What To Do If Medicaid Benefits Are at Risk of Termination
by Linda Ershow-Levenberg, Certified Elder Law Attorney (C.E.L.A.)
Updated August, 2020
Practice Area: Medicaid
A married nursing home resident has been on Medicaid for years. His “community spouse” passes away. What will happen next?
An unmarried Medicaid recipient is receiving community Medicaid benefits under Home & Community Based Services (formerly called Global Options). He lives in a house owned by his brother, who leaves him “everything” under his Will. The brother dies. What happens next?
A married Medicaid recipient who has been separated from her spouse for a long time is receiving community Medicaid benefits under MLTSS. Now the spouse files for divorce and may have to pay alimony or provide assets under a property settlement. What happens next?
The attorneys at Fink Rosner Ershow-Levenberg have extensive experience representing clients in cases like these where there is an imminent termination of Medicaid benefits. Many strategies are available to deal with those situations and avoid such catastrophic consequences.
Community Spouse Passes Away: What’s the Elective Share All About?
The Medicaid recipient who is a surviving spouse will likely receive a Termination of Benefits Notice that says the deceased spouse’s estate is expected to provide one-third of the estate assets to the surviving spouse as an “elective share.” This refers to a Medicaid regulation at N.J.A.C. 10:71-4.10(b)3.ii which says that “Waiving the right to receive an inheritance, including spousal elective share pursuant to N.J.S.A. 3B:8-10″ is deemed to be an uncompensated transfer of assets that results in a transfer penalty (i.e., ineligibility for a period of time). The deceased spouse may have a Will that totally disinherits the spouse who is receiving Medicaid; or that leaves him a portion of the estate, or that leaves assets in Trust for him. The deceased spouse may have left all assets to other people, such as the children, via beneficiary designations or Transfer on Death designations.
The Elective Share Statute (N.J.S.A. 3B:8-10) has a procedure for a surviving spouse to file a “claim for elective share” in court. That statute also has some exceptions in it, as there are situations in which the surviving spouse isn’t entitled to any elective share of the estate. Further, the statute outlines how the share is to be calculated. One Appellate Division case affirmed a transfer penalty in a situation where the entire estate was left in trust for the surviving spouse, but the surviving spouse failed to “file the claim” for the elective share. I.G. vs Dep’t of Human Services, 386 N.J. Super. 282, 900 A.2d 840 (App. Div. NJ 2006).
Medicaid Recipient Living in the House With a Sibling Inherits Sibling’s Estate
If the Medicaid recipient is disabled and under age 65, we can arrange for the creation of a Special Needs Trust and transfer the inherited assets into the trust. This will preserve the assets for special needs, and maintain the Medicaid eligibility. If there are any mortgages on the real property, they would need to be paid off or refinanced before any transfer is done. This kind of trust is permitted under federal and state Medicaid law. It must be created by a parent, grandparent or court on special petition (such as guardianship), or can be created by a capable adult disabled person.
If there was a Will with an inadequate trust arrangement, or no trust at all, and there is “clear and convincing evidence” to prove that the deceased sibling would have created a supplemental needs trust for the beneficiary had s/he been better advised, or that the Will was written incorrectly, it may be feasible to petition the court to “reform the will to reflect the testator’s intent.”
If the above options are not feasible, there are generally other options available that could fit your particular circumstances.
Married Medicaid Recipient Under MLTSS Home Care is About to Receive Alimony or a Property Settlement in a Divorce
If a person receives community-based MLTSS Medicaid benefits and their gross monthly income exceeds $2,349/month (in 2020), two things will happen. First, a Qualified Income Trust (QIT) will be required as the vehicle to channel the income. Second. income in excess of this amount will go to the State as a cost share – not productive for the Medicaid recipient.
Similarly, receipt of resources as part of a property settlement could result in ineligibility due to having excess resources.
If the Medicaid recipient is disabled and under 65, we can arrange for the creation of a Special Needs Trust, and the Family Court can order that the alimony and property settlement resources be paid into the trust. This will preserve the assets for special needs, and maintain the Medicaid eligibility. This kind of trust is called a “(d)4a trust” and is permitted under federal and state Medicaid law. It must be created by the disabled person or by a parent, grandparent or court on special petition. We will write the Trust, prepare the petition, provide the needed instructions, and oversee the entire process to assure that your eligibility is preserved.
As above, if the Medicaid recipient is older than 65, there are still other options that can be available. In any situation, call us for representation early in the process so that we can advise you about your options.
To make an appointment or speak to an attorney about spousal elective share, sibling inheritance, divorce and Medicaid, call 732-382-6070 or contact us online.