Among the little-known provisions of the biennial state budget proposed by Republican Gov. Scott Walker and rubber-stamped by Republicans in the Legislature is a provision buried in the budget that would drastically expand the state’s ability to claim dead couples’ joint property – even if the assets are protected in trusts.
The language is designed to help the state recover Medicaid money spent on a number of long-term care programs, most notably Family Care, which helps keep disabled and elderly people out of costly nursing homes.
It’s unlikely the changes will take effect for months, but attorneys who specialize in elder law say they’re already creating concern among seniors who want to leave property to their children and other beneficiaries. The state has prioritized recovering every dollar spent on Medicaid over families’ well-being, said Carol Wessels, a Wauwatosa attorney and former chair of the state bar’s Elder Law Section Board of Directors.
The provisions would allow DHS to claim property even if it’s not subject to probate, a legal process creditors can use to settle debt after a death, or held in a trust, a financial arrangement in which a third party, such as a bank, holds assets until they’re passed on to beneficiaries. People often use trusts to protect property from probate.
Federal rules also prohibit people from divesting or giving away property to make themselves poor enough to qualify for a long-term Medicaid program. However, the regulations allow applicants to transfer some assets, such as interest in a business, at less than market value without penalty.
The Wisconsin budget eliminates that exemption, which means a Wisconsin resident seeking Medicaid coverage for long-term care would have to sell his or her assets, such as a share of a family business or farmland, for full market value even if it was going to a child.
So there you have it folks…Scott Walker and Republicans in the Legislature are sticking it to the elderly (and their families) even after they’re dead.
UPDATE: In an Op-Ed for the LaCrosse Tribune, Democratic State Rep. Steve Doyle explains just how bad Scott Walker’s Medicaid “death tax” could be for family farmers.
With the new “death tax,” when a family member on Medicaid dies and then their spouse dies, the state in certain cases can go after their farm, their business or their house to recover payment for their long-term health care expenses.
This expansion of the law will punish families who want to transfer the family farm or business if the head of the family is sick or disabled and needs certain Medicaid services.
Here in the Coulee Region, we have many family farms run by parents who hope one day to pass them on to their children. As part of their estate planning, parents often choose to transfer the business for less than market value because their children have earned significant sweat equity in the property and often don’t have enough money to buy the farm at full value.
But what if less than five years later a stroke forces Dad to go into long-term care paid for by Medicaid? Under this expansion, the entire family might be penalized. Dad might not be able to receive Medicaid, and if the farm is still in his name when he dies, the state will be able to take back the amount of money paid for his long-term care. To recover these fees, the state could even foreclose the farm.
What makes this truly a “death tax” is that when Mom dies, the state can move in and seize the farm and even the home.
This expansion of the asset-recovery program takes an onerous situation and makes it even worse. In the worst-possible cases, some desperate couples may choose to get a divorce so that the healthy spouse can safely pass on the family farm to the next generation without fear of foreclosure.
No family should be faced with that kind of decision.