A few years ago, a family got a big surprise: when their mother died, they probated her estate, and a claim was made in the estate by Medicaid for $270,000. Even though their mom hadn't been on Medicaid, their father had.
Prior to receiving any benefits from Medicaid, individuals must "spend down" their cash assets to below $2,000. Some property is termed by Medicaid officials as "exempt" property—to include one vehicle, limited life insurance, a home, a funeral plan and personal property. While such property doesn't have to be spent down, that's very misleading. You see, those limited assets may be exempt for qualifying for Medicaid, but they're not exempt after the person dies. They're subject to what's called "estate recovery."
Estate recovery is the process that allows Medicaid to recover the amounts it paid on a person's behalf from that person's estate. Kansas' Estate Recovery is a "privatized" agency which can seek repayment of Medicaid benefits against the "estate" of a deceased Medicaid recipient or—as described above—against the estate of a spouse. Kansas has what is call expanded estate recovery.
Usually when someone dies, the person's family may need to initiate probate. When the deceased had all of the property in joint tenancy with a spouse, probate isn't needed. However, if a piece of property isn't held in joint tenancy or is not otherwise automatically conveyed to a third person upon the death of the owner, then only that property will have to be probated. These items typically don't have to be probated:
- joint tenancy property
- property with a transfer-on-death or pay-on-death provision
- life insurance with named beneficiaries
- life estates
But Estate Recovery in Kansas allows an agency to bring in all of the property that an individual may have any interest in at the time of death—even though that property would ordinarily not have to go through the probate process. Hence, contrary to standard probate law, the estate can consist of joint tenancy property, property with transfer-on-death or pay-on-death provisions, life insurance payable to a third party, and life estates. It can also include property that was transferred away within one year of death. So you see that Estate Recovery has a much broader definition of what property can be included in an estate than any other creditor in the Jayhawk State.
Talk to a qualified elder law attorney who is familiar with how to plan for the possibility of estate recovery.
Reference: The Hays (KS) Daily News (April 12, 2016) "Estate recovery — an unexpected surprise"