Michigan Passes Estate Recovery Legislation Eliminating
Homestead Protection for Nursing Home Residents:
Leaving No Gravestone Unturned.
The State of Michigan, as part of a series of tax increases
and spending cuts to prevent a threatened shut down in
government services, passed estate recovery legislation
that will result in the loss of the homestead protection on
individuals who seek public assistance to help pay the cost
of nursing home care.
This is a dramatic change that caps a year during which
many shelter options used over the last decade to protect a
family's assets when a loved one entered long term care
were effectively eliminated. The look back for
transfer of assets was increased from 36 months to five
years. Many financial shelters were eliminated as
planning options.
What perhaps makes the move by Michigan lawmakers to go
after the homes of seniors in skilled care most uprising is
that most surprising believe the state will generate
limited revenue in contrast to the costs expended in paying
for nursing care. Further, Michigan had already
placed both an 18 month length of residency requirement and
an equity cap of $500,000 on the homestead exemption
earlier this year.
There has been very little news coverage of the loss of the
homestead protection because of the amount of focus on the
other state budget issues.
A more detailed article which appeared in the Detroit News
can be found here: Detroit News
Homestead Coverage.
The agency that handles Michigan's Medicaid system, the
Department of Human Services, will be implementing the law
by drafting revisions to it Policy Enforcement Manual
(PEMs) in the upcoming months. As always, the devil
will be in the details. It appears there may be some
exceptions if the house is occupied by a dependent relative
such as a disabled child. Further, it seems that
those who have already had Medicaid approval under the old
rules will not be subject to the loss of homestead
protection.
How the law will be implemented appears to involve the use
of a "charging lien" whereby the real estate of a nursing
home resident accepting Medicaid will be subject to a lien,
similar to a reverse mortgage. What the state expends
in providing care will require repayment when the house is
eventually sold to settle the estate, hence the term estate
recovery legislation.
It is unclear is how the lien will be calculated, and how
quick the state will expect repayment. Some states
have forced the sale of the subject home while the owner
was still alive, and receiving care. There is no
indication under what conditions Michigan will require a
forced sale. Coupled with this new law is the recent
trend significantly declining real estate prices.
The full text of both Michigan laws that are dicussed here
can be found at here: 2007-SNB-0204 2007-SNB-0374.
As answers to many of these questions are worked out in the
next several months, and planning options for our clients
emerge, we will keep you informed. Check our website
for regular updates as this law is implemented.
(c) 2007. Sean O'Bryan