State Recovery of Medicaid Benefits Partial Safe Harbor for Surviving Spouse

06.01.2022

Author: Attorney Thomas J. Casey

If the Estate of the decedent’s spouse includes real estate, the State of Wisconsin may be entitled to recovery of benefits paid for Medicaid or at least a lien in that amount.  However, for Estates that do not include real estate, the State of Wisconsin does not recover liquid assets when there is a surviving spouse regardless of the amount of the assets.

Many times a surviving spouse raises questions regarding what assets the State of Wisconsin will try to recover Medicaid benefits paid on behalf of that person’s deceased spouse.  Under current Wisconsin law, the Department of Health Services, Division of Medicaid Services, Estate Recovery Section, will file a Claim in any Estate for received Medicaid benefits or services.  However, the State rules are different for an Estate when there is a surviving spouse.

When there is a surviving spouse and the Estate Inventory includes an interest in real estate, the State of Wisconsin will request that the decedent’s interest in the property be subject to a lien in favor of the Department of Health Services for the amount equal to the Department’s Claim or the remaining value of the Estate after other higher priority Claims have been paid, whichever is lower.  Once the lien is in place and recorded, the Estate Claim is released.  The lien does not have to be paid until the surviving spouse passes away.  If the real estate is sold for fair market value and the surviving spouse is the owner of the property at the time of sale, the Department of Health Services releases its stipulated lien and makes no recovery.

However, if the spouse transfers the property for less than fair market value or is not the owner of the property and the property is sold during the lifetime of the spouse, the Department will only release its lien if the amount of the lien or the proceeds due to seller are placed in a Trust or bond to be paid to the Department at the death of the surviving spouse.

If the real estate is sold while the probate of the first spouse is pending, the State of Wisconsin will request copies of the Inventory in the Estate, fair market value documentation for the real estate and a copy of the signed Settlement Statement.  If the State verifies the property is being sold for fair market value, then it will release its Claim and allow the surviving  spouse to retain the net proceeds from the sale.

In conclusion, it is always a wise decision to review these issues with an experienced attorney before making payment of any Claim raised by the Department of Health Services.