As an estate planning attorney, I am committed to helping you create a great estate plan. After working hard your whole life, you deserve to enjoy your retirement without risking your nest egg to healthcare costs, especially with the state’s complicated Medicaid rules.
In Pennsylvania, if you become incapacitated, require nursing home care, or pass away without an estate plan, the state’s rulebook dictates what happens to your assets. By creating an estate plan, you can write your own rules, ensuring your family, finances, and goals align with your wishes rather than default state laws.
The Hidden Risks of Medicaid Estate Recovery
A recent case highlights why proper Medicaid planning is crucial. A senior, cared for by her daughter, qualified for Medicaid’s Home and Community-Based Services (HCBS) program. Under this program, family members can be paid as caregivers through an agency, with Medicaid reimbursing the agency at $25/hour. Of this, the agency keeps $10/hour, and the caregiver receives $15/hour.
To qualify for Medicaid, the senior had to spend down her assets to meet the strict $8,000 resource limit but was allowed to keep her home. While the senior received care at home, Medicaid unknowingly set up a future financial burden for her family.
When the senior passed away, the estate recovery program kicked in. Medicaid sought reimbursement for the full $25/hour paid for her care—this included the agency’s $10/hour cut and the caregiver’s $15/hour pay. Since the senior’s house was part of her probate estate, the state forced its sale to recover the Medicaid expenses.
As a result, the daughter lost more than what she earned as a caregiver. Although her mother’s will left the house to her, Medicaid’s estate recovery claim depleted the inheritance entirely.
Avoiding Estate Recovery
This unfortunate outcome could have been avoided with proper Medicaid planning. Estate recovery only applies to assets in the probate estate—those owned solely in the individual’s name at death. If the senior’s home had been placed in an irrevocable asset protection trust at least five years before she needed care, it would have been protected from estate recovery.
At Sechler Law Firm, we strongly recommend using asset protection trusts to shield homes and savings from the high costs of long-term care. These trusts remove the house from the probate estate while allowing you to live there for life. Although you give up access to the equity, you safeguard your legacy for your family.
Plan Ahead to Protect Your Legacy
The Medicaid system is complex, and improper planning can lead to devastating financial consequences. If you or a loved one might need long-term care, consulting an elder law attorney is essential. Planning ahead ensures your assets are protected and your family avoids surprises like estate recovery.
To learn more, join one of our Estate Planning Workshops: Three Secrets to Protect Your Legacy. We’ll teach you how to use trusts, preserve your assets, and prepare for life’s uncertainties. Register today at sechlerlawfirm.com/workshops.
