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State Recovery Law to Impact Families
During its latest marathon session, the state Legislature passed a law that might have a direct effect on some Michigan seniors and their families.
It has called "estate recovery," and it provides Michigan the right to try to bring together Medicaid bills for long-term care from an individual's estate.
It applies to nursing home care or Medicaid waivers, which permit long-term care at home. It still needs federal approval.
The new law might cost some families money, but East Lansing-based elder law attorney Doug Chalgian has a larger concern: that high-pressure sales folks will make use of the new law as a lever to sell seniors financial products they do not require.
He said, "People have said if you go through probate, it's going to take all your money. These types of things have resonance with older folks because they're afraid of that and because they're so confusing."
Therefore, here is Chalgian's word on the new law:
Michigan is not the first state to pass an estate recovery law.
In fact, it is the last. Moreover, if it had not done so, it stood to lose federal Medicaid funds.
The federal government mandated estate recovery starting in 1993; Michigan dragged its heels in executing a law, at least in part since former Gov. John Engler was not in favor of it.
The good news is that Michigan's estate recovery law contains a variety of safeguards to ensure successors do not have to sell their parents' homes to pay Medicaid bills.
The new law applies only to assets, which are part of an estate that passes through the traditional probate system. At least part of the value of a home that goes through probate is protected. For instance, a home in probate is worth $100,000. The average value of a home in the county where it is situated is $150,000. Half of the value of the average home in that county is exempt, meaning $75,000 of the $100,000 estate would be exempt from estate recovery.
Chalgian said Michigan's law was designed with input from elder law attorneys, the Alzheimer's Association, the Michigan chapter of the National Association of Social Workers, the Farm Bureau and others.
He said, "There were a variety of interests that cooperated in lobbying their perspective on this issue."
The objective: Protect as many estates as possible.
Assets which are in joint ownership, in a revocable trust or which have a designated beneficiary are exempt from estate recovery.
Chalgian said, "That's a loophole you can drive a train through. That's a very big planning opportunity for people."
The new law also comprises other exemptions. For instance, a home where a child or family member of the deceased lived with them for at least two years before they entered long-term care would be exempt.
Chalgian said the best bet for people who do not fit into the law's many exemptions is to discuss with a qualified elder law attorney.
He said, "This isn't the end of the world. The good advocates in our state have persuaded our lawmakers to adopt a law that isn't as punitive as it could have been."