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Thursday, June 1, 2023

Protecting Your Home from Medicaid Estate Recovery

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Timothy Chance
Cynthia, a Maryland Volunteer Lawyers Service (MVLS) client, receives free legal help to keep her home in her family for future generations. To contact Maryland Volunteer Lawyers Service for free help, call 410-547-6537, Monday through Thursday from 9 a.m. to noon. Photo credit: Wide Angle Youth Media

Question: My mom passed away. I am still living in her house and now Medicaid has placed a lien on her house. I’m worried about whether our family could lose the house.

Answer: Many Marylanders wish to age in place, maintaining their independence while remaining in the comfort and familiarity of their home. Oftentimes, adult children may move into the home with their parents and step into the role of caregiver for as long as possible. If further assistance is needed, the parent may apply for Medicaid benefits and move into a nursing facility, leaving the child as the home’s only resident. Unfortunately, this may significantly interfere with the family’s plan for the passing the home down to the next generation. When that parent dies, Maryland law requires that Medicaid attempt to recover the cost of providing care— a process known as estate recovery.

Medicaid, under Federal and Maryland Law, is permitted to file a claim against the estate of a deceased Medicaid recipient for medical services it provided to the recipient. Additionally, Medicaid is allowed to place a lien on the homes of benefit recipients when it is determined that the parent will not be able to return home from a nursing home facility. This creates a major barrier for many Marylanders, as the home can be the only asset of value and the family is forced to sell the home.

The family home, instead of going to the caregiver children, is instead sold to satisfy Medicaid’s claim. Instead of being a tool for building and maintaining intergenerational wealth, the home is forever lost to the family.

When Medicaid Cannot File a Recovery Claim: There are some situations in which Medicaid cannot file a recovery claim. Medicaid cannot file a claim if there is a surviving spouse, an unmarried child younger than 21, or a child who is blind or disabled living in the home.

If none of these three exemptions apply, recovery may be waived due to a substantial hardship. Hardship can be established if there is a dependent whom lived in the property at the time of the Medicaid recipient’s death and lived there continuously for a period of two years before the Medicaid recipient’s death and cannot find another place to live.

To establish that the dependent lived in the property prior to the recipient’s death and during, the recipient will need to send proof, such as old mail, to the Maryland Department of Health. The Maryland Department of Health will also consider the dependent’s household income to determine if the dependent can find another place to live.

For example, if a caregiver child moved in to take care of their mother and three years later, the mother went into a nursing home, the child could seek a hardship exemption if they have nowhere else to live. Sometimes, when all those conditions are not met, Medicaid will allow the dependent to continue to live in the property but may place a non-interest-bearing mortgage on the property. Medicaid, based on the dependent’s ability to pay, determines monthly payments.

Life Estate Deeds: An additional way to safely pass the property to the next generation is through a life estate deed without powers. A life estate deed without powers allows the parent to retain ownership of their home throughout their lifetime and upon their death, the property would automatically pass to a named beneficiary. Specifically with a life estate deed, if five years pass from the date of the creation of the life estate deed without applying for Medicaid  benefits, the home would be exempt from Medicaid recovery and could safely pass to the recipient’s heirs.

If you are facing Medicaid estate recovery or want to draft a life estate deed to safely pass your home on to your loved ones, you can contact Maryland Volunteer Lawyers Service for free help at 410-547-6537, Monday through Thursday from 9 a.m. to noon.

Visit www.mvlslaw.org to learn more.

Timothy Chance, Esq. is the Tangled Title Staff Attorney at Maryland Volunteer Lawyers Service. His practice focuses on estate planning, estate administration and housing issues for Marylanders of limited means. Do you have a question you would like to see addressed in this monthly column? Email [email protected] to submit your question to the Baltimore Times’ legal tip column.


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