Medicaid makes nursing home and other forms of care affordable for many Illinois families. Few realize that this help can result in a significant claim against the recipient’s estate.
To understand Medicaid estate recovery, consult an experienced estate planning attorney. Careful planning may allow you to reduce or manage this costly expense.
Understanding the Federal Requirement
Federal law requires every state to seek repayment from the estates of Medicaid recipients age 55 or older who benefited from nursing facility care, home and community-based services, and related hospital and prescription drug services. This means a claim can arise after Medicaid funded in-home care, not only after a nursing home stay. Medicare cost-sharing paid through Medicare Savings Programs is exempt from recovery.
The Illinois Public Aid Code makes Medicaid spending a claim against the estates of recipients age 55 or older or a person of any age who was an inpatient in a nursing home or similar institution. The Illinois Department of Healthcare and Family Services (HFS) administers the program.
How the Process Works
HFS notifies people about estate recovery when they apply for long-term care, so the program should not come as a surprise. After a Medicaid recipient dies, the state sends a notice to the estate representative or heirs, asking for information to determine whether a claim is appropriate. The state cannot collect more than it paid for services, and the estate’s debts, including funeral expenses, legal fees, and mortgage balance, are paid before the Medicaid claim. For recipients who died on or after July 1, 2022, the first $25,000 of all estates is protected from recovery.
What Counts as the Estate?
Illinois relies upon the probate estate and real estate liens to collect repayment. Certain assets are protected from Medicaid recovery, including:
- Life insurance policies with a named beneficiary
- Bank accounts payable upon death to a beneficiary
The state may claim certain assets passed through joint tenancy, life estates, or living trusts once the state records a lien notice.
When the State Cannot Collect
Federal rules found on Medicaid.gov say recovery is barred while the recipient is survived by a spouse, a child under age 21, or a blind or disabled child of any age. HFS also does not pursue estates worth $25,000 or less and does not pursue property that costs more to sell than it is worth.
Illinois law defers recovery until the surviving spouse dies, and the statute also refers to claims against the spouse’s own estate. However, in a 2006 case the Illinois Supreme Court held that federal Medicaid does not authorize a state to seek reimbursement from a surviving spouse’s estate, sharply limiting that part of the statute.
Heirs may also request an undue hardship waiver. Qualifying situations include a family farm or business that was operated for at least a year before the recipient’s death and supports the heirs, or a claim that would push the heirs onto public assistance. The waiver is not automatic; heirs must supply documentation.
Liens During the Recipient’s Lifetime
Recovery doesn’t always wait until death. States may place a lien on the home of a recipient who is permanently institutionalized, unless a spouse, a child under 21, a blind or disabled child of any age, or a sibling with an ownership stake lives there. The lien must be released if the recipient leaves the facility and returns home.
Tools for Planning Ahead
Estate recovery depends heavily on how assets are titled, so advance planning can make a real difference. Beneficiary designations, payable-on-death accounts, and certain trusts may affect what passes through probate. However, Medicaid’s five-year look-back on asset transfers means that giving property away shortly before applying can trigger a penalty period.
Protecting Your Home and Your Family’s Future
The estate planning attorneys at Legacy & Life Law can review your assets, explain how estate recovery may apply, and help you build a plan that supports your care while preserving what you want to pass to heirs. Call today for a consultation.