Medicaid Expands Definition of Estate

* By: Anthony J. Enea, Esq.

The following is the first of a two part article. Pursuant to 42U.S.C. 1396 p (b) (4) (B) the definition of "estate" for the recovery of Medicaid properly paid included all real and personal property and other assets of the decedent as defined for purposes of State probate law. Additionally, at the option of the States the definition of "estate" can include any other real and personal property (and other assets) in which the decedent had any legal title or interest in at the time of death (to the extent of said interest). The States at their option can include such assets conveyed to a survivor, heir or assign of the deceased through joint tenancy, tenancy- in- common, life estate, living trust or other arrangement .

As part of the recommendations made by the Medicaid Redesign Team appointed by Governor Andrew Cuomo, the legislature amended 360-7.11(b) of the NYCRR by adding new paragraphs (7) (8) and (9) on April 1, 2011, subject to the promulgation of regulations by the NYS Dept. of Health. (emphasis added) Pursuant to this new legislation the definition of "estate" was expanded to include any property in which the individual has any legal title or beneficial interest at the time of death, including jointly held property, retained life estate, beneficial interest in a trust to the extent of such interest. However, the claim against the recipient of property received by descent, distribution or survival shall be limited to the value of the property received by the recipient and in no events greater than the medicaid benefits otherwise recoverable.

Since April 1, 2011, the elder law bar has been waiting for the Department of Health to promulgate the implementing regulations. On June 21, 2011 the Department of Health issued State Plan Amendment transmittal # 11-42 to Title XIX attachment 4.17 A: Page 1. The Governors office reported no comment to transmittal #11-42. While as of the date of this writing the Regulation has not yet been officially promulgated, the aforesaid transmittal # 11-42 provides the best view of the regulation we have been awaiting. If it is not or is modified in any way I will report same in the second part of this article.

Pursuant to transmittal # 11-42, the term "estate" for medicaid recovery purposes is defined to include all real and personal property and other assets included within the medicaid recipient's estate and passing pursuant to the terms of a valid Last Will or by intestacy. It also includes any other property in which the individual has any legal title or beneficial interest at the time of death including jointly held property, retained life estates and beneficial interests in trusts, to the extent of such beneficial interest. However, the claim against the recipient of such property by descent distribution or survival shall be limited to the value of the property received by the recipient and in no event greater then the amount of medical assistance benefits otherwise receivable, whichever is less.

Interestingly, Transmittal # 11-42 also defines what is not part of the medicaid recipients "estate" for recovery purposes. For example, (a) interests in real or personal property, irrevocable trust, life estate or joint interest where the transfer or conveyance was made prior to the adoption of the regulation or within 60 days thereafter or where the interest was held prior to adoption of the regulation, except those assets included within the individuals probate estate and passing under the terms of a valid Will or by intestacy; (b) an irrevocable trust where the recipient has no interest in the principal of the trust, but only a right to income or the right to the use of trust property. However, if such individual has the right to trust income, the individual's estate shall include any trust income that has not yet been distributed on the date of death of such individual; (c) any beneficial interest in any trust or life estate created by someone other than the individual , a life estate purchased for consideration by the individual, or a retained life estate owned by the individual as of his or her death; (d) any beneficial interest created in a Special Needs Trust (except first party trusts with payback provisions ); (e) any beneficial interest in a pension plan, IRA's, 401(k), 403(b), 457 plans or any work related pension plan for self employed such as Keogh plans, except to the extent that an individual's estate is the beneficiary of such account or plan; (f) any beneficial interest in a life insurance policy and/or annuity payable to anyone other than the individual or his or her estate, (g) any remainder interest in real property owned by a person other than the individual medicaid recipient; (h) any power that is not a beneficial interest, including, but not limited to, a limited power of appointment, power to substitute property of equivalent value or other grantor trust powers under Sections 671 through 679 of the IRC which are not beneficial interests; (i) any jointly owned bank account to the extent of the surviving joint owner's verifiable deposits thereto; and (j) any jointly owned securities account to the extent of the surviving joint owner per capita share thereof;

Additionally, within 30 days of receipt of a written notice of death from the representative of the estate of a medicaid recipient or any party with an interest in the estate, the Department of Health shall file a Notice of Claim or Waiver of Claim upon the estate. If the Department of Health fails to file a Notice of Claim within 30 days this failure to do so shall constitute a waiver.

From the above stated it is clear that the use of retained life estate, revocable living trusts and retaining title to real property jointly will not be able to shield a medicaid recipient from the claims for medicaid paid. It's also clear that the use of an Irrevocable Income Only Trust continues to remain a viable long term care planning tool. Whether or not any further changes to the proposed Regulations will be made remains to be seen. It is also anticipated that litigation challenging the legislation and regulations may be forthcoming.

In the second part of the article I will address the planning options available in light of the new legislation and its implementing regulations as well as bringing you up to date on any changes in the regulation.