Medicaid Estate Recovery, and Jointly Owned Houses

Monday, August 28, 2017

    In Oregon, after a Medicaid recipient dies, the Medicaid Estate Recovery Unit, also called the Estate Administration Unit seeks to recover amounts paid for care by Medicaid from the estate of the Medicaid recipient who has just died.

    The state has a high priority in the order of payments for things that must be paid from the estate before the remainder can be paid to the beneficiaries named in a will, or to the heirs at law if there is no will.

    There are many kinds of property which can be owned jointly, with right of survivorship.

    One of the few things in which a Medicaid recipient is likely to actually have an interest when he or she dies is real estate.

    This is because the only thing that a Medicaid recipient is likely to still own, aside from tangible personal possessions and a bank account of up to $2,000, is a joint interest in a house or other real estate.

    The reason for this is that if a piece of real estate is jointly held, and the co-owner is not willing to sell, the state cannot force the sale as part of the Medicaid spend down.

    After a Medicaid recipient has died, however, the state can force the sale of jointly held real estate in order to recover costs of care paid by Medicaid during life.

    This is true even though no other creditor could force such a sale, or could collect against such an asset in many cases.

    A prime example is real estate that is held jointly with right of survivorship.  In Oregon, technically, real estate cannot be held jointly with right of survivorship.  Instead, it is usually held “not as tenants in common, but with right of survivorship,” if the two co-owners were not married.  A deed with this language is sometimes called an Erickson deed.  

    Married couples often hold the property as tenants by the entirety.  There are some protections against the sale of one person’s assets without the consent of their spouse if property is held as tenants by the entirety, but on death, the entire interest passes to the survivor alone, so it produces a result very similar to joint ownership with right of survivorship in bank accounts, or to Erickson deeds in real estate.

    Jointly owned real estate that is not meant to pass to the survivor is generally held as tenants in common.  Each owner can sell their interest separately, without the consent of the co-owner, and the heirs or beneficiaries (or creditors) of a deceased owner will take the owner’s share of the ownership when the owner dies.

    Even though other creditors cannot generally reach property owned as tenants by the entirety or a joint owners with right of survivorship after the owner has died, the State has written the laws, and the State can take such assets to recapture amounts that were advanced by the State through Medicaid to provide medical care or long term care for the decedent.

    The state will not take such assets from a spouse, as long as the property qualifies as the home of the spouse (i.e. so long as the asset is an exempt asset, from the standpoint of Medicaid).

    The state will, however, seek to take recovery for Medicaid costs provided to a Medicaid recipient when the other spouse dies or moves into long term care, and the state will usually seek to force recovery for Medicaid costs provided to the Medicaid recipient immediately when there is not a surviving spouse.

    For this reason, it can be very important that a Medicaid recipient’s name be removed from a home or other piece of real estate when the person qualifies for Medicaid.

    If, for example, a child has added a parent to the title of the child’s house, in order to qualify for a mortgage, the state may have a claim against that house when the parent dies, if the parent ever received Medicaid benefits.

    The child may be able to defeat that claim if the parent did not contribute to the purchase price or maintenance, taxes, or the like for the house, but any money that the parent did contribute can likely be recovered by Medicaid.

    This is true even if the gift of a down payment, or of money to purchase or maintain the home was made long ago, well before the beginning of the five year Medicaid look back period that would otherwise apply to gifts.  This is because the parent remained on the title to the house, and the state can recover against any such asset owned by the parent at the time that the parent dies, if the parent has ever received Medicaid.

    A skilled Medicaid attorney may be able to help with several possible strategies to transfer the parent’s interest in the home back to the child.  If this is not possible, and if a gift would be disqualifying, a skilled Medicaid attorney may at least be able to set the stage for the dispute that will emerge when the parent dies, in order to try to limit the amount that the State may be able to recover, in hopes of saving the house for the child.  Without anything more, if a parent and a child are either tenants in common, or own the property “not as tenants in common, but with right of survivorship,” the default position of the Estate Recovery Unit is likely to be that the parent owned fifty percent (50%) of the property, and, in order to save the property, the child may have to pay the State up to 50% of the value of the property in order to prevent a partition and sale action, where the property would be sold in order to repay amounts that the State had advanced for Medicaid care.