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Estate Plan - Medicaid umbrella pretecting family

Medicaid planning can protect family's inheritance, minimize estate recovery

by Legacy Plan
December 20, 2016

Regardless of the size of your estate, almost any estate can benefit from estate planning. For those people who may eventually have a need for receiving benefits from the Medicaid program, Medicaid planning can be a valuable component of your estate plan, allowing you to protect your family by minimizing the negative effects of Medicaid estate recovery.

When you undertake the process of estate planning, there can be a lot that is involved. The types of planning that need to form a part of your overall estate plan are varied and each person's needs are unique. Some might need death tax planning. Others might need to plan for a special-needs child. Still others may need Medicaid planning. For those who may at some point need to obtain and receive Medicaid benefits, proper Medicaid planning can be very valuable, and the failure to do this type of planning properly can be damaging, with a recent court case clearly illustrating that lesson.

In December 2013, Catherine Klein passed away in a Montrose, Michigan, nursing home at the age of 95. As with many people, especially people who live as long as this woman, Klein was receiving Medicaid benefits. Sharon Pumford, who was Klein's niece, goddaughter and attorney-in-fact for certain affairs, signed Klein's Medicaid application form. That application included acknowledging that the state government of Michigan had “the legal right to seek recovery from my estate for services paid by Medicaid” after Klein's death. This process of Medicaid estate recovery can be delayed or avoided in certain circumstances. In Michigan, the state will delay pursuing repayment of bills that Medicaid paid if you have living at home a spouse, a child under 21, a child who is blind or a child who has disabilities. In some cases, the state won't pursue Medicaid estate recovery at all if an “undue hardship” exists. To get this hardship waiver in Michigan, though, you have file a hardship waiver application with the state.

After Klein died, the state filed a claim against her estate, seeking reimbursement of all the amounts Medicaid had paid on Klein's behalf, a sum totaling more than $133,000. Pumford, who was also the personal representative of Klein's estate, refused to pay the claim, arguing that Klein met the legal criteria for hardship since the only thing she owned at the time of her death was a house valued at roughly $45,000. Pumford had not, however, ever submitted the hardship waiver application. After Pumford refused to pay the claim, the state sued Klein's estate. The estate eventually lost, with the Michigan Court of Appeals deciding that, in order for an estate to be entitled to the hardship exemption, a hardship waiver application had to be filed and approved. Since no one had even completed this paperwork on behalf of Klein's estate, there could be no hardship exemption. As a result, the appeals court ordered the trial court to rule in the state's favor and grant its $133,000 claim against the estate.

There are many tools available to accomplish the goal of Medicaid planning. There are ways of structuring assets that make those assets exempt from Medicaid estate recovery. For example, in Michigan, Texas and some other states, you can title a piece of real estate using what's known as an enhanced life estate deed (also known as a “Ladybird Deed.”) Also, as this case shows, states like Michigan have hardship waivers that can allow the estate to avoid Medicaid estate recovery completely.

Whether you have a lot or a little in your estate, estate planning can benefit you. In this case, some more detailed planning might possibly have allowed this family to avoid these estate recovery-related problems, and drawn-out litigation, entirely.

How do I create an estate plan?

There are numerous options and scenarios to consider when developing an estate plan that protects your legacy and achieves your objectives, and important decisions should be made with the advice of qualified lawyers and financial experts. Membership with Legacy Assurance Plan provides members with valuable resources and guidance to develop comprehensive estate plans that take life's contingencies into consideration and leave a positive impact for generations to come. Legacy Assurance Plan members also receive peace of mind that a team of trusted, experienced professionals will assist them in developing legal, financial and tax strategies that will meet their needs today and for years to come through periodic reviews.

This article is published by Legacy Assurance Plan and is intended for general informational purposes only. Some information may not apply to your situation. It does not, nor is it intended, to constitute legal advice. You should consult with an attorney regarding any specific questions about probate, living probate or other estate planning matters. Legacy Assurance Plan is an estate planning services company and is not a lawyer or law firm and is not engaged in the practice of law. For more information about this and other estate planning matters visit our website at

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