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Beginning in April of 2007, the State of Michigan has implemented a series of law changes to the Medicaid program that could affect individuals who are in nursing homes or who are eligible for the Michigan MI Choice program. Several of those changes were explained in prior issues of Elder Law Issues & Ideas. Other rule changes are more recent or scheduled to go into effect in 2008. One of the most anticipated and troubling changes our clients are hearing about is the implementation of Estate Recovery -- rules that allow the State to seek reimbursement for Medicaid expenses from the Probate estates of deceased Medicaid recipients.

In this issue of Elder Law Issues & Ideas, we will explain Estate Recovery in Michigan, and tell you why most of our clients will not be affected by the Estate Recovery. We will also advise you about some of the other significant changes to Medicaid which have recently gone into effect.

On September 30, 2007, Michigan became the last state in the nation to adopt an Estate Recovery law. This law allows the State to recover the costs paid for by the Medicaid program, from assets owned by the Medicaid beneficiary at the beneficiary s death. Michigan s Estate Recovery law is relatively generous to the Medicaid recipient because the new law only seeks recovery from the recipient s Probate assets, and there are some exemptions. Unfortunately, in most cases, the recovery would come from the only asset most Medicaid beneficiaries still own at their deaths their homes. It is important to understand that this new law will only be imposed on individuals who first apply for Medicaid Assistance after December 1, 2007, and will not affect individuals who became Medicaid eligible prior to that date. As the law is currently written, it will also not affect individuals who have Direct Distribution or Trust estate plans like the ones prepared by The Wideman Law Center. (See Avoiding Probate & Estate Recovery in this issue.)

The following is a summary of the most significant Medicaid rules changes since 2005. For additional information about these changes contact The Wideman Law Center, P.C.

• 9/1/05 Michigan adopts stricter requirements for exempting annuities when qualify for Medicaid Assistance.
• 2/8/06 The Deficit Reduction Act of 2005 (DRA), becomes Federal law and mandates that all states make significant changes to their Medicaid eligibility rules.
• 1/1/07 Michigan requires proof of U.S. citizenship when applying for Medicaid Assistance.
• 4/1/07 Michigan caps the exemption for rental properties at $6,000 of equity value, and eliminates the use of pre-paid funeral plans to achieve retroactive Medicaid eligibility.
• 7/1/07 Michigan adopts DRA retroactively and changes to a 5-year look-back and prospective penalties for gifting. Exempt home values are capped at $500.000 of equity and annuities rules now require Medicaid recipients to name Michigan as a primary beneficiary if they are single and a contingent beneficiary if they are married.
• 10/01/07 Michigan adopts Estate Recovery for all new Medicaid recipients after December 1, 2007.

Still more changes to the Medicaid rules went into effect as of January 1, 2008; Medicaid applicants are now precluded from spending down assets by prepaying expenses for maintaining their homes, plus applicants will not be allowed to use excess assets to pay for the purchase of personal care services if they are in long-term care. Additionally payments to family members for their services are severely restricted after January 1, 2008. Also new this year, it is now considered divestment for an applicant (or their spouse) to give away their exempt vehicle. This was not previously the case.

The new Medicaid rules can be like landmines on the road to Medicaid eligibility for individuals who require long-term nursing home care. It s not easy to see the traps in the Medicaid rules, but if you inadvertently step into one of them now, you could trigger a Medicaid penalty and destroy your chances of qualifying for much needed assistance in the future. On top of that, even if you do qualify for Medicaid Assistance, the State will soon be able to make a claim to your assets after you die unless you have an estate plan which is design to avoid Probate.

Put simply, Probate is the process of taking assets our of a deceased person s name and putting them into a living person s name. If a person dies owning assets in their name alone and there is no surviving co-owner or beneficiary named on the asset, then those assets may have to go through Probate. Wills do no avoid Probate. Wills are your instructions to the Probate Court on how you would like your assets administered after your death. If a person dies with Probate assets and there is no will, Michigan s laws will dictate how that person s estate is administered by the Probate Court.

The good news for clients of The Wideman Law Center is that our Direct Distribution and Trust estates plans are specifically designed to avoid Probate, and therefore protect our clients from Estate Recovery. We do this by using tools such as Revocable Living Trusts, Beneficiary Designations, Life Estate Deeds, and Lady Bird deeds.

**The information in this article is provided by Attorney Susan G. Wideman as a general overview and is not intended as specific legal advice. For more specific information on these issues and how they relate to your individual situation, please use our contact form.