Over the past year, you may have heard about New York Medicaid recovery against a deceased nursing home patient’s jointly held property, retained life estates and interests in trusts. In 2011, New York legislation, administrative directives and emergency regulations expanded the definition of the “estate” that was subject to recovery by Medicaid (EER). That law was recently repealed.
How could there be a recovery against the estate of a Medicaid recipient? To qualify for Medicaid, the recipient is limited to resources of no more than $14,250. However, certain resources are exempt, such as retirement accounts that are in maximum payout status or a home having an equity value of $786,000 or less.
What is estate recovery? Under federal law, each state must recover against the probate estate of recipients who receive Medicaid benefits after age 55 (or those who were permanently institutionalized, regardless of age). States are permitted, but not required, to recover beyond the probate estate. New York State has opted to follow the minimum requirement and make claims against the probate estate only.
What is the probate estate? The probate estate is comprised of assets that are in the name of the decedent alone with no named beneficiary. These assets cannot be transferred to a beneficiary without the Surrogate’s Court approving the probate of the will or the administration of the intestate estate (if there is now will). An estate includes all of the individual’s real and personal property and other assets passing under the terms of a valid will or by intestacy.
What is the non-probate estate? Non-probate assets are those that have a named beneficiary or pass by operation of law, such as joint bank accounts, in trust for (ITF) accounts, payable upon death (POD) accounts, transfer upon death (TOD) accounts, life estates in real property, trust accounts, or life insurance.
What were the Emergency Regulations? The EER emergency regulations described the assets subject to recovery as those in which the decedent had an interest immediately prior to death. This included real property held jointly or as a tenant in common; a retained life estate; a per capita share of jointly held securities; the principal and interest in a revocable trust; principal and interest of an irrevocable trust but only to the extent that the person was entitled to a distribution; and remaining annuity payments.
What concerns were raised by EER? The greatest concerns raised by EER involved the retroactive effect of recovery against life estates created before enactment of the regulations. This would have undermined estate and Medicaid planning completed years before the definition of “estate” was changed. Also of concern was that the transfer of real estate interests would be unclear, affecting title insurance. EER conflicted with the Employee Retirement Income Security Act that protects retirement accounts from creditor claims.
What is the current law on Medicaid estate recovery?
The New York 2012-2013 budget bill repealed the EER legislation that expanded the definition of “estate” beyond the probate estate. Non-probate assets may not be considered as part of the decedent’s estate for recovery purposes. This brings us back to the place of beginning or to the status quo ante. Now, in New York State, there may be recovery only against the probate estate of a decedent who received Medicaid benefits during his or her lifetime.
For further information regarding Medicaid, see the “2012 New York Medicaid Guide” at http://www.wny-lawyers.com/pamphlets.php