As you may already be aware, failing to include Medicaid planning in your estate plan can put your assets at risk if you need to qualify for Medicaid in the future. The focus on the value of assets at the time of application causes many people to labor under the mistaken belief that once they qualify for Medicaid, their assets are safe. Unfortunately, however, that is not always the case. On the contrary, the Medicaid Estate Recovery Program (MERP) may pose a risk to your estate assets long after you qualify for benefits. To help you understand the potential impact of MERP, a North Dakota Medicaid planning attorney at Thompson Law explains what you need to know about the North Dakota Medicaid Estate Recovery Program.
Medicaid Eligibility and Long-Term Care Costs
For many seniors, the primary reason for applying for Medicaid is the high cost of long-term care (LTC). Across the United States, the average cost of LTC is approximately $100,000 per year. In North Dakota, LTC expenses have historically mirrored the national average, averaging just over $115,000 for 2024. The high cost of LTC makes Medicaid an essential resource for many seniors who cannot afford these costs out of pocket. Since Medicare and most private health insurance plans do not cover LTC, Medicaid often becomes the only viable option for seniors needing financial assistance.
The problem, however, is that qualifying for Medicaid requires applicants to have income and countable resources (assets) that fall below the program’s (low) limits. If they make it through the application process and are approved for benefits, many individuals assume that since they have been approved for Medicaid that their financial concerns are over. That assumption does not always hold true, however, due to the Medicaid Estate Recovery Program.
Understanding the Medicaid Estate Recovery Program (MERP)
The Medicaid Estate Recovery Program (MERP) is a government initiative designed to recoup the costs that Medicaid pays on behalf of beneficiaries. Under this program, the state of North Dakota may attempt to recover funds from the estate of a deceased Medicaid recipient to reimburse the long-term care expenses covered by Medicaid while the decedent was alive. While some states engage in “expanded recovery,” meaning they can seek reimbursement from any assets owned by the deceased, regardless of whether those assets were required to go through probate, North Dakota limits estate recovery to assets that pass through the probate estate of the Medicaid recipient.
Are There Limits to MERP?
If Medicaid covers your long-term care expenses, North Dakota may file a claim against your estate after your death in an attempt to recover those costs. There are, however, specific circumstances under which Medicaid estate recovery is prohibited:
- If the deceased Medicaid recipient has a surviving spouse, Medicaid cannot pursue estate recovery during the spouse’s lifetime.
- If the Medicaid recipient has a surviving child who is under 21 years old or who is blind or disabled, estate recovery is not allowed.
- If the primary residence of the deceased Medicaid recipient is occupied by a qualifying relative, such as:
- A sibling who has an equity interest in the home and lived there for at least one year before the recipient entered a nursing home, provided that sibling has continuously resided in the home.
- An adult child who lived in the home for at least two years prior to the recipient’s institutionalization, provided they played a role in delaying the recipient’s need for nursing home care and have remained in the home continuously since that time.
What Is a “Hardship Exemption” for the North Dakota Medicaid Estate Recovery Program?
As you may well imagine, the thought of losing the family home or leaving family members homeless can be frightening. With that in mind, North Dakota law does allow Medicaid estate recovery to be waived or reduced if it would cause “undue hardship” to the heirs or beneficiaries of the estate. For example, undue hardship may exist when:
- The asset in question is the primary source of income for a surviving family member, such as a farm or small business, and the income generated is limited.
- The property is considered a “modest” home, meaning its value is no more than 50 percent of the average home price in the county where it is located.
- The property serves as the primary residence for a beneficiary who meets the criteria for hardship.
If a beneficiary or estate representative believes that undue hardship applies, they must submit a request for consideration within 30 days of receiving the Medicaid estate recovery notice.
Medicaid Estate Recovery and Real Property Liens
One way that MERP seeks reimbursement is by placing a lien on real property owned by the deceased Medicaid recipient. This is known as a post-death lien. The lien will typically remain in place until the Medicaid claim is satisfied or until an exemption applies. It may be possible to defer recovery under MERP under the following conditions:
- An heir or survivor has continuously lived in the home before the recipient’s death and does not wish to sell the property.
- The Medicaid estate claim cannot be paid without selling the property.
- The heir or survivor lacks the financial ability to obtain a loan to pay off the Medicaid claim.
- The heir or survivor agrees to a repayment plan with Medicaid, subject to reasonable payment terms and interest.
How Can I Protect My Assets from the North Dakota Medicaid Estate Recovery Program?
Given the potential impact of MERP, it is crucial to incorporate Medicaid planning into your estate plan early on in your life because proper Medicaid planning strategies can help protect your assets and ensure that more of your wealth passes on to your loved ones. An experienced North Dakota Medicaid planning attorney can help devise a plan that works with your unique facts and circumstances; however, some common Medicaid planning strategies include:
- Creating an Irrevocable Trust: Assets placed in an irrevocable trust may be protected from Medicaid estate recovery, provided they are transferred at least five years before applying for Medicaid.
- Utilizing Exempt Transfers: Certain transfers, such as those made to a spouse or a disabled child, may be exempt from Medicaid estate recovery.
- Spending Down Assets Strategically: Properly structuring asset transfers and expenditures can help individuals meet Medicaid eligibility requirements while preserving wealth.
The Medicaid Estate Recovery Program in North Dakota can pose a significant risk to your assets if you rely on Medicaid for long-term care expenses. While Medicaid estate recovery is not always avoidable, understanding the program and implementing proactive planning strategies can help protect your estate and ensure that your loved ones are not left with unexpected financial burdens. Because Medicaid rules are complex and subject to change, working with an experienced Medicaid planning attorney in North Dakota can help ensure that your estate is protected.
Do You Have Additional Questions about the North Dakota Medicaid Estate Recovery Program?
Please join us for an upcoming FREE seminar or webinar. If you have additional questions about the North Dakota Medicaid Estate Recovery Program, contact the North Dakota and Minnesota Medicaid planning attorney at Thompson Law by calling 605-362-9100 to schedule an appointment.
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