Larry King passed away in January due to complications with COVID-19. At the time, he was in the middle of a divorce from his seventh wife, Shawn. His net worth is estimated to be some $144 million. Shawn has been adamant that the pair have had an estate plan in place for many years. However, last month, a holographic will was found.

Federal law demands that states attempt to recover amounts expended on certain beneficiaries receiving Medicaid benefits. (See 42 U.S. Code § 1396p(b)) Namely, a state must attempt estate recovery for individuals who were aged 55 and up when they received benefits to pay for nursing home care, home and community-based services, and related hospital and prescription drug services.

Federal law defines estate as “all real and personal property and other assets included within the individual’s estate, as defined for purposes of State probate law.” However, the definition goes on to say that each state may pass laws to widen this definition, to include “any other real and personal property and other assets in which the individual had any legal title or interest at the time of death (to the extent of such interest), including such assets conveyed to a survivor, heir, or assign of the deceased individual through joint tenancy, tenancy in common, survivorship, life estate, living trust, or other arrangement.” If a state has passed such a law, then that state has expanded estate recovery.

When someone needs long-term care and applies for Medicaid benefits, there is a look-back period. The Medicaid agency will look back a number of months immediately preceding the otherwise eligible date, which is usually when the applicant is institutionalized and has submitted a Medicaid application. For California, the look-back period is thirty months; for all other states, the look-back period is sixty months.

If the applicant made transfers for less than fair market value during the look-back period, then the assumption is that the transfers were made in order to qualify for Medicaid services by getting the applicant’s resources down to the pertinent individual resource allowance. Then, the applicant would be assessed a penalty period, where they would not be eligible for benefits for a certain period of time. However, the applicant can rebut this assumption by showing the assets were transferred for some other purpose than to qualify for Medicaid long-term care services. One way the applicant can try and rebut the assumption is to show that they were not sick and in need of care when the transfers were made, thus they were not contemplating Medicaid eligibility. Another way would be to show a habit of gifting before Medicaid was needed.