For Massachusetts residents, understanding how MassHealth (Medicaid in Massachusetts) can impact your assets is critical, especially when it comes to MassHealth Estate Recovery. Understanding MassHealth Estate Recovery
MassHealth Estate Recovery is a program that allows MassHealth to seek reimbursement from the estates of certain members after their passing, which can leave families with unexpected challenges.
It is important to know who is affected, when recovery takes place, and what is included, so families can plan appropriately and protect their assets.
Who is Impacted by Estate Recovery?
Estate recovery applies to:
- MassHealth members who are 55 or older.
- Members of any age who have received long-term care in a nursing home or similar institution.
Only probate estates with a value over $25,000 are subject to recovery.
However, even estates exceeding this amount may qualify for exceptions or waivers in specific circumstances. MassHealth has expanded exemptions and waivers allowing more people to avoid estate recovery. These include:
- Care Provided Waiver for beneficiaries who lived in the home and provided care to the member.
- Income-Based Waiver for beneficiaries with low income.
When Does Estate Recovery Occur?
Recovery efforts do not begin until after the MassHealth member has passed away. This ensures that assets remain unaffected during the member’s lifetime.
What is a Probate Estate?
A probate estate includes assets that were solely owned by the deceased at the time of death. Examples include:
- Real property, such as a home or land.
- Personal property, including vehicles, jewelry, and other valuables.
Some assets, like IRAs, 401(k)s, and life insurance policies are generally excluded from the probate estate. However, exceptions may apply based on individual circumstances.
The probate process, overseen by the court, determines how these assets are distributed and whether they are subject to recovery.
How Much Can MassHealth Recover?
MassHealth can recover the full amount it paid for the member’s care, including:
- Long-term care costs.
- Other medical expenses.
For members enrolled in MassHealth health plans, recovery includes premiums paid on their behalf. For those receiving fee-for-service care, the recovery is based on the actual costs of services.
Importantly, MassHealth cannot recover more than the total value of the probate estate, and family members are not held personally liable beyond this amount.
The 5-Year Look-Back Period
MassHealth reviews all asset transfers made within the five years prior to the member’s application for benefits. If transfers during this period are found to violate rules, penalties may apply, affecting eligibility for MassHealth coverage.
MassHealth Liens
To secure repayment, MassHealth can place a lien on a member’s home during their lifetime.
If the home is sold, proceeds may be used to repay care costs. After a member’s death, MassHealth must release the lien and file an estate recovery claim against the probate estate if they wish to recoup the costs.
Federal vs. Massachusetts Requirements
Under federal law, states are required to recover long-term care costs from Medicaid recipients.
However, as of September 6, 2024, Governor Maura Healey signed legislation that limits MassHealth estate recovery to only federally mandated recovery for nursing home care and certain other long-term care costs. Also, this new law removes estate recovery for residents receiving assistance under CommonHealth and Personal Care Attendant (PCA) services.
Strategies to Protect Your Assets
Planning ahead can help minimize or avoid the effects of MassHealth Estate Recovery on your family. The following strategies focus on preserving your assets and ensuring they pass on to your loved ones as intended.
Spend Down Assets
One way to reduce the estate subject to recovery is by spending down assets on qualifying expenses. This strategy can include:
- Paying off debts or mortgages.
- Making home improvements or repairs.
- Purchasing necessary medical equipment or services.
By allocating assets toward allowable expenses, you can lower your estate’s value and meet eligibility requirements for MassHealth. Proper planning ensures that these expenditures are made strategically and in compliance with the rules.
Gifting
Gifting assets to family members or other beneficiaries can also reduce the value of an estate. However, it is essential to consider the 5-year look-back period.
Any gifts made within this window may trigger penalties or delays in MassHealth eligibility. Careful timing and documentation are critical to avoid complications.
Irrevocable Trusts
Setting up an irrevocable trust, such as a Medicaid Asset Protection Trust (MAPT), is an effective way to protect assets from estate recovery. Once assets are transferred to the trust, they are no longer considered part of the estate. Benefits of irrevocable trusts include:
- Protection of assets from probate and recovery.
- Continued eligibility for MassHealth benefits.
However, trusts must be carefully drafted to comply with legal requirements and ensure they provide the intended protection.
Life Estate Deeds
A life estate deed allows you to transfer ownership of property to a beneficiary while retaining the right to live in and use the home for the rest of your life. This strategy can shield the home from recovery while ensuring lifetime security for the grantor.
When creating a life estate deed there are several things it is important to consider:
- Proper Titling: Incorrectly titled deeds can lead to unintended consequences.
- Tax Implications: Beneficiaries may face capital gains taxes depending on the property’s value.
- Pros and Cons: Life estates offer control and security but may lack the flexibility of other options, such as outright transfers.
Joint Tenancy
Owning property as joint tenants with the right of survivorship ensures that ownership automatically transfers to the surviving owner upon death, bypassing probate. While this can protect a home from recovery, there are some reasons why it may not always be the best strategy:
- Adding non-spouse joint tenants can trigger gift taxes.
- Joint tenancy may complicate future ownership changes or sales.
Exemptions and Waivers
MassHealth provides certain exemptions and waivers that can help protect estates, including:
- Exemptions for estates valued under $25,000.
- Hardship waivers for low-income heirs or caregivers.
- Deferrals for surviving spouses, disabled children, or minor children.
Eligibility for waivers requires a careful review of the estate and family circumstances. Seeking legal advice is important to ensure all available options are explored.
Long-Term Care Insurance
Long-term care insurance offers a proactive way to avoid the need for MassHealth altogether. By covering the cost of care privately, this type of insurance can protect assets from recovery.
When considering a policy, keep in mind:
- The types of coverage available (e.g., home care, nursing home care).
- The policy’s benefit period and coverage limits.
- Whether remaining benefits can exempt the home from recovery.
Long-term care insurance can provide peace of mind while preserving your family’s financial security.
Take Action to Protect Your Legacy Today
MassHealth Estate Recovery can have a lasting impact on your family, but the right planning can make all the difference.
At Casey Lundregan Burns, P.C., we work with families across Massachusetts to create personalized strategies that protect your assets and secure your legacy. If you are concerned about the future of your estate or have questions about how MassHealth Estate Recovery might affect you, we encourage you to reach out.
Contact us today at (978) 878-3519 to schedule a consultation and learn how we can help you protect what matters most.
Disclaimer: The information in this post is not intended as legal advice or as a substitute for the particularized advice of counsel. For more information, please consult an attorney.