Special Needs Planning: What to Know About Age 55

Age 55

A State’s Right to be Reimbursed for Cost of Medicaid Assistance

The age of 55 is relevant because it limits a State’s right to seek reimbursement for Medicaid benefits paid on an individual’s behalf.  Some people decide not to apply for help because they are concerned (a) they might have to pay the government back for the help received if they later inherit money or obtain a good job, (b) that a lien might be placed on their home, or (c) that the government will seek reimbursement from their estate at their death.  However, some of these concerns are misplaced.

Medicaid Recovery During Life

Benefits Correctly Paid

In general, federal law prevents the government from demanding reimbursement for help it provided while an individual is still living if the individual was, in fact, entitled to the help received.  For instance, if you accurately reported all of your income and resources when you applied for assistance and were found eligible for Medicaid, then you would not have to pay the government back during your lifetime, even if you later inherited a significant sum of money or became gainfully employed.  The one exception to this, described in greater detail below, applies to certain individuals who are at least age 55, not living in their home, and receiving Medicaid long-term care benefits. Benefits Incorrectly Paid If you did not report all of your income or savings, however, your eligibility for future benefits might be affected, and the government might have the right to request reimbursement.  It therefore is highly important to provide complete and truthful information when applying for assistance, and to then inform the relevant agency when your circumstances change. Liens on Real Estate You may have been told that the government will put a lien on your home if you receive Medicaid. For the most part, however, that is not true. The Medicaid program will not force you to sell your house to pay it back for help to which you were entitled.  Your house cannot be “taken away” from you simply because you needed and received medical assistance from the government.  Moreover there are significant restrictions on when the State is allowed to file and enforce a lien on a home. Specifically,

  • A lien cannot be placed on the home for most types of Medicaid benefits, but only for nursing facility level of care benefits (nursing home, or benefits under a home and community based care waiver);
  • Even if an individual is receiving nursing facility level of care Medicaid benefits, a lien cannot be placed on the home unless the individual is not living in the home, and only if it is determined that the individual cannot reasonably be expected to be discharged from the facility and return home;
  • A lien also may not be placed on the home if any of the following people live in the home:
  • The individual’s spouse; or
  • The individual’s minor or disabled child; or
  • The individual’s sibling, if the sibling had lived in the home for at least a year prior to the individual’s nursing home admission and who has some type of claim to the property.

Medicaid Recovery upon Sale of Real Estate If a lien was properly placed on a home under the rules listed above, then the State can enforce its lien and seek recovery from the sale of the home for Medicaid nursing facility benefits paid on that individual’s behalf, but only for those benefits paid on behalf of the individual after the age 55. Medicaid Recovery After Death Although the State cannot seek reimbursement for Medicaid benefits that were paid correctly while the individual is living, it might have the authority to seek reimbursement after the individual’s death.  First, if a lien properly had been placed on the home during the individual’s lifetime, the State generally can seek recovery upon the sale of home. However, it may not seek recovery if:

  • There is a child living in the home, and had been living in the home for at least two years before the individual was admitted to the nursing home, and provided care to that individual that resulted in a delayed nursing home admission.

Second, the State has the right to seek recovery against the individual’s “estate,” but only if none of the following individuals then are living:

  • The individual’s spouse; or
  • The individual’s minor, disabled or blind child.

An individual’s “estate,” for Medicaid recovery purposes, includes probate assets as well as life estates and joint tenancies in real estate, and property held in a revocable trust. Medicaid Benefits Received Before Age 55 Why is the age 55 significant?  Because, generally, federal law prohibits a State from seeking reimbursement for Medicaid benefits that were correctly paid prior to an individual reaching the age of 55.  Therefore, if an individual dies prior to reaching the age of 55, there would be no Medicaid recovery regardless of how much was paid on that individual’s behalf. There are two very significant exceptions to this rule, however:

  • The State can seek recovery against assets remaining in a self-settled special needs trust – i.e., a special needs trust that holds assets previously owned by the individual – and its claim can include any type of Medicaid benefits paid on the individual’s behalf, even if paid prior to the creation of the special needs trust.
  • The State can seek recovery for assets remaining in an ABLE account. ABLE stands for Achieving a Better Living Experience, and is an advantage savings account for certain individuals who became disabled prior to age 26. Medicaid recovery against an ABLE account includes Medicaid benefits provided after the date the ABLE account was established.

Not all Resources (such as a home) are ‘Countable’ To be eligible for Medicaid or Supplemental Security Income (“SSI”) you may have only a limited amount of “countable” resources in your own name, such as bank accounts, stocks, bonds, etc.  If you are eligible for Medicaid or SSI, receiving a significant amount of money from a personal injury settlement or an inheritance could present a true dilemma if retaining eligibility for this benefit is important.  One option is to use the money to purchase assets that are “non-countable,” such as a house, vehicle, furniture or other personal property; another option is to deposit the funds into a self-settled special needs trust, and then the trust later could purchase a house, vehicle, etc.  It also is possible to use both of these options – i.e., to purchase certain items, and then deposit the excess funds into a special needs trust. Therefore, if a person were to die prior to reaching the age of 55, the State may not have a right to seek Medicaid reimbursement from the individual’s estate, but the State must be reimbursed from any assets remaining in a self-settled special needs trust or cash held in an ABLE account.  Since valuable assets, such as a home, may be titled in a self-settled special needs trust it is important to consider whether such assets should be titled in the name of the trust or in one’s own name. There are a number of factors to consider. Should a Home be Owned by a Special Needs Trust? Pros: Owning a home in your own name can bring a sense of pride and independence.  You can decorate the house to your liking.  You will have the right to borrow against the equity in the home in order to make repairs or improvements, and to determine who will live in the home with you.  You alone can decide whether to sell the home and how to use the sale proceeds.  Were you to pass away before the age of 55, the equity in your home will not be subject to Medicaid recovery. Cons:  If you have creditors, or are likely to have creditors, your housing could be at risk if you own the home in your individual name.  While having the ability to mortgage a house might be appealing, this may not be the best option for someone who tends to be irresponsible with money, or who is vulnerable to being taken advantage of by others.  Further, if you have limited income, you may not always be able to pay the monthly mortgage, which also will put your housing at risk. If your special needs trust or a family member helps you pay the real estate taxes or other costs associated with owning a home, such assistance will be treated as your “unearned income” for both SSI and Medicaid eligibility purposes.  However, funds taken from an ABLE account and used to pay housing expenses are not treated as income by SSI or Medicaid. Titled in the Name of a Special Needs Trust Pros: If a special needs trust owns a home, the home will be protected from any future creditors.  The trustee becomes responsible for all costs associated with the home.  If the trust pays property taxes and other carrying costs associated with the home, SSI will still treat such payments as unearned income to you, but, in NH, such trust expenditures will not be considered your income for Medicaid eligibility purposes.  You will not be able to take out a mortgage, which could be beneficial if you have a tendency to act irresponsibly or impulsively, or simply cannot afford a monthly mortgage payment. Cons: If a special needs trust owns the home, the Trustee ultimately makes all decisions, not you – including whether you may decorate the house in a particular way, whether certain improvements will be made, and whether the house will or will not be sold.  Assets titled in the name of a special needs trust at the time of your death might have to be paid to the State as reimbursement of Medicaid paid on your behalf over the course of your lifetime and will not be restricted to assistance provided after the age of 55.