Quick Summary

After someone receives Medicaid help for long-term care, the State of Michigan may try to recover some of what it paid after that person dies. This is called estate recovery. It does not affect whether someone qualifies for Medicaid while they’re alive — but it can affect what’s left behind if assets end up in probate (especially a home). The good news is that with good planning we can avoid estate recovery by keeping assets out of probate and by using the protections and exceptions the law provides.

This is Part 5 (and the final part) of our blog series on Medicaid planning.  The goal is to make sure you understand that there are a number of options to allow you to protect your home and life savings from the devastating cost of long-term care.

What’s Covered In This Blog

Estate recovery is the process by which the State of Michigan seeks reimbursement for certain Medicaid benefits after a Medicaid recipient dies. This blog explains:

  • What estate recovery is (and what it is not)

  • When the state can make a claim

  • What assets are at risk

  • The major exceptions and hardship rules

  • Practical planning strategies families should understand

Estate recovery does not affect Medicaid eligibility during life, but it can affect what happens after death, especially when a home or probate assets remain.

Here Are The Rules In Plain Language

Estate recovery applies when someone:

  • Was age 55 or older, and

  • Received long-term-care Medicaid benefits, and

  • Dies with assets in their probate estate

Michigan’s estate recovery program has been operating since 2011, and it allows the state to seek repayment for services such as:

  • Nursing home care

  • MI Choice waiver services

  • PACE services

  • Home Help services

  • Certain hospital costs related to Medicaid care

The key concept is this:

Estate recovery only applies to probate assets.

This means assets that pass outside probate — such as:

  • Trust assets*

  • Lady Bird deed property

  • Joint ownership property

  • Beneficiary-designated accounts

are generally not subject to estate recovery claims.

*Note that trust assets are many times “countable” in a Medicaid situation and so, with the exception of a strategy using a sole benefit trust for the spouse outside the nursing home, it is unusual for a Medicaid applicant to have significant assets in a trust.

There are also important exceptions and protections, especially involving a home.

Estate recovery cannot occur while any of the following are living in the home:

  • A surviving spouse

  • A disabled or blind child

  • A child under age 21

  • A qualifying caregiver relative

  • A sibling with an ownership interest who lived there

These protections often delay recovery, but they do not always eliminate it permanently.

Michigan law also allows hardship exceptions, including:

  • Homes of modest value

  • Income-producing assets like family farms or businesses

However, these hardship exceptions rarely granted, are not automatic, and usually require:

  • Filing an application

  • Providing documentation

  • Following strict procedures

Another important point:
When a Medicaid beneficiary dies, the state typically sends an Estate Recovery Questionnaire (ERQ) to someone connected to the estate. This begins the estate recovery review process.

Families often don’t realize that:

  • Responding to the ERQ requires careful thought

  • Hardship waivers must be requested intentionally

  • Probate timing and allowances can affect recovery

  • Claims can sometimes be challenged

This is why estate recovery planning is often just as important after Medicaid eligibility is established as it was before.

From a planning perspective, common strategies to reduce estate recovery risk include:

  • Moving assets out of the Medicaid recipient’s name when permitted

  • Using non-probate transfers like beneficiary designations or joint ownership

  • Planning carefully for the community spouse. MAJOR WARNING:  If the spouse outside the nursing home dies first, assets could pass to the spouse on Medicaid in the nursing home and cause major problems.  Special planning is required to avoid this disastrous result.

  • Considering caregiver-child transfers when appropriate

  • Using Lady Bird deeds for homestead property

  • Coordinating post-eligibility estate planning

For single individuals, decisions about whether to keep or transfer a home often become central planning questions once estate recovery is considered.

Closing Reflection

Estate recovery adds another layer to an already complicated planning landscape. It can feel unsettling for families to learn that help received during life may be repaid from an estate later. But in most cases, estate recovery is not something to fear — it is something to understand and plan around.

Good planning doesn’t try to “beat the system.” It focuses on protecting dignity, care, and family stability while working within the rules that exist today.

As with many areas of elder law, the goal is balance — helping families preserve what they can, while making sure the person who needs care receives it without unnecessary risk or confusion.

 

If you’d like to talk through a Medicaid planning question, you can call us at (517) 548-7400 or reach out here:  Contact Us