The State of Colorado, through its Medical Assistance Estate Recovery Program, can seek recovery for the amount of medical assistance provided to an individual over age 55 or provided to an individual in an institution, regardless of age. The State of Colorado is an interested party in that individual’s estate because of the assistance it provided to him or her. After the individual dies, the state must be
notified of the death and be given notice of the individual’s estate proceedings. The state will then try to assert a lien against individual’s estate to obtain reimbursement for the assistance it provided to him or her. The state will file a claim against the individual’s estate to obtain the equity in the home and any other assets owned by the individual.
The State of Colorado can recover for the individual’s Medicaid only to the limit of his or her equity or interest in the home and any other property in the individual’s estate. The state cannot recover against any other owners of the property, including certain trusts. Further, a life estate and joint tenancy interest owned by the individual ceases at the moment of death and are not considered part of the individual’s estate, so these interests cannot be reached by a lien or estate recovery claim.
The fact that a Medicaid recipient may own property in joint tenancy with another person, such as a savings account, does not necessarily mean the property is “safe” from Medicaid estate recovery liens. When real property is held in joint tenancy and one joint tenant dies, the property automatically reverts to the other joint tenant outside of the decedent’s estate.
The only protection against estate recovery liens afforded a Medicaid recipient owning a residence under joint tenancy with another person is when the Medicaid recipient dies first. Then, the residence automatically reverts to the surviving “well” joint tenant and Medicaid cannot place an estate-recovery lien on that property. If the “well” joint tenant dies first, however, the residence passes to the Medicaid recipient, subjecting the residence to estate recovery after the death of the Medicaid recipient. Medicaid may still consider the property to be exempt as the recipient’s principal residence for Medicaid-qualification purposes, but the home’s vulnerability to estate recovery after the recipient’s death points up the fact that Medicaid funds made available to unmarried Medicaid recipients are, in reality, only “loans”.
Another danger of holding property in joint tenancy is that the property will be subject to claims, judgments or liens by the other joint tenant’s creditors.
To avoid the possibility of a Medicaid lien in a situation where the married couple owns the home in joint tenancy, it is advisable to transfer ownership of the residence to the community (“well”) spouse exclusively. The community spouse can then provide for proper distribution of the residence through his or her will. The transfer to the community spouse will not incur any penalty periods since transfers between spouses are exempt. If there is no community spouse, transferring the home to a non-spouse, while retaining a life estate, is a much safer strategy than transferring the home into joint tenancy with the non-spouse.