Estate Recovery May Affect More Than Your Home

For years prior to the passage of Michigan’s Estate Recovery Act, our office informed its clients and seminar attendees about the detrimental affects that Estate Recovery would have. Michigan was the last state in the union to pass an Estate Recovery Act, and the act has now been in force in this state for almost five years.

The Estate Recovery Act was driven by Michigan economics. To summarize the Estate Recovery Act, if the State of Michigan pays for your long-term care through Medicaid, then the State can file a lien against your probate estate — and in particular — your home. So when a Medicaid recipient passes away, the State of Michigan acts as a high priority lien-holder against his or her estate.

Another way Estate Recovery is affecting Michigan residents is through the State acting as a remainder beneficiary of certain annuities. Annuities are special financial products that retirees use to create an additional stream of income or as an investment tool to create a greater interest exchange on their money. If an annuity is annuitized, meaning irrevocably in pay status, the annuity is considered income for Medicaid purposes. If an annuity has a cash surrender value, then that value is considered an available asset for Medicaid purposes minus any surrender charges, but not reduced by taxes.

For all annuities established after February 8, 2006, the State of Michigan requires that it be named a remainder beneficiary before it will pay for your long-term care. PEM Item 401, at 5. The end result is that the State’s remainder interest could be enforced for an amount equal to the amount of the Medicaid benefits provided. 

As I stated, all annuities purchased or annuitized on or after February 8, 2006, will require that the State be named a remainder beneficiary. However, if the annuity has a community spouse or minor or disabled child named as its remainder beneficiary, then the State’s remainder interest may be secondary.

Michigan Medicaid Attorneys at The Elder Law Firm PC provide assistance in protecting your assets and protecting your family through Medicaid planning. Contact us by calling 616.840.3754 or completing our free online Medicaid planning form here.