Does a Medicaid Recipient's Estate Owe Repayment?

Yes, it is possible that his estate (the assets he left behind) will have to pay back Medicaid, but there are several exceptions and specific rules involved.

This process is known as Medicaid estate recovery.

What Is Medicaid Estate Recovery?

Federal law requires every state to seek repayment from the estates of deceased Medicaid recipients who were 55 or older, or those who received long-term care services (like nursing home care) at any age.

Since your brother-in-law was receiving Social Security Disability (SSDI or SSI), he was likely enrolled in Medicaid to cover medical costs. When he passed, the state’s Medicaid agency became a creditor of his estate.

Does the Will Protect the Assets?

A common misconception is that a will prevents the state from taking money. In reality:

• The will dictates who gets what after debts are paid.
• Many Medicaid costs are considered a debt.
• The executor of the will is legally obligated to notify the state of the death and pay valid claims before distributing money to heirs.

Key Exceptions: When the State Cannot Collect

The state cannot take money from the estate if any of the following people are still living:

1. A surviving spouse: This is the biggest protection. As long as a spouse is alive, the state typically cannot collect from the family home.
    
2. A minor child: If he had a child under age 21.
    
3. A blind or disabled child: If he had a child of any age who is legally blind or permanently disabled.

What Assets Are at Risk?  

Medicaid recovers funds from assets that go through probate. In addition, in many states, Medicaid also recovers from assets transferred to survivors outside of probate, through living trust, transfer on death, and other mechanisms.

• The home: This is usually the primary target. However, there are two exceptions that may protect it. First, if a sibling had an equity interest in the home and lived there for at least a year immediately before the Medicaid recipient was institutionalized, the state will be barred from recovery. Additionally, if an adult son or daughter lived in the home for at least two years before institutionalization and provided care that delayed the need for a nursing facility, they may be able to claim a caregiver child exception. Both exceptions have strict requirements and are determined during the eligibility phase, not after the recipient’s death.
• Bank accounts: If the accounts were in his name only, they are subject to recovery.
• Assets that bypass the will: Generally, things like life insurance policies with a specific beneficiary or payable-on-death (POD) accounts go directly to the beneficiary and may avoid Medicaid recovery, but many states still collect against nonprobate transfers.

Important Distinctions

• Social Security Disability (SSDI/SSI): The government does not ask for back the monthly disability checks he already received. Recovery only applies to the medical bills Medicaid paid on his behalf.
• Hardship waivers: If paying back Medicaid would cause the heirs to lose their own ability to survive (e.g., losing the only family home), you can apply for a hardship waiver through your state’s Medicaid office.

Checklist for the Family

• Consult a probate attorney: Laws vary significantly by state.
• Check the age: Was he under 55? If so, did he receive long-term or nursing home care?
• Identify any nonprobate transfers: Look for accounts with named beneficiaries.
• Wait for the claim: Don’t start spending or distributing money until the state has issued a Notice of Intent to Recover.

Note: This information is for educational purposes and does not constitute legal advice. Because Medicaid laws are state-specific, you should contact a local elder law or probate attorney to protect your family’s interests.