Legal Law

New York Approved and Later Repealed Medicaid Expanded Estate Recovery: A Summary

What is “equity recovery”?
When a Medicaid beneficiary dies, Medicaid can request reimbursement from their estate for benefits paid on their behalf. This is known as “estate recovery.” Each state has rules that detail how and to what extent such recovery is possible.

Historically, NY limited equity recovery to asset succession
Until 2011, New York limited such recovery to Medicaid recipients. probate assets, that is, only those assets titled solely in the name of the Medicaid beneficiary. Other assets, including assets held jointly with another person, a “life estate” reserved in a deed, and assets held in revocable and irrevocable trusts, were excluded from estate recovery.

New rules and regulations expanded wealth recovery
On April 1, 2011, New York enacted “expanded” estate recovery rules.[1]. These new rules were subject to regulations to be promulgated by the New York State Department of Health, and on September 8, 2011, the Department of Health finally enacted these highly anticipated regulations.[2]. In reality, the regulations were promulgated as “emergency regulations” in an expedited fashion, with a built-in expiration date if it was not extended or made permanent regulations. Then, on September 26, 2011, the New York State Department of Health issued an Administrative Directive to clarify the scope of the regulations.[3].

These new rules and regulations expanded the definition of “estate” to specifically include as assets subject to estate recovery those that are owned by the deceased “through joint tenancy, common tenure, survivor, life estate, living trust, or other arrangement. , to the extent of the decedent’s interest in the property immediately prior to death “(emphasis added). Both the expansion to these asset categories and the express wording “immediately before death” were quite significant. As explained below, they were also very concerning.

For example, a very popular planning tool is the use of a life estate in a principal residence deed. It is a powerful tool because it accomplishes a number of things, in particular: (1) it removes ownership of the Medicaid applicant’s name; and (2) the life estate causes the real estate tax base to “increase” to fair market value upon the death of the Medicaid beneficiary, saving tens of thousands, even hundreds of thousands, of dollars in property taxes. capital gains. once the Medicaid beneficiary dies. As you can imagine, life succession writing, which is relatively easy, quick, and inexpensive to implement, has been very popular and widespread as a planning tool.

In New York, the theory was that a lifetime estate is extinguished at the time of death, so Medicaid cannot place a lien or pursue anything after the death of the Medicaid recipient. But once the definition was broadened to include life assets and the value of the life estate “immediately before death,” Medicaid intended to seek recovery against the life estate. Consequently, whereas previously the critical calculation was the value of the life estate based on the life expectancy of the beneficiary at the time of the transfer of the deed, now the key concern has become the recoverable amount, which is the value based on the age of the Medicaid beneficiary. just before the moment of death.

The problems with the new rules and their application.
From the beginning, the new rules were opposed on constitutional and other legal grounds; in fact, the New York State Bar Association filed a lawsuit that challenged them. Among the problems with the new rules:

1. There was no clear effective date or vested rights. Children to whom their parents transferred real estate years ago could have faced the dilemma of reimbursing the state for care provided to their parents decades after the transfer was made, even if the property was no longer owned by the family and even if the income (if any) was gone. Similarly, parents and others who did their planning under the laws that were in effect at the time of the transfers could have had all of their planning, even if it was done decades ago, thwarted by the new law;

2. The duration of the Medicaid lien was not stated;

3. Title companies could have had many problems and possible financial exposure from the ensuing title problems.

Due to pressure from the Bar Association, and the problems and inconsistencies noted, the regulation was not extended, it was not made permanent, but was allowed to expire after December 6, 2011.[4].

Extended equity recovery is repealed
Finally, on March 27, 2012, New York repealed[5] regulations that had expanded the definition of “Estate” for Medicaid recovery purposes; therefore, the old rules governing estate recovery now remain in effect and lifetime estates are no longer vulnerable to recovery.

The consequences:
While this result is a relief to seniors and their families in New York, and brings the law back into line with established constitutional and legal principles, it is fair to conclude that “the writing is on the wall” that Medicaid will strengthen and legislature will learn from this misadventure. Future laws will surely have a grandfathered provision and adhere to established law. The recommendation is clear: plan now, while it is still possible.

[1] As part of New York State’s 2011 budget legislation, Chapter 59 of the Laws of 2011, Medicaid estate recovery was expanded, modifying the definition of “Estate” in Section 369 (6) of the Estate Act. Social services.

[2] The Regulations at 18 NYCRR 360-7.11 were amended, effective September 8, 2011, to implement this change.

[3] 11 OHIP / ADM-8, effective September 8, 2011, “Extended definition of estate for Medicaid recoveries”, regarding regulatory compliance and the method to be used to assess life estate interests .

[4] GIS 11 MA / 028 provided: “This GIS is to inform local districts that, as of December 6, 2011, the revised regulation at 18 NYCRR 360-7.11 that implemented the expanded definition of estate for Medicaid recovery purposes expired. Effective immediately, districts must not include assets that pass out of the estate as part of the decedent’s estate for recovery purposes. “

[5] Governor Cuomo and the state legislature agreed to the New York State Health Budget Bill for 2012-2013, which repeals the expanded definition of “estate” of a Medicaid beneficiary.

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