Posts Tagged ‘retained life estate’

A Retained Life Estate May No Longer Avoid Medicaid Recovery

A retained life estate is itemized in new Medicaid law and regulations as a type of non-probate asset now included in the definition of “estate” for Medicaid recovery purposes. Therefore, a deceased Medicaid recipient’s interest in a retained life estate may now be available for Medicaid recovery on the death of the Medicaid recipient.

The potential recovery of this interest was not anticipated when many parents even years ago transferred their home by deed to a child or children and retained a life estate.  We expect that Medicaid’s legal right to recover from a life estate interest will be challenged in court in the near future. However, we do not know what the results of that litigation might be and as of now the retained life interest is a recoverable asset.

The owner of a retained life estate may have options available to protect the life estate interest.  This will depend upon the individual’s particular situation.

A Sea Change in Medicaid Law in NY

On April 1, 2011, New York enacted changes to its Medicaid law by significantly expanding the list of estate assets from which Medicaid can recover its costs.  This is of course a huge concern for anyone contemplating or receiving Medicaid benefits.

Prior to this new law, Medicaid could only recover its costs from assets that passed from the deceased Medicaid recipient (or in some cases the spouse’s estate) through a court proceeding. The assets would have been in the sole name of the decedent.  Assets such as jointly held accounts, accounts with named beneficiaries, life estate interests passed directly to the beneficiary. That is no longer the case under this new law.

On September 8, 2011, the NYS Department of Health promulgated emergency regulations clarifying the new law and the assets now available for recovery.  The emergency regulations define an estate for recovery purposes as those assets passing by will or intestacy as well as “any other real and personal property and other assets in which the decedent had any legal title or interest at the time of death, including such assets conveyed to a survivor, heir, or assign of the decedent through joint tenancy, tenancy in common, survivorship, life estate, living trust or other arrangement, to the extent of the decedent’s interest in the property immediately prior to death.”

The regulations allow recovery from the estate of the deceased Medicaid recipient’s interest in a retained life estate even where the deed was executed many years prior.

The emergency regulations allow recovery from irrevocable trusts to the extent the decedent had an interest in the principal of the trust or was entitled to income from the trust that was not distributed prior to death.

We are working with these changes to develop the best planning options now available for our clients.