Written by attorney Douglas L. Kaune



The Pennsylvania Department of Human Services (hereinafter “DHS") operates an estate recovery program which seeks to recover certain payments made by the Commonwealth on behalf of medical assistance patients. Estate recovery is sought from the probate estates of individuals who received Medicaid support after the age of 55 years. Medicaid payments are typically made on behalf of individuals who are no longer able to pay for their own long term care in a nursing care facility. However, it is possible that the Medicaid recipient may either have retained assets such as a primary residence or received assets after Medicaid application.

ASSETS AVAILABLE TO ESTATE RECOVERY: In Pennsylvania only the probate assets contained in an estate are subject to estate recovery. Probate assets generally are only those assets which were in the name of the decedent alone or which become part of his or her estate after death. Recoverable assets may include life insurance, IRA, 401K, or pension funds made payable to an individual’s estate. Careful attention should be paid to the beneficiary designation made on each of these accounts to insure that they are not made a part of the probate estate at the time a nursing care patient passes away. Other assets such as real estate, bank accounts or stock accounts in the decedent’s name are also recoverable.

ASSETS NOT AVAILABLE TO ESTATE RECOVERY: All non-probate assets will be free from the recovery process for the Department of Human Services. Non-probate assets include, but are not limited to, jointly owned property, life insurance proceeds paid to designated beneficiaries, irrevocable funeral reserves, assets placed in trust prior to the date of death, IRA and 401K funds made payable to specified beneficiaries. Even though these assets are not recoverable, it is likely that they either should have been or were spent for the care of the decedent. If the assets were not spent on long term care, but should have been, they can still may be recoverable for other reasons.

WHEN MUST THE DEPARTMENT OF HUMAN SERVICES BE NOTIFIED: If the decedent was over the age of 55 years, the personal representative for the estate must determine if the individual received medical assistance within the 5 years prior to the date of death. If the personal representative ascertains that no medical assistance was received then there is no need to make notice to the DHS. However, it may be prudent for the personal representative to give notice to the DHS under circumstances where they believe that no medical assistance had been paid for the decedent’s benefit. This would ensure that the personal representative was not mistaken. The personal representative must ensure that all expenses including any debts owed to the DHS are paid prior to the distribution of assets to beneficiaries in order to avoid the potential of personal liability.

If medical assistance was paid by the Commonwealth, the DHS will make a claim to the Executor or Administrator of the estate within 45 days of their receipt of notice or they lose the ability to make any claim. The personal representative will have the right to request an itemized statement of claim. The itemized billing will typically include all of the services and care paid for by the DHS on the individual’s behalf within the five years prior to the date of death.

PRIORITY OF A CLAIM: Although many people refer to the Commonwealth’s right to receive repayment from the estate as a lien, it is actually a claim and not a lien. This terminology is important in that it results in a change of priority in which the Commonwealth can expect to be paid. Typically a lien would be paid prior to any and all other claims at the time of sale or transfer of property. A Commonwealth recovery claim is unsecured and is relatively low priority, as compared to some of the other expected expenses and debts of the estate of a decedent. Things such as estate administration expenses, attorney’s fees, accountant’s fees, a $3,500.00 family exemption, Executor’s fees and in most cases, general expenses and gravestone expenses will be paid prior to repaying the Commonwealth’s claim.

CASES WHERE POSTPONEMENT OF ESTATE RECOVERY MAY OCCUR: In certain situations the DHS will allow for the estate recovery to be postponed. During each of these situations, the amount of the claim will not continue to grow with interest accruing. The Commonwealth will delay its claim until the death of a surviving spouse, the death of a disabled child who is residing in the property, the date at which any surviving child reaches the age of twenty-one years or where a sibling has an ownership interest in the property and had been living in the property for one year prior to the decedent’s death either dies or sells the property or vacates the property. Under all of these circumstances, the personal representative of the estate is responsible for taking any steps necessary to protect the interest of the Commonwealth. If proper steps are not taken, the personal representative could be held personally liable.

CASES WHERE HARDSHIP WAIVER MAY BE APPLIED FOR: A personal representative of an estate or individuals who may be affected by the estate recovery may file a petition in writing to the Estate Recovery Section of the DHS. This petition would be reviewed and heard by a specific committee to review all of the issues on a case by case basis.

COMMON RECOVERY CLAIMS: The most common estate recovery claim would be against the personal residence of the decedent. It is possible that even though the decedent had qualified for Medicaid, he or she or their Agent under a Durable Power of Attorney document may not have sold the personal residence prior to the date of death. The personal residence is not required to be sold if there is a possibility that the individual could return to the home during his or her lifetime. Families often hold onto the property thinking that either mom or dad will re-enter the family home or out of fear that they would have to spend the proceeds of the sale immediately upon the sale.

The reality is that by retaining the property, they are incurring additional expenses such as payment of real estate taxes, repair costs and utilities only to ultimately have the Commonwealth bring a recovery claim against the real estate or the death of the owner. In many cases, it may be more prudent for the Agent to sell the real estate and enter into to a gifting or other asset protection plan in order to protect the assets.

In order to appeal a claim against the value of the personal residence of a decedent, the personal representative must prove hardship. This would require that there was a care giver who resided in the decedent’s property who had helped to keep the decedent from entering a nursing care facility or who had provided certain amounts of care to the decedent during a period of time where community services were being provided. The care giver must actually reside in the personal residence of the decedent for two years immediately prior to their entering into a nursing care facility or for a two-year period during home based care. If this hardship waiver is granted, the Department will terminate the claim with regard to the residence permanently.

CONCLUSION: This article should serve to provide some level of understanding of the Estate Recovery Program in Pennsylvania. Most importantly, it helps to emphasize the need for professional guidance throughout the planning process. Even those decisions that are seemingly basic can lead to a savings or a loss of tens of thousands or hundreds of thousands of dollars for Medicaid recipients and their families. Executors and Administrators must also be careful to avoid personal liability in an estate administration.

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