The Ever Changing Medicaid Rules
Many families have either little information or incorrect information concerning the gauntlet of rules that will affect them if one of their loved ones ends up in a nursing home or in an assisted living facility.
With respect to Medicaid planning, many of my clients have told me “this is what my neighbor/friend/family member told me to do” or “this is what my parents did to protect their home or assets.” My standard response to these types of statements is that the Medicaid system is one of the most complex areas of law and the rules can and do change often. Therefore, even assuming the information was accurate at the time, it is unlikely that what others have done in the past will either work any longer or have the same results.
The complexity of the Medicaid system, even before the most recent changes, is due to the fact that there are two separate sets of rules that must be considered. I call these the “before” and “after” rules. The “before” rules: the State is going to look at all of your current assets AND go back 5 years to see if you “divested” (transferred for less the full fair market value) any assets. This process simply determines your eligibility to receive Medicaid benefits and any penalty period (# of days ineligible for benefits) for divestments. The “after” rules: after you pass away, the State will recover through the Estate Recovery Program the amounts paid on your behalf for your long-term care.
The 2013-2015 Wisconsin budget bill, known as 2013 Wisconsin Act 20, significantly changed the divestment and estate recovery rules.
The changes in divestment rules: (1) Transfers of assets to family members for less than full fair market value within the five year look back period are now prohibited. This means you can forget about discounted sales of the family farm to children; (2) Any gifts that are determined to be divestments must be repaid in full to the Medicaid applicant in order to prevent the divestment penalty; (3) The spouse of an individual on Medicaid can no longer safely transfer any assets to anyone by gift or loan until the institutionalized spouse has been on Medicaid for at least five years. If the spouse does so, the institutionalized spouse is penalized.
The changes in the estate recovery rules: (1) Life Estates: this is very drastic change given that Life Estates have been used for many years as a way for many Wisconsin parents to deed a remainder interest in their real estate to their children. For Life Estates created on or after August 1, 2014, the State is now allowed to recover the value of the life estate interest (a percentage determined by actuarial table in the Medicaid Eligibility Handbook). (2) Non-Probate Asset Recovery: another major change that allows the State to recover ALL property in which the Medicaid recipient had an interest in immediately before death. If created on or after August 1, 2014 the following will be subject to recovery: joint tenancy property, life insurance policies payable to a beneficiary, and revocable trust assets. All other types of non-probate property will be subject to repayment for recipients who pass away on or after August 1, 2014.
It cannot be over-stated how significant these law changes impact the ability to protect assets or prevent penalties with proper Medicaid planning and add to the post-death issues that families must address if a deceased person received Medicaid benefits.