Simply qualifying for Medicaid is not enough if after your death your family will have to repay the state for every penny of benefits they paid on your behalf during your lifetime. There must be some planning techniques you can implement, right? Any “secrets” to avoid that harsh rule? Let’s take a look at some…

First, in states where the recovery of benefits paid (“estate recovery”) is only made through a claim against your estate (so-called “probate-only states”), all you need to make sure is that the Medicaid beneficiary has No succession inheritance at death. Thus, the beneficiary should only have assets in the form of POD, TOD, co-ownership with right of survival, life annuity, etc. This is similar to “sequence avoidance” techniques, except that you cannot use a living trust: Any asset held in the name of a living trust will be a “countable” asset for Medicaid purposes, even if it would normally be “uncountable” if it were No in the trust.

For example, you can title a car in joint name with a child So the car would be titled “Mary Smith and John Smith, JTWROS”. John is Mary’s son, and upon Mary’s death, sole title to the car automatically passes to him outside of the estate. “JTWROS” stands for “joint tenants with right of survivorship.” (Be sure to check your state’s motor vehicle titling rules to make sure this will work in your state!) Since a car of any value is exempt during Mary’s lifetime, it’s protected during her lifetime and escapes recovery of the estate after his death.

You can even take the same approach for your home. Since a Medicaid recipient’s home is typically exempt for their lifetime (up to $500,000 in estate value), it is only upon the beneficiary’s death that there is a problem. So, to prevent the house from being included in the parents’ estate, once again you can title the house as JTRWOS. CAUTION: Adding someone else’s name to the deed is a gift of an interest in the house, effective as of the date of the deed! Therefore, when Mary asks her attorney to add her son John’s name to the deed, she has just donated 50% of the house to him. Although gift tax is rarely an issue, it should be considered. More importantly, however, this is a Medicaid disqualifying transfer, with a large penalty attached. If Mary wants to go down this path, she may not be able to apply for Medicaid to five years after she signs the deed.

Also, What happens if Juan is sued or divorced? Mary may still think of the entire house as “hers,” but the creditor or divorcing spouse will consider 50% ownership of the house to be John’s asset, and could be subject to attack. Mary may find herself on the street if the house has to be sold to satisfy the judgment or divorce settlement.

Some states allow adding another person to the deed by giving them less than 50%, which could reduce the amount of the gift, but that is something only your attorney can determine for you. Sometimes the rule for real estate law differs from the rule for Medicaid purposes. So, a word to the wise: make sure the attorney doing the new deed for you is up to date on the effect it will have on your Medicaid eligibility!

In my other articles on this topic, we will look at other ways to plan for estate recovery.