Protecting the Family Home from Estate Recovery

What is Estate Recovery?

Estate Recovery is a practice that is mandated by the federal government.  It forces the state to seek reimbursement for money spent on Medicaid.  The result of this is the state going after an individual’s assets after they have passed away, if they used MassHealth for nursing home level care, and for home and community based services.

How does Estate Recovery function?

MassHealth most often recovers funds by filing a claim in the probate court, and by placing a lien on the decedent’s home after they pass away.  This could leave an individual who uses MassHealth to pay for nursing home level care with a large debt which their estate would be obligated to pay.

What are the limits to Estate Recovery?

Estate Recovery is limited by the Five Year Rule (discussed below), and the Undue Hardship Waiver.  Generally, Estate Recovery is also limited by the size of the decedent’s probate estate. 

What are some common approaches to avoiding or limiting estate recovery?

A common method for addressing concerns related to Estate Recovery is by moving the individual’s primary residence out of their name and into an irrevocable trust.  This transfer of ownership starts the clock for the Five Year Rule.  

Generally speaking, so long as five years pass from the date of the transfer to the date that the grantor enters into a nursing home, their home will be off the table with respect to Estate Recovery after they pass away.

What is the Five-Year Rule?

The Five Year Rule states that if an asset is transferred out of an individual’s name more than five years from the date they use MassHealth benefits to pay for nursing home level care, said asset is not subject to Estate Recovery.

How do I start the clock for the Five Year Rule?

“Starting the clock” is when an individual actually transfers an asset out of their name.  For example, if a home is transferred to an irrevocable trust, the date on which the deed was recorded is the date that the clock is started.  

What is an Irrevocable Trust?

An irrevocable trust encompasses a broad category of trusts, with one running theme.  Once the trust is executed, the grantor may not change the terms of the trust.  This is best understood as putting a lock on the trust, or as a “set it and forget it” type of instrument.

Due to the immutable nature of an irrevocable trust, it is most often used in conjunction with a revocable trust or Will-based estate plan.

How can I learn more?

If you're unsure which estate planning tools make the most sense for your goals, we invite you to schedule an initial consultation. We’ll walk you through your options and help design a bespoke estate plan tailored to your needs.

Contact us today to get started with your personalized estate plan.