What is Medicaid Recovery?

 Posted on February 11, 2025 in Estate Planning

Many people throughout Maryland end up incorporating long-term care costs into their budgets at some point, generally relying on Medicaid benefits to help cover the expenses. However, Medicaid recovery can be detrimental to a family’s finances years later. Speak with a knowledgeable Maryland estate planning lawyer to learn more about Medicaid recovery and how you can address it in your estate planning to protect your family’s assets.

What Does Long-Term Planning Commonly Include?

Individual needs can, of course, differ from person to person. However, long-term care planning typically means taking financial steps to help cover the costs of a nursing home or assisted living facility, in-home care, adult day care center, memory care unit treatment, or hospice care, should any become necessary.

Long-term care is incredibly expensive in Maryland, which is why many families depend on Medicaid to cover the costs. However, the Medicaid program’s strict eligibility requirements and recovery provision, which allows the state to collect costs from a deceased individual’s estate or beneficiaries, make it not always a clear-cut and smooth option.

How Does Medicaid Recovery Work?

In Maryland, where long-term care benefits are some of the largest costs that Medicaid covers, the state can be required by law to pursue reimbursement from the estate or beneficiaries of a deceased Medicaid recipient. With Medicaid recovery, funds can be recovered from anything the deceased owned, including bank accounts, real estate, or other property. A large portion of an estate can be taken to cover claims from the state instead of being given to the intended beneficiaries. 

Medicaid recovery involves the following steps:

Step 1: Determining Eligibility for Recovery

Eligibility is based on recipient age and estate status:

• MERP primarily targets people who were at least 55 years old when they received Medicaid benefits for long-term care. 

• Recovery can only be sought from assets that go through the probate process.

Step 2: Filing a Claim Against the Deceased’s Estate

Maryland’s Medicaid agency can file a claim after a Medicaid recipient’s death, against his or her estate during probate. The claim is for the total amount of benefits Medicaid paid for on the recipient’s behalf.

Step 3: Reviewing Exemptions and Hardship Waivers

Certain assets can be exempt from Medicaid recovery. Typical exemptions include anything the deceased left to a surviving spouse, disabled dependents, or minor children. There are also hardship waivers offered by the state if recovery would cause the surviving beneficiary to suffer undue financial hardship.

Step 4: The Estate Is Settled

If the recovery claim is approved, assets in the deceased’s estate might need to be sold to pay the debt. Of course, any exemptions or hardship waivers are addressed in this estate settlement.

Can I Protect My Estate From Medicaid Recovery?

A big part of estate planning is trying to plan for hypotheticals. You may never require long-term care, and if you do, your estate may not be subject to Medicaid recovery. However, there are ways to protect your estate in case it does become relevant in the future.

Irrevocable trusts are a legal way to transfer any assets out of your estate before you apply for Medicaid, and those assets would be safe from recovery because they would belong to the trust. You might also consider transferring property to exempt beneficiaries. Lastly, life estates or joint ownership structures could keep your estate out of probate and, thus, safe from recovery.

Schedule a Free Consultation with a Silver Spring, MD Estate Planning Attorney

To ensure your estate plan is thorough, speak with a qualified Bethesda, MD estate planning lawyer about protecting your assets from Medicaid recovery. At The Eleff Law Group, we pride ourselves on using our many years of experience to help clients address as many hypothetical scenarios as possible. Call us at 301-857-1990 to schedule a free consultation and learn how we can help you leave as large an inheritance as possible for your loved ones.