Probably not, but that doesn’t mean that you can ignore this issue altogether because there are exceptions. Back in December, I wrote a blog discussing why proper estate planning is not just for the wealthy, a common and often harmful misconception. This blog addresses one set of circumstances that illustrates this point perfectly.
By definition, Medicaid recipients are not wealthy. In fact, the purpose of Medicaid is to provide healthcare services to people who don’t earn enough to pay for health insurance. It is a program that is federally subsidized and managed by individual states that is often thought of as health insurance for low-income families or seniors.
However, one substantial difference between Medicaid and traditional health insurance is that, if a Medicaid recipient undergoes costly treatment for a health issue before dying, Medicaid and the state of Florida can attempt to recover those funds from the recipient’s estate. That naturally raises the question, “Is our family’s house at risk?”
The short answer is: Typically, no, but it’s a good idea to discuss your family’s circumstances with an estate planning attorney. By law, the cost of treatment and healthcare services paid for by Medicaid can be recovered from your estate upon passing. Furthermore, these claims are considered a Class 3 claim, which means they have a high priority and are paid before other creditors and beneficiaries.
Fortunately, the law provides that a home that you live in, and therefore has a homestead exemption, is protected. That means your heirs can keep the home or sell it without fear of losing the proceeds from the sale.
There are, however, some notable exceptions you need to be careful about.
The home doesn’t have a homestead exemption. If a house has ever been used as a rental property without you living there, it loses the homestead exemption. In that case, the state could force your heirs to sell the home and forfeit the proceeds to repay the Medicaid program;
Your will cannot dictate that the home be sold upon your death. It must pass directly to your heirs and it will be up to them to determine whether or not to sell it. If that is set as a term of the will, Medicaid will see the proceeds as a liquid asset, not a homestead, and can pursue that money;
Your will gives your property to a person who does does not qualify to receive exempt homestead property;
You have relinquished your homestead rights before death. This can also remove the homestead exemption from your home, leaving it vulnerable to creditors, including the state and Medicaid.
In Florida, only assets that are going through probate are potentially recoverable by Medicaid. Generally speaking, one of the primary goals of effective estate planning is to keep as much of your assets as possible out of probate. We can add protecting them from Medicaid recovery to the list of reasons why that’s important.
For most Medicaid recipients, the equity in a home is the largest, possibly the only substantial asset they have to leave to their families. In many of those cases, their heirs are counting on that house being passed to them so they can live in it or sell it and improve their own lives with the proceeds. Losing that asset could be devastating.
Fortunately, there are ways to protect your home from the state and from Medicaid recovery after you pass. That said, every family’s circumstances are unique. The number of heirs in your family, the value of your home, if you have a mortgage, and the value and type of other assets you hold can all affect how your estate planning should be handled.
If you are receiving Medicaid benefits, or think you may have to apply in the future, or would simply like to talk to a qualified estate planning attorney about how to protect your family in general, contact Nexus Legal Solutions at 407-900-7722 for a consultation.