaid costs to your estate to recoup their loss after you die. 

Estate administrators or executors must pay creditors from the assets of the estate. If your home is your only significant asset, your estate may necessarily sell your family home to pay the Medicaid Recovery Program in NC. 

North Carolina Medicaid Recovery Law Exceptions

NC Medicaid Recovery Law requires Medicaid to recoup its expenses for your care. However, their bill for care does not always get paid. In many instances, your estate does not owe the bill. Some examples where the state of NC will waive its right to Medicaid Recovery include if: 

  • Your estate value is less than $5,000
  • Medicaid spent less than $5,000 on your care
  • Your spouse, disabled child of any age, or your child (under 21) lives in the home
  • An irrevocable Medicaid Asset Planning Trust owns your assets, including your home. Because your estate does not own your home, it does not go through probate or estate administration.

Medicaid Never Takes Your Home

When you die, your estate must go through a settlement, usually with the help of a probate court. If you have a revocable trust, your assets pass to your heirs without probate court. However, in either case, your estate may receive a bill from Medicaid for the amount they spent on your care. 

Whoever you choose to administer your estate will decide how to pay the bill using accepted practices for settling an estate. Your administrator will inventory your estate and see how much your estate is worth. At this point, they will pay your bills, including Medicaid Asset Recovery claims or bills from other creditors.

For example, let’s say you owned a beautiful family home with a market value of $450,000 in the greater Raleigh Durham area of NC. When you pass away, your son, the estate administrator, receives a bill from Medicaid Recovery for $40,000. The exceptions above do not apply to you because no one lives in your home, and a Medicaid Asset Planning Trust does not own your home. 

Because you have little to no assets other than your home, your son decides it is best to sell the home and pay the bill. After the sale of your home, your estate still owns $410,000 that your heirs inherit. In this example, the great majority of the equity in your home goes to your heirs. 

However, if Medicaid spent $450,000 on your long-term care, your son, as estate administrator, would sell the home and then pay the entire $450,000 to Medicaid Recovery. Sometimes, your estate administrator must sell your home and use the proceeds entirely towards your Medicaid Recovery bill.

We Can Help

Whether you are in the early stages of considering how you will pay for future long-term care needs, or you’ve just realized you need to spend down to qualify for Medicaid coverage, we are here for you. At Hopler, Wilms, and Hanna, we consider your circumstances and carefully plan for your future and that of your heirs through legal instruments such as trusts. We also work with estate administrators trying to find the best way to settle an estate after Medicaid Recovery sends the bill.

We understand your desire to maximize your hard-earned assets, and our planning strategies keep you and your family prepared for whatever the future brings. Contact us today for a free consultation and find out how we can help.

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