Estate Recovery

You have perhaps heard that Michigan passed a form of estate recovery in September of 2007, becoming the last state in the union to do so. Estate recovery is a program through which states attempt to recoup the costs of Medicaid long term care benefits paid out. Although Michigan has passed the necessary legislation to begin estate recovery, it will not be until the program is reviewed and approved by CMS that it is officially implemented.

What is subject to estate recovery? Many commentators say that only probate assets are subject to estate recovery, and conclude that one must only avoid probate in order to avoid estate recovery. But I believe this is misleading for a few reasons. First, annuities purchased or modified after February 6th, 2006 must name the state of Michigan as a remainder beneficiary to the extent of Medicaid benefits received. For all practical purposes, this is estate recovery on a non-probate asset. Second, many common techniques for avoiding probate of real estate can interfere with qualification for Medicaid. So to say that one must only avoid probate in order to avoid estate recovery is not accurate.