Medicaid Estate Recovery: What Kinds of Accounts and Assets Will the Government Seek “Pay Back” From After My Loved One with Special Needs Passes Away?

Medicaid Estate Recovery What Kinds Accounts and Assets Will the Government Seek Pay Back From After My Loved One with Special Needs Passes Away

Under current law, Illinois generally must pursue Medicaid estate recovery from the estates of Medicaid recipients. As a result, when the Medicaid beneficiary passes away, the state of Illinois typically will pursue the beneficiary’s assets for repayment of the Medicaid benefits that it provided to them. The attorneys at Rubin Law can advise you on Medicaid estate recovery and other legal issues specific to special needs planning.

ABLE Accounts and Medicaid Estate Recovery

Illinois changed its state law in 2017 to try and exclude ABLE accounts from estate recovery rules for Medicaid recipients. However, this change in the law did not benefit most Medicaid recipients with intellectual and developmental disabilities due to a conflict with federal law and policy.

Federal law governs this issue in that it permits estate recovery from the ABLE accounts of certain Medicaid recipients, despite the change in state law. These recipients include individuals over 55 who received Medicaid benefits and those who received Medicaid benefits for certain Long-Term Services and Supports (LTSS) and who were subject to post-eligibility of treatment (PETI) rules.

Many individuals with intellectual and developmental disabilities receive LTSS services and are subject to PETI rules. These individuals include anyone who receives any Illinois Home and Community Based Services (HCBS) Waivers, many of which are used by individuals with special needs. Some examples of LTSS services these individuals receive are home-based supportive living services, funding to live in a group home, and services for persons with brain injuries. Typically, these waiver recipients are subject to PETI rules.

As a result, the ABLE accounts of these Medicaid recipients are still subject to Medicaid estate recovery after the death of the account beneficiaries. Federal law directly contradicts state law in this respect, which permits the Medicaid estate recovery to occur despite the state law change meant to protect ABLE accounts from Medicaid estate recovery.

Special Needs Trusts

First-Party or Self-Funded Special Needs Trusts

First-party or self-funded special needs trusts generally consist of funds that belong to the child with special needs. For instance, a child receiving medical malpractice or personal injury settlement could place those funds in a self-funded special needs trust. Funds remaining in a first-party or self-funded special needs trust after the beneficiary’s death are subject to Medicaid estate recovery.

Third-Party Special Needs Trusts

A person other than the beneficiary creates a third-party special needs trust. Family members and friends then can fund the trust for the benefit of the person with special needs, such as through inheritances left after their deaths or with gifts to the beneficiary. These trusts permit the child access to supplementary funds for certain items to improve their quality of life without endangering their eligibility for public benefits. Unlike first-party or self-funded special needs trusts, third-party special needs trusts are not subject to Medicaid estate recovery. Any remaining funds in these trusts at the beneficiary’s death would go to the successor beneficiary or beneficiaries named in the trust.

Contact Us Today to Learn More About Our Legal Services

Rubin Law is the only Illinois law firm to dedicate itself exclusively to providing compassionate legal services for children and adults with special needs. We offer unique legal and future planning techniques to meet your family’s individual needs.

Call us today at 866-TO-RUBIN or email us at to learn more about the services we can offer you and your family.