You may have heard that the government can take your home and farm if you or your spouse need Medicaid for long-term care. This isn't technically true, but the government could effectively take your land from your children and heirs after you're gone.

It's called Estate Recovery, and it applies to anyone 55 or over who has received Medicaid for long-term care on or after September 30, 2007.

How it works

Any property, including land, bank accounts, jewelry, cars, etc., that belonged to a Medicaid recipient who passes away must be reported to the State of Michigan on a questionnaire that the state will send to the estate representative or heirs of the deceased.

Once the state has the information, they will file a claim against the estate to recover Medicaid expenses paid to the deceased. Although the law doesn't require heirs to sell off property to pay the debt owed, in many cases they will have to sell or mortgage property to cover the amount the state is trying to collect.

There are several situations where the state will delay collecting the funds, the most common being if the spouse of the Medicaid recipient is still living. But, they will eventually come back for the money after the spouse dies.

The Big Exception

Because the state is only making a claim against the estate of the Medicaid recipient, they can only collect money up to the value of the estate. Any property that is not part of the estate is protected from the estate recovery. So, the big question is, what property is in the estate?

The estate does not include any property that automatically passes to someone else on the death of the owner. This can mean any property that is in a trust, or jointly owned, or certain deeds, depending on the specific type of trust, deed, or ownership.

The Big Risk

The problem is that you can't just transfer property to trusts, or deed it to others without being aware of the risks. You could lose eligibility for Medicaid depending on what you do. Property taxes for yourself, or your heirs in the future could also be affected.

A good plan can make sure your property ends up where you want. Good legal advice now can help you make those plans, before it's too late.