Estate recovery means that after the death of the nursing home Medicaid recipient, the state looks for repayment of the cost of long term care out of the assets of the recipient. Since typically the only property a Medicaid nursing home resident has is $2,000 plus a home and a car, the state typically presents its claim against the home.

Michigan's estate recovery law was signed September 30, 2007. Michigan does not have a program in place yet, but has submitted proposed rules to CMS, the federal Medicare and Medicaid agency. So far, Michigan does not have an approved estate recovery plan.

Under the law, the state's estate recovery claim will only be presented in probate estate administration. Estate recovery may be avoided if the recipient has taken the proper steps to avoid probate.

The law provides for a number of exemptions that will have to be proven. Farms, businesses and other income producing property are exempt if they are the primary source of income to the survivors. The homestead will be completely exempt if it is occupied by the spouse, disabled or minor child or a relative who for two years or more provided care sufficient to postpone entry into the nursing home. It will be exempt if a sibling co-owner lives in it.

Suppose a home is exempt because a spouse lives there. What happens when the spouse dies? What if the spouse sold the home before the recipient died? What if the spouse sells the home after the death of the recipient? Does estate recovery then pursue the funds from the sale on the death of the spouse? The law is silent.

Finally where recovery is not exempted by the foregoing, it will apply only to that portion of the value that is above 50% of the average price of a home in the county. How that 50% value is established is unidentified. An elder law attorney will be needed to guide the probate personal representative in dealing with the state's claim.
There are many questions, such as: Will estate recovery apply to current recipients or only recipients entering the program after the passage date? Must applicants be advised of estate recovery before the receipt of benefits? We do not know the answers at this time.

Estate recovery makes smart probate avoidance planning mandatory; lest the cure be worse than the disease. Probate can be avoided by many ways, some smart and some risky. For example, adding a child to property ownership makes that property vulnerable to the child's creditors or bankruptcy. Naming beneficiaries on an account avoids probate but may not have the desired effect if one beneficiary predeceases the account holder. A last Will and Testament allows contingency planning should an heir predecease, but a Will does not avoid probate.

Prudent planning dictates safe probate avoidance and provision for the heirs of the elder. Estate recovery adds an additional dimension of complexity that makes the assistance of a professional mandatory.