This blog post is the thirteenth chapter of a series entitled “How to Qualify for Medicaid in Pennsylvania.” This post focuses specifically on Pennsylvania’s estate recovery program. Qualifying for Medicaid can be confusing and complicated, but this guide helps explain it easily. You can order a copy of the complete guide here.

Estate Recovery – What Happens After Death?

Estate recovery is Pennsylvania’s program for recovering Medicaid costs from the estates of recipients who have died.

For example, if Aunt Martha spent a year in a nursing home receiving Medicaid and then died owning a house worth $200,000, the estate recovery program would try to recover the Medicaid dollars spent for her care from Aunt Martha’s probate estate. Whether the state succeeds or not depends on a number of things.

When does estate recovery apply?

First, the state can only receive payment for services rendered during the five years preceding death “to an individual 55 years of age or older.” If Martha received Medicaid benefits longer ago than five years, or when she was under age 55, estate recovery would not apply.

Second, the state can recover from a Medicaid recipient’s probate estate. If she owned her house jointly with another person “with rights of survivorship,” then the house would not be subject to estate recovery because it would not be part of her probate estate. A probate estate consists of assets titled in the decedent’s name alone, with no beneficiary designation, joint title, or “transfer on death” designation.

Third, there may be an “undue hardship” exception. An example of an undue hardship exception applies to the primary residence in the case in which a caregiver lived in the residence for at least two years before the Medicaid recipient received benefits, provided care or support during those two years, and has no other alternative permanent residence.

The state will also postpone collection of its estate recovery claim until:

  • the death of any surviving spouse;
  • the death of any child who is blind or totally and permanently disabled;
  • the date any surviving child turns 21 years of age; or
  • the date when a sibling of the recipient (who also has an equity interest in the property and has been living in the property for at least one year prior to the death of the recipient) dies, vacates the property, or transfers the property.

In addition to a probate estate, the state can recover its Medicaid costs from:

  • a recipient’s life insurance proceeds, but only if they are payable to the recipient’s estate;
  • assets placed into trust by the recipient, including irrevocable burial reserves, but only if they are payable to the recipient’s estate; and
  • certain items exempted from probate by Section 3101 of Pennsylvania’s probate code, such as an account with less than $10,000.

What items are exempt from estate recovery?

Pennsylvania’s regulations provide that certain additional items are not subject to, or are specifically exempt from, estate recovery:

  • assets in certain trusts for the benefit of disabled individuals, described in 55 Pa. Code 178.7(f)
  • certain income, resources and property of Native American Indians and Alaskan Natives; and
  • government reparation payments to special populations.

As you can see, Pennsylvania may be able to recoup Medicaid costs from Aunt Martha’s estate. But depending on the circumstances, the state may get nothing or may have to wait to collect its money.

A Medicaid recipient’s house has other names on the deed. Is the house subject to estate recovery?

That depends. If the house is owned with a surviving spouse, the answer is no.

If there is one or more surviving owner, and the deed shows that the property is owned jointly with rights of survivorship, the house will not be subject to estate recovery.

But if the owners are “tenants in common,” then the recipient’s fractional share is subject to estate recovery. Pennsylvania law presumes that multiple owners are tenants in common unless the deed clearly shows joint ownership with rights of survivorship.

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