The law, codified in Ohio Revised Code 5162.21, applies to Ohio Medicaid recipients who died on or after September 20, 2005. For those individuals, the so-called "augmented estate" includes all real and personal property in the probate estate; any real or personal property that would have been part of the decedent's probate estate but for release of administration procedures; AND any other real or personal property in which the deceased had an interest or to which they had legal title immediately prior to death (to the extent of such interest).
The new law changed dramatically the way Ohio property law works. Prior to the law, title of property sometimes vests automatically at the time of death to a beneficiary or heir. Generally, once title vests in the ownership of another, the debts and liabilities of the former owner are not enforceable against the property, and the new owner can be assured that the title is free, clear, and unencumbered. The new law provides that title vesting to another is irrelevant, at least when the State of Ohio is the creditor; Ohio may pursue its claims against property after the death of the Medicaid recipient even if Ohio filed no lien, claim, mortgage, or encumbrance prior to the recipient's death.
Consider the following example: John Smith, Medicaid recipient, owns a home, an annuity, a bank account jointly with his daughter, and a living trust that holds various investments. This example is only to show how estate recovery works with different assets, and is not a realistic depiction of a Medicaid recipient; most Medicaid recipients have no assets. Smith transfers an interest in the home to his adult daughter, and they become joint tenants with right of survivorship. Prior to the establishment of the augmented estate, the home and the joint bank account would have passed automatically to Smith's daughter on his death, and would never have been part of the probate estate. Therefore, they would not have been subject to estate recovery.
The assets in the living trust don't "transfer", per se, but they are not administered through probate. Smith's successor trustee would distribute the trust assets to the named beneficiaries in the trust, free from resource recovery. Similarly the annuity pays beneficiaries, outside of probate, free from resource recovery.
Prior to the new law, individuals could preserve assets for their family simply by removing them from their probate estate. Under the new law, preserving assets is harder.
The state can only attempt to recover against the estate of a Medicaid recipient after the death of their surviving spouse (if married), and when the Medicaid recipient no longer has any surviving children who are either under the age of 21 or are blind or totally disabled. (Total disability is defined by Medicaid regulations.) However, if you do not have a surviving spouse or children with qualifying disabilities, your adult children or other heirs might find assets they expected to receive claimed instead by Medicaid estate recovery.
If you are concerned about preserving assets for your family in the event that you need Medicaid assistance at some point in your life, you will need to plan to keep assets out of your augmented estate. Certain transfers are permissible to keep assets out of an augmented estate, as are other estate planning tools like supplemental needs trusts for disabled or special needs beneficiaries, and certain irrevocable trusts. An elderlaw lawyer can help map out strategies to meet your goals and needs.
