August 1 Deadline for Estate Recovery “Grandfathering”

Medical Assistance (MA) is a government program that pays certain expenses, including nursing home expenses, for individuals that fall below certain asset and income thresholds. The laws pertaining to MA change more often than other areas. Recently, in Wisconsin, those changes have expanded the state’s ability to seek reimbursement from a deceased person’s assets (or their spouse’s assets). The after-death reimbursement right is called “estate recovery”.

Prior to the recent change, estate recovery was largely limited to probate assets – assets that were titled in the deceased person’s name that require the probate court’s assistance to transfer to children or other heirs. Non-probate assets – such as those contained in revocable trusts or life insurance passing by beneficiary designation – were not available for estate recovery.

The recent changes allow the state to recover from non-probate assets. The changes also impose duties on the people handling the estates (or trust administrations) to properly notify the state and pay over any required funds. The changes have been controversial, in part because Wisconsin’s rules differ from (and, some attorneys argue, are contrary to) the federal law. It will take time, and likely court battles, before we will know for certain whether the laws will be upheld by the courts.

While we cannot change the law on the books, nor can we control the court battles, there is a limited opportunity under the law to be “grandfathered” under the former estate recovery rules. The State has issued an operations memo stating it will not seek estate recovery in certain circumstances for asset transfers or trusts created before August 1, 2014.

Keep in mind that estate recovery only comes into play: (1) if you were admitted to the nursing home; (2) if you asked the government to pay for your care through MA; (3) if you qualify for MA; and (4) if MA does, indeed, make payments on your behalf. You may have made other arrangements to pay for your long term care expenses (long term care insurance), you may have too many assets to qualify for MA, or you may never go to the nursing home at all. In addition, the laws could change again.

The operations memo is available here.