Many people will likely need skilled nursing care at some point as they age, whether it’s for short-term rehabilitation or a long-term stay. Unfortunately, few people plan for it.
Medicaid helps pay for long-term care in some situations, but eligibility criteria apply. Furthermore, the state may later seek reimbursement through the Medicaid Estate Recovery Program (MERP). That can significantly reduce what loved ones inherit. However, with the right estate planning strategies in place, it may be possible to reduce or even avoid Medicaid recovery.
Exemptions and protections
Maryland’s Medicaid estate recovery usually applies only to assets that go through probate. These include real estate titled solely in the Medicaid recipient’s name as well as bank accounts and other assets without beneficiary designations. If no planning is done, the family home is often the most significant asset exposed to recovery.
One of the most effective ways to reduce exposure to recovery is to begin planning well before long-term care is needed. Irrevocable trusts are commonly used because the individual no longer owns any assets placed in them.
Here are two important points to remember:
- The Medicaid look-back period is 60 months. The state will review all financial transactions made during that time, including asset transfers.
- Once created, an irrevocable trust can’t easily be changed and may require court intervention.
Another planning option involves structuring how the assets are transferred upon death. Those that go directly to a named beneficiary or surviving joint owner usually avoid probate and, thus, Medicaid recovery.
The law also provides protections for certain family situations. Estate recovery is generally postponed if there is a surviving spouse. It may also be limited or avoided if the Medicaid recipient is survived by a disabled child or recovery would cause undue hardship to the heirs.
Estate planning is not about hiding assets from Medicaid recovery. It’s about using the legal tools available to protect a lifetime of savings, preserve family stability and ensure long-term care needs are met. Working with a legal professional can make all the difference in protecting your legacy while still allowing you to access the care you may need later in life.
