Simply qualifying for Medicaid is not enough if after your death your family will have to repay the state for every cent of the benefits they paid on your behalf during your lifetime. There must be some planning techniques that you can implement, right? Any “secrets” to avoid that harsh rule? Let’s take a look at some…

First, in states where recovery of benefits paid (“estate recovery”) is only made through a claim against your estate (so-called “probate-only states”), all you need to ensure is that the Medicaid recipient has No estate succession at death. Thus, the beneficiary must only possess assets in the form of POD, TOD, co-ownership with right of survivorship, annuity, etc. This is similar to the “avoid sequences” techniques, except that you cannot use a living trust: Any asset titled in the name of a living trust will be a “countable” asset for Medicaid purposes, even if it would normally be “noncountable” if it were No in the trust.

For example, you can jointly own a car with a child. The car would then be titled “Mary Smith and John Smith, JTWROS.” John is Mary’s son, and upon Mary’s death, sole title to the car automatically passes to him out of probate. “JTWROS” stands for “Joint Tenants Right of Survivorship.” (Be sure to check your state’s motor vehicle titling rules to make sure this works in your state!) Since a car of any value is exempt during Mary’s lifetime, it is protected during her lifetime and escapes the recovery of estate after death.

You can even take the same approach for your home. Since a Medicaid recipient’s home is typically exempt for their lifetime (up to $500,000 in equity value), it is only at the recipient’s death that there is a problem. So, to prevent the house from being included in the parents’ probate estate, once again you can title the house as JTRWOS. CAUTION: Adding another person’s name to the deed is a gift of interest in the home, effective as of the date of the deed! Therefore, when Mary asks her lawyer to add the name of hers her son John hers to the deed, she has just given her a gift of 50% of the house. Although gift tax is rarely an issue, it should be taken into account. More importantly, though, this is a Medicaid-disqualifying transfer, with a big penalty attached. If Mary wants to go down this path, she may not be able to apply for Medicaid to five years after she signs the deed.

Also, What happens if Juan is sued or divorced? Mary may still think of the entire house as “hers,” but the creditor or divorcing spouse will consider 50% ownership of the house to be John’s asset, and could be subject to attack. Mary may find herself homeless if the house has to be sold to satisfy the divorce judgment or settlement.

Some states allow someone else to be added to the deed by giving you less than 50%, which could reduce the amount of the gift, but that is something only your attorney can determine for you. Sometimes the rule for real estate law differs from the rule for Medicaid purposes. So, a word to the wise: make sure the attorney doing the new deed for you is up to date on the effect it will have on your Medicaid eligibility!

In my other articles on this topic, we’ll look at other ways to plan for estate recovery.