Homeownership has historically made up the largest share of assets in almost every age bracket and served as a significant divide in net worth. In 2019, the median net worth of homeowners was $255,000, while the median net worth of renters was just $6,300 – over 40 times smaller. Homeownership is a primary indicator of the ability to transfer wealth into other valuable assets, such as stocks and retirement accounts, as homeowners are shown to own significantly more of these assets than non-homeowners. Simply put, homes are the single largest asset owned by the vast majority of Americans, and for many, the only significant asset they own.
This information demonstrates the importance of homeownership in the aggregation of wealth. As such, transferring ownership of the home to a loved one or descendent is a crucial aspect of ensuring a secure financial future. Unfortunately, Medicaid estate recovery poses an extreme threat to transferring this wealth to descendants because homes are by and large the largest asset owned by Americans, and frequently the only significant asset, they’re often the primary target for Medicaid estate recovery – leaving descendants without the wealth that was previously designated for them, and on much worse financial footing.
What is Medicaid Estate Recovery?
After the passing of a Medicaid recipient, they will request repayment for services provided, to the decedent usually from the estate assets before passing to the estate beneficiaries or a relative of the deceased. Notably, the agency will attempt to recover payment directly from a Medicaid recipient’s share of the estate. Suppose the Medicaid recipient died without a will, or other estate planning documents to protect the transfer of their assets to their loved ones. In that case, the agency will take assets from the probate estate (the assets that are in the process of being passed down to beneficiaries) equal to the cost of the services provided. Because the home is often the only asset valuable enough to cover the cost of care, or outright the only asset available, they will take an lien/interest in the home. This can happen even if there is another co-owner of the home.
Thankfully, action can be taken to protect the home from Medicaid estate recovery. In our next two blogs, which will be released in July and August, we’ll cover several different estate planning tools that can safeguard your home and ensure that your most important asset is provided to the ones you love. To get started on an effective estate plan that will defend you from Medicaid Estate Recovery and offer many other benefits to yourself and your beneficiaries, contact Ledwidge & Associates today.
Ledwidge & Associates
