Michigan Adopts Estate Recovery Law
A little history: In 1993 the federal government mandated every state must adopt an estate recovery program. As of September 29, 2007, every state except Michigan had done so. On September 30, 2007, Michigan became number 50.
Because each state implemented estate recovery according to its own laws, estate recovery works differently in different places. Some states have a very aggressive estate recovery program. Some states have more lenient programs. The biggest difference between an aggressive and lenient program is how the state defines the type of property that may be subject to recovery. Michigan has adopted the more lenient approach of only seeking recovery from so-called probate property.
That means that when estate recovery is implemented in Michigan (which will not occur until after the plan is approved by the federal government), recovery will only be allowed against assets that are in an estate administered by a probate court. This would not include jointly owned property, property that passes by beneficiary designation or payment on death designation, property held in a trust, or property which is held in life estate or life lease.
Further, even if property is subject to recovery, the law provides the following exemptions and exclusions:
a. Family farm, business or other income-producing assets are exempt if they are the primary source of income to the survivors.
b. If the homestead is subject to estate recovery, recovery only applies to that portion of the value which is above 50 percent of the average price of a home in the county where the home is located.
c. The homestead is completely exempt from recovery if occupied by the spouse or child (blind, disabled or under age 21) of the Medicaid recipient (although there is language in the law that might allow a claim to be made when the spouse dies–if s/he leaves property in a probate estate).
d. The homestead is completely exempt from recovery if occupied by a relative of the Medicaid recipient (within fifth degree of kinship) and if that relative provided care to the Medicaid beneficiary for at least two years, thereby keeping the Medicaid recipient deinstitutionalized.
e. The homestead is exempt from recovery if the Medicaid recipient’s sibling is a joint owner and lives in the home.
f. Any recovery is limited to the actual costs of medical services paid for on behalf of the Medicaid recipient, without interest.
In addition, estate recovery will not be applied to the estates of people who were receiving Medicaid benefits prior to September 30, 2007.
A more immediate concern is that the passage of estate recovery will give rise to new scams. Unscrupulous individuals will use this news to try to scare senior citizens into purchasing products that are not in their best interests. Individuals over age 55 can expect to be invited to more seminars and to be solicited by the usual suspects: annuity salespeople, reverse mortgage brokers and living trust mill operators—each of whom may claim that estate recovery is another reason to purchase their products. Before making any financial or legal decision regarding the impact of estate recovery, individuals should consult with a qualified trusted adviser with whom they have an established relationship. Individuals should avoid falling victim to high-pressure scare tactics.
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Douglas G. Chaligian, JD is one of the few attorneys in Michigan who is certified in elder law by the National Elder Law Foundation. He is involved in various community activities, including the board of directors of the Alzheimer’s Association (Great Lakes Chapter), the Michigan Society of Gerontology and the Thomas M. Cooley Law School Sixty Plus Clinic.