Understanding the Medicaid Estate Recovery Program (MERP)
Facing the high costs of nursing home care often means relying on Medicaid. Federal law mandates that states implement a Medicaid Estate Recovery Program (MERP) to recover long-term care costs from the estates of deceased recipients aged 55 and older. This is the basis for concerns about the state taking a home.
How MERP Works
Upon the death of a Medicaid recipient, the state notifies the estate's representative or heirs about its intent to file a claim for recovery of long-term care services costs. If the deceased's home is part of the estate, the state may force its sale to satisfy the Medicaid debt. It's important to understand this occurs through the estate recovery process after death, not directly by the government seizing property while you are alive. State laws define which assets are subject to recovery, which can include assets beyond those passing through probate, such as those held in joint tenancy or trusts.
When is Your Home Protected During Your Lifetime?
A primary residence is often exempt from being counted as a resource for Medicaid long-term care eligibility while the recipient is alive. However, this protection has conditions.
The "Intent to Return" Rule and Family Members
A single person in a nursing home can keep their home as an exempt asset by stating their intent to return, provided their equity is below the state's limit. The home is also exempt if a spouse, a child under 21, a blind or disabled child of any age, or a sibling with an equity interest (who lived there for at least a year) resides in the home. If the recipient returns home, any state-placed lien must be removed.
Medicaid Liens
To secure future estate recovery, states may place a lien (often a TEFRA lien) on the property of someone permanently in a nursing home. This doesn't force a sale while the person is alive but must be addressed if the property is transferred.
Navigating Post-Death Estate Recovery
The risk to a home primarily arises after death through estate recovery. However, protections exist for surviving family members.
- Spousal and Child Protections: States cannot recover while a surviving spouse is alive and often defer recovery until after the spouse's death. Recovery is also prohibited if the deceased has a surviving child under 21 or a blind or disabled child of any age.
- Hardship Waivers: States are required to have procedures for waiving recovery in cases of undue hardship for heirs, such as when the home is a family business.
Strategies to Protect Your Home
Protecting your home from Medicaid estate recovery requires proactive planning, ideally well in advance of needing long-term care.
1. Life Estates
A life estate transfers ownership to heirs while you retain the right to live there. It may avoid probate recovery, but state laws vary, and the five-year look-back period applies.
2. Irrevocable Trusts
Placing your home in an irrevocable trust means you no longer own it, protecting it from both Medicaid eligibility calculations and estate recovery. This strategy is subject to the five-year look-back period and the trust cannot be changed once created.
3. Caregiver Child Exemption
This allows penalty-free transfer of your home to a child who lived with you for at least two years before you entered a nursing home and provided care that delayed your institutionalization.
Planning for Long-Term Care: A Comparison
Understanding the options is key. Below is a comparison of common asset protection strategies. Consulting an elder law attorney is crucial for personalized advice.
| Strategy | How it Protects | Subject to Look-Back? | Post-Death Protection | Flexibility | Complexity |
|---|---|---|---|---|---|
| Life Estate | Transfers ownership to heir while retaining residency rights; may avoid probate recovery. | Yes (5 years) | Strong, but state law varies | Low (property cannot be sold without heir's consent) | Medium |
| Irrevocable Trust | Removes assets from your estate entirely for both eligibility and recovery. | Yes (5 years) | Very Strong | Low (cannot be changed once created) | High |
| Caregiver Child Exemption | Allows penalty-free transfer of home to a qualifying child. | No (provided conditions met) | Strong | Medium (must meet specific criteria) | High |
| Spouse/Dependents Exemption | Protects home from eligibility count and delays recovery while family lives there. | N/A | Defers recovery until qualifying individual no longer resides there or passes. | Medium | Low |
Conclusion
While the state won't take your home the moment you enter a nursing home, the Medicaid Estate Recovery Program (MERP) can claim assets from your estate after death to recover costs, potentially forcing a home sale. During your lifetime, your home can be protected under certain conditions, especially if a spouse or dependent resides there. Proactive planning using strategies like irrevocable trusts or life estates, implemented well before the five-year look-back period, is essential. Consulting an elder law attorney is the best step to creating a plan that safeguards your assets. For more information, the Administration for Community Living provides a useful guide: Medicaid Estate Recovery - ACL.gov.
