Qualifying for Medicaid as an older adult often requires careful planning. Those at or past the age of retirement may give strategic gifts to their loved ones or even place their most significant assets, like their retirement account, into a trust to ensure that their assets won’t preclude them from getting Medicaid benefits.

Certain assets, like the family home, often don’t count against someone’s ability to qualify, but those assets may become vulnerable in the future. A home of any value, even one worth millions, isn’t an asset that impacts Medicaid eligibility when they need benefits, but that same home could wind up with a lien against it as a means of recovering Medicaid benefits.

What is estate recovery?

When a Medicaid recipient dies, the government has the option of trying to recover the benefits that it paid to that individual from their estate. The goal is to prevent abuses of the system. Although the law does have exceptions for estate recovery, such as a beneficiary leaving behind a spouse or a child with medical conditions, like blindness, most people who die after receiving Medicaid could have vulnerable assets in their estate.

If those planning their estates don’t take steps to protect their most significant assets, their planned legacy might wind up completely eaten up due to the Medicaid benefits that they received. After all, the executor of the estate may settle debts before they distribute assets to heirs.

The sooner someone starts Medicaid planning, the better the protection 

The earlier in life someone moves assets out of their own name and the more well-established the trust is, the less likely it is that Medicaid will be able to bring a claim against a deceased individual’s property held in a trust. Although trusts are a common tool for Medicaid planning, some trusts are still vulnerable to claims by Medicaid.

If your parents have already created a trust but not explicitly for the purposes of Medicaid planning, reviewing and possibly altering the existing trust may be necessary to maximize the benefits that it offers for your parents and the loved ones that stand to inherit some of their assets when they die. If you worry about your parents’ estate, discussing Medicaid planning with them soon could help protect them and your inheritance.