According to the NCDHHS Dept of Aging & Adult Services, North Carolina ranks 9th nationally in the number of people 65 and over, and that population is expected to grow 61%. This means there will be an increased proportion of older adults needing long-term care. If you are age 65 and up, your chances of needing some type of long-term care during your lifetime are about 70%. Long-term care helps meet health or personal needs. Most long-term care services assist people with Activities of Daily Living (ADLs), such as dressing, bathing, and using the bathroom.
As a senior in North Carolina, you may plan to rely on Medicaid as part of your plan for long-term care if needed. Even if you have a nice home or some assets, you can still qualify for help from Medicaid. However, there are expenses associated with accepting Medicaid help that you may not know about. Let’s explore how much Medicaid actually costs you.
Medicaid Recovery Process
You may be affected if you are 55 years of age or older and have received funds from NC Medicaid to pay for one of these programs:
- Living in a medical facility and receiving medical care services
- Home and community-based services (HCBS)
- Community Alternative Program (CAP)
- Innovations and Traumatic Brain Injury (TBI)
- Personal Care Services (PCS)
To cover the costs of your healthcare, the state recovery program from the Division of Health Benefits (DHB) can make a claim against your estate once you die to recover the funds they spent for your care. Third-Party Recovery Section (TPR) is the NC agency that collects the funds once the probate suit has ruled for your estate to pay. In other words, when you die, your estate will pay for your care and your heirs only receive what is left over. Medicaid Estate Recovery generally makes a claim for anywhere from $50,000 to $300,000 or more!
Real-Life Example
If you have a family home worth $250,000 that you are leaving to your children, Medicaid recovery in NC can legally make your family sell the home and pay for your long-term care from the proceeds. It is not a lien, but it is a judgment made in probate court after you die. This happens every day and most people don’t realize that this is how Medicaid gets the funds to be able to “help” with long-term care.
State Exemptions From Medicaid Recovery
There are ways to keep certain assets away from the recovery process after your death. The ways below are listed in the Medicaid Policies Handout.
- Marriage:If you are married when you die, Medicaid Recovery only has 1 year to recoup the expenses. They cannot recoup expenses if your spouse is still living. As long as your spouse lives longer than 1 year after you die, Medicaid cannot make a claim on the estate for your expenses.
- Have a Child Under 21 or a blind or disabled child. Your estate is still needed to care for your child, so the state does not collect in this instance.
- Hardship
For Medicaid estate recovery purposes, an “undue hardship waiver” can be either full or partial. A partial waiver may be a waiver that applies to only some of the assets in the beneficiary’s estate, or may be limited in duration or both. A time-limited undue hardship waiver is also known as a deferral.” A claim of undue hardship must be made within 60 days of the date of the notice of the Medicaid claim. A claim of hardship must describe the financial circumstances of the surviving heir, and/or their dependents in the estate. The estate recovery administrator evaluates each claim of hardship based on documentary evidence submitted by the claimant.
- Total Assets of Estate are less than $5,000
- Total Medicaid Payments Eligible for Recovery are less than $3,000
When one or more of these above conditions are met, Medicaid Recovery defers the claim against the estate until the conditions above are no longer met. They may then move forward with the claim against the estate. In most states, however, there is a one-year period of time that Medicaid can make a claim. After that, the statute of limitations is met.
Legal Ways Around Medicaid Recovery
There are ways to own your home and still qualify for Medicaid. There are also ways to keep your home out of the hands of Medicaid Recovery. Let’s look at the legal possibilities to maximize your assets after you die.
Do NOT own a home:
- Solely in your name or
- Jointly as “common tenants” without a “right of survivorship”
These 2 ways of owning a home are subject to Medicaid Recovery.
Do Own a home:
- Jointly with “right of survivorship” or
- Solely with a LadyBird Deed
Comprehensive Life estates, also known as Lady Bird Deeds, can be used to avoid Medicaid recovery because the house immediately belongs to your heir upon your death. The house never passes through probate court so the Medicaid Recovery process cannot make a claim that requires the home to be sold.
Caregiver Exemption
This rule allows you to transfer your home to your child without being disqualified from receiving Medicaid (You can’t usually transfer assets during the 5 years before you need Medicaid or you are declared ineligible).
You still qualify for Medicaid and are able to transfer your home and keep it out of the Medicaid Recovery program if all of these conditions are met:
- your child lived with you two+ years prior to your moving
- You moved into nursing home or assisted living facility paid for by Medicaid
- Your child provided care that delayed your moving from your home into a nursing home
This same principle also applies to a sibling who lived with you and was a part-owner for at least a year before you qualified for Medicaid.
Trusts
An irrevocable trust does not pass through probate because it does not belong to the estate when you die. One way to avoid probate court altogether is to make sure any assets you own are placed into an irrevocable trust, also known as a Medicaid planning trust (irrevocable trusts can also help you qualify for Medicaid in the first place)
Long Term Care Partnership Programs
According to the American Council on Aging, “Long Term Care Partnership Programs help protect all, or a portion, of a Medicaid applicant’s assets from Medicaid’s asset limit, as well as from Medicaid estate recovery. Partnership Programs are a collaboration between a private insurance company that sells long term care partnership policies and a state’s Medicaid program. Essentially, the same dollar amount that a long term care insurance policy pays out for the policyholder’s long term care is “protected” from Medicaid’s asset limit and from estate recovery. “
Seek Wise Counsel
Because the laws about Medicaid are so complicated and change fairly often, it is advisable that you seek the advice of an attorney who specializes in estate planning before choosing a way to protect your assets from Medicaid Recovery in North Carolina.
Different states have different rules and regulations concerning qualifying for Medicaid, Probate, and the Medicaid Recovery Process and exemptions. To feel confident about your choices, set up a consultation and find out how to maximize the assets of your estate for future generations. The sooner you start planning, the better the outcome.