According to the CDC, in 2016 more than 8 million Americans received support from one of five main long-term care services: (1) home health agencies; (2) nursing homes; (3) hospices; (4) residential care communities; and (5) adult day service centers. And in 2019, Medicaid accounted for approximately 42.9% or $182.8 billion in spending in the long-term services and supports sector.

One condition of receiving Medicaid is that DHS has a right to seek recovery of medical payments made from individuals, regardless of age, who are permanently institutionalized, who receive medical services in a nursing facility, and who had to pay all but a minimal amount of income for their care.[1] In addition, recovery must also be attempted against individuals aged 55 and older who receive medical services in a nursing home or in a home and community-based waiver program.[2]

The cost of receiving nursing home services and home and community-based care can add up quickly. It’s not unusual for DHS to have claims in excess of $100,000. A claim of this size has the potential to greatly decrease the value of a deceased person’s estate.

An Example Explanation.

Here is a common scenario. Consider a fictional person, we’ll call “Bob.” Bob decides to have his Last Will and Testament drawn up. Bob wants it so that his home will go to his children equally after he passes away. After drafting and executing his Will, he stows it away in a safe place and forgets about it. A few years later, Bob suffers a stroke and is unable to take care of himself. Due to Bob’s complex medical needs, Bob’s children decide it would be best that Bob receives medical care in a nursing home where he will have better support.

Bob has Medicare coverage, but Medicare only covers a limited number of days in a nursing home setting. The nursing home informs Bob’s children that he will need to apply for Medicaid. They apply for Medicaid for Bob and indicate that Bob does intend to return to his home in the event his medical condition improves (though the chances of this occurring are very low).

Bob does not get better and passes away a year later. When Bob passes away, his children decide to sell the family home but are told that they don’t have a marketable title. They need to probate Bob’s estate. Following the recommendation of a family friend, the children find a local lawyer who has experience in probating estates. The lawyer files a petition to administer Bob’s estate. Since Bob was on Medicaid during his time at the nursing home, the lawyer is required by law to notify DHS (since that is the state agency responsible for administering Medicaid).[3]

After receiving notification of the estate, DHS files a claim seeking recovery for all amounts paid on Bob’s behalf. That claim is for more than $50,000 and the home was only expected to sell for $75,000.

DHS may negotiate to reduce the amount of its claim but there is no guarantee that this will occur. Regardless, DHS will more than likely receive a significant portion of the proceeds from the home sale, reducing the expected inheritance of Bob’s children. This scenario is something that Bob likely did not anticipate when he drafted his will. His plans have been frustrated.

A solution- Beneficiary Deeds 

One solution to the above is to use what is called a Beneficiary Deed to transfer the property. A Beneficiary Deed, also known as a “Transfer on Death Deed,” allows a person to plan for their property to transfer immediately upon death thereby avoiding probate. In addition, a recent change in Arkansas law makes it so that DHS will not make a claim against the grantees of a beneficiary deed. Thus, the above hypothetical scenario is prevented.

In addition, a Beneficiary Deed is able to be canceled during Bob’s lifetime if he changes his mind. By avoiding the payback of large DHS claims, Beneficiary Deeds can be an effective tool in helping families build generational wealth. This is important because according to HousingEconomics.com, the primary residence accounted for almost one-third (30 %) of all assets held by households in 2010. Consequently, when planning your estate, consider whether a Beneficiary Deed makes sense for you.

If you would like to learn more about beneficiary deeds, watch this video from the UAMS Arkansas Geriatric Education Collaborative and Arkansas Legal Attorney Helen Newberry:

If you need to speak to an attorney about a beneficiary deed, you can call our helpline at 501-376-3423 or search for one on the Arkansas Bar Association “Find-A-Lawyer” website.

Resources:

[1] 42 U.S.C. § 1396p.

[2] Id.

[3] Ark. Code Ann. § 28-40-111.

AUTHOR: TREVOR TOWNSEND, STAFF ATTORNEY FOR THE CENTER FOR ARKANSAS LEGAL SERVICES