Medicaid in Michigan: Why You Should Remove Your Home from Your Trust (Episode # 306)

0:30 Well, good afternoon, michiganers. It is Tuesday, October fifteen, twenty twenty four, and this is of course Tuesday with Tom, Michigan's only weekly internet show where we do answer your questions about estate planning and a state settlement in Michigan. I'm your host, Tom Doyle, a state planning attorney, lifelong Michigan resident, and ambassador for all things good in this great state of Michigan. Welcome, Welcome, Welcome to today's program. Well, it's been a while since I've been with you. Spent a lot of time trying to enjoy the nice summer days here in Michigan. Obviously fall is now here. We all know that colors are changing, and we are back to begin another round of Tuesday with Tom episodes. Well, the last episode if you listen to it. If you didn't, I encourage you to. Does Michigan's uniform Power of Attorney law affect your power of attorney? I talked about the new law that became effective on July first, and that law might require everybody that's out there that already has an existing durable power of attorney to update that power of attorney. So, if you're one of those people, I encourage you to listen to that episode.

1:58 Today. Well, today comes about because of conversations I had recently with a client about their deeds that we had done for them and whether or not they needed to change those deeds. So today topic is Medicaid in Michigan why you should remove your home from your trust. But please remember that what I'm about to discuss during the program is, as always for educational purposes only. It is not intended to be legal advice. You need to work with your attorney to determine what is appropriate for you and your estate plan. Medicaid in Michigan and why you should remove your home from your trust or talk about important topic today and that is whether or not you should consider remove your home from your trust.

3:03 So, as part of. Your estate plan, many of you have a revocable living trust that was created for you. Oftentimes, one of the goals behind that living trust is to avoid probate. And in order to avoid probate, you should have had a deed prepared that would have transferred your home into the trust. That way, it's not in your name anymore, it's in the name of the trust. That way, it would not have to go through probate at the time of your death. So your goal of avoiding probate relative to the home is accomplished by having that deed prepared. But what happens.

3:44 What happens if, however, before you die, you go into a nursing home and need to apply for Medicaid to cover the cost of your long term care. Well, let's start. Let's kind of set the stage first with a little bit of understanding about Medicaid. Medicaid is a state and federally funded program that pays for long term healthcare if you are poor, including long term care costs like nursing home. And in Michigan, nursing home can be incredibly expensive, often exceeding currently eight thousand dollars a month, and because of that, many people are going to turn to Medicaid to help cover those expenses. That is, they're going to fill out a claim or an application for Medicaid basically saying, hey, Medicaid has some strict income and asset eligibilary requirements, but I qualify under those requirements to have the government pay for my long term care. And one of those assets that you will see, which is a most significant asset that most people have, or many people have and will be able to retain if appropriately done, even in medicaid process, is their home. So what happens if your home is

5:15 in a trust and you apply for medicaid, Well, if your home is in revocable living trust. Revocable living trust is the most common living trust that gets created for clients as part of an estate plan. Revocable meaning that you can change it, that you're still in charge of it, that you can get rid of it. So that's what we're talking about, is a revocable living trust. And you have put your home into that revocable living trust, and that would have been done by having a deed prepared for your home. Well, if your home is in a revocable living trust, Medicaid may treat your home as what they call an available asset. That means the value of your home could be counted against you when determining your medic medicaid eligibility.

6:09 What does that really mean? Well, in Michigan, if what they call your countable assets, those are the things that Medicaid looks at as your countable assets. If your countable assets at seed two thousand dollars, you won't qualify for medicaid unless those assets are spent down, meaning you have too much. You have too much by way of assets. You have to spend your money. You have to get rid of it. You know, you have to spend down those assets, and normally it means spend them on the nursing home. So you're going to use your own assets to pay for your care in the nursing home until you get down to two thousand dollars.

6:51 Where the issue here is at medicaid. If your home is in the trust, Medicaid is is going to look at that home and say, hey, that home is not in your name. That home is in the name of your vocable living trust and it has to be spent down or basically they're going to look at the home as something that you have to sell in order to qualify for medicaid. So that's the starting problem. You put your home into a trust, you're applying for medicaid, and now the government is saying, well, wait a minute, that home has to be sold in order for you to qualify for medicaid. So question, why should you remove your home from the trust. Well, let's talk about that. If you remove the home from the trust and again let's talk about exempt assets in medicaid. In Michigan, your primary residence is typically exempt from MEDICAIDS asset calculation as long as its equity value is under the federal limit, which is currently about six hundred and eighty eight thousand dollars in twenty twenty four. But that exemption only applies if the home is not in a revocable trust and is in your name. So by moving your home out of

8:23 the trust back into your name, you should not have to sell it to qualify for medicaid. So the reason for removing the home from your trust and putting it back into your name is so that your home will not have to. Be sold in order to qualify for medicaid. Well, obviously, not having to sell your home is certainly especially important if you've got a spouse who still needs to live in the home. If you're married and your home has to be sold in order for you to qualify for medicaid, where's your spouse going to live? Also, it might not being the only asset that would be available at your death to pass on to your children.

9:08 So many clients their estate plan is designed to pass assets onto their children. They're looking at their home as perhaps being a primary asset for that Well, if it has to be sold in order for you to qualify for medicaid, that home is not now going to be available to pass on to your children. So the why you should remove your home from the trust is so that the home will now be an exempt asset and not have to be sold. Well, question, so, how do you remove it from your trust? You already put it inside your trust. When your trust was created for you would have had some sort of a deed prepared. Normally, that deed was prepared in order to put that home inside your trust. That's what we tell clients, that's what lawyers tell their clients, so that it's in the trust so that it doesn't have to go through probate. Well, how you will go about removing the home from your trust is going to depend upon a couple of things. One, what type of deed was prepared for you, and we're going to talk about that about what kind of deed was prepared for you. And two, whether or not the deed that was prepared for you that transfers your home into your trust has been recorded with the.

10:33 Register of Deeds Office. So let's go through that if the deed that was prepared is what is called a ladybird deed, and don't look for the lady bird word on it, You're never going to find it. I know, we prepare a lot of them, and clients are always asking us, where does this thing? Say? Ladybird? That's the general term descriptive terms. That lawyers have. But if the deed that was prepared is what is known as a ladybird deed, then even if the deed has been recorded, you don't have to do anything. So if your deed is a ladybird deed, and even if you've recorded that ladybird.

11:13 Deed, you don't have to do anything. And that is because of the way that a lady ladybird deed works. The way that a ladybird deed works is. The ownership of the home is still yours until your death because it's yours. When you do apply for. Medicaid, it is considered still an exempt asset. But because it's a ladybird deed, then upon your death it will automatically transfer into the trust without having to go through probate. So again, if the deed that was prepared is a ladybird deed, even if you recorded it, you don't have to do anything. What if the deed is not a ladybird deed, If the deed is not a ladybird deed, which quite often was the case with attorneys who are preparing these deeds, if it hasn't been recorded. So, if you've got a deed it's not a ladybird deed, you're just holding on to that deed as part of your state planning documents, planning on recording that later on, or planning on having your trustee perhaps recorded after your death, then you can simply destroy that deed. It's never been recorded, it's never become a public record. You could simply tear that deed up and throw it away. So if the deed is not a ladybird deed and it has not

12:45 been recorded, then you can simply destroy the deed that was prepared for you. If, however, the deed is not a lady bird deed and you have already recorded the deed, then you will need to have a new deed prepared that's going to transfer the home out of the trust back into your name, and you should be able to determine if the deed's been recorded simply by looking at the top of it, because when it does get recorded, there's going to be some numbers and some tests that's going to be stamped or printed on the top of the deed from the registered deed's office indicating that the deed has been recorded. So if the deed is a lady Bird deed, doesn't matter whether it's recorded or not, you don't have to do anything. If the deed is not a Ladybird deed and has not been recorded, then you can simply destroy the original deed that was prepared. If, however, the deed is not a Ladybird deed and you have already recorded the deed, then you'll need to have a new prepared, new deed prepared that's going to transfer the home out of the trust back into your name, and just a.

13:59 Brief brief mention on deeds. Usually at the top of a deed, it's going to have a line that tells you what kind of a deed it is. It might be what we call. A quit quit claim deed, or it might be a warranty deed. A quit claim deed or a warranty deed could be a Ladybird deed or might not. So whether it's a warranty deed or quit claim deed does not answer the question as to whether or not it is or is not a ladybird deed. So let's say you destroy that deed because it hasn't been recorded, or you've had a deed prepared putting the property back into your name because that deed had been recorded. Well, here's the next thing, though, Once the home has been removed from the trust and placed back in your name, there is still work that needs to be done.

14:58 And here's why. Even though Medicaid won't count your home as an asset for eligibility, it might now try to recover the cost of care from your estate after your death. So the federal government requires the state of Michigan to try to recover the cost of Medicaid benefits that were paid for you from your estate after you die. That's what's known as Medicaid estate recovery. So in Michigan, under Michigan's Medicaid to State Recovery law, the state, through the Michigan Department of Health and Human Services, will go after your home to get repayment of Medicaid payments paid on your behalf.

15:43 If it now goes through probate. Why because in Michigan, the state can only go after assets. That go through probate. So go back to when your trust was created and that deed was prepared. Why was it done. It was done to get the proper out of your name so it didn't have to go through probate. Well, now we've put the property back into your name, so it will be an exempt asset for medicaid. But the problem now is because of Michigan's A State Recovery law, the State of Michigan will be able to go after that home to help pay itself back for any of the expenses that it paid for you to be in. The nursing home. So once you remove the home.

16:26 From the trust placed it back into your name, it's now subject to going through probate and subject to Michigan's A State Recovery law. So to avoid your home having to be sold in order to repay the State of Michigan after you die, you need a new deed prepared, another deed prepared that will now transfer the home back into your trust at the time of death. That deed is what is going to be a Lady bird deed. Again, Lady Birdie deed would now get prepared, so you've got the property back in your name. You have the deed work that was done to put it back into your name, so it's no longer in your trust. Well now, in order so it won't go through probate, you need to have a new deed prepared, and that is what is called a lady bird deed, And in our practice, generally speaking now we simply do ladybird deeds from the beginning.

17:27 So if you were to come in today and create a new living trust with our office, the deed that we would prepare would be a lady bird deed, and that's what many attorneys are doing. So if you want more detailed explanation about Medicaid state recovery law, I had a podcast on March one, twenty seventeen, titled will the State of Michigan Take Your Home after you receive Medicaid? For a more discussion about what different types of deed are. If you're curious what works TVs are, quit claim deeds, are lady beer deeds, et cetera, listen to my October second, twenty eighteen podcasts titled the Anatomy of a Deed. Well, let's just a little side note here, what if you have what's called an irrevocable trust, Because we've been talking about revocable trust, which are ones that.

18:24 You can change. If you have an irrevocable trust, those are going to work differently normally. An irrevocable trust, if properly structured, might help shield assets from medicaid after certain look back period. It's designed usually in the medicaid planning world, to try and shield more assets so you can keep more assets quite frankly, for your loved ones, so that they don't have to be sold in order for you to qualify for medicaid. Well, if you have an irrevocable trust, one that was for you buy an attorney for medicaid planning, then you should consult your attorney who prepared the irrevocable trust.

19:09 If you have any questions. About is your home in it, is it done properly, what do you need to do with it? Because the general discussion that we're having today is really about the most common trust, which is the revocable living trust. So the question that raises now though, is well, should you remove your home from the trust now or should you wait until you apply for medicaid. Well, some of the clients that we work with decide to remove the home from the trust now, even though they're not currently applying for medicaid. So we've looked at it and have determined that either the deed was a non Ladybird deed and had been recorded, or they've thrown.

19:58 Away the deed that they did. Then the question is do they do that now, throw it away now, or do they wait until they apply for medicaid. Well. Again, some clients decide to take the helm out of their trust now, even though they're not currently planning to apply. That way, it's done and they don't have to worry about it. It's just one more thing that is off their plate, and that oftentimes is much of the concern that clients have when they're putting their state plan together. It's getting things off of their plate and having the peace of mind from knowing that it's been done. So have the deed taken out now, and have your new ladybrewd deed done now so you don't have to worry about it.

20:42 They also don't have to worry though if you don't. If you say, well, let me just wait until I apply for Medicaid. Okay, Well, now they have to worry about what would happen if when the time comes to apply for Medicaid they're not able to have the deed work done at that time. They might be incapacitated by then. And if they're incapacitated by then, they're not going to be able to execute the necessary deeds to either take the property out and or the lady bird deed that's going to be es central to avoid the Medicaid recovery law. Other clients are going to wait. They're just going to wait until they have to play plan for Medicaid because they're saying, Hey, if I never plan for Medicaid, it's never an issue, so I'm not going to worry about it.

21:28 I will put it off another day. And obviously, what they are assuming in that case is that they will be able to execute the deeds at the time. What you should do now, however, what you should do now, what you should do now is review any deed that was done as part of your estate plan, whether it was done by our office or another office. You need to review the deeds. You need to determine whether or not it is a lady bird deed. Or whether or not it has been recorded. If you're not sure, if we prepared the deed for you, contact our office. We'll be able to look up your file and advise you on that. If it's another attorney that prepared it for you, contact that attorney who prepared the deed so that you can know is it a ladybird deed?

22:19 Is it not a deed. You can have a conversation about whether or not the deed has been recorded, and only one. Should do that. Can you decide if you should have new deeds prepared now? So the important thing. To do now is to know what you have. So the important thing to do now is to review the deeds that was done now. It used to be pare fairly common practice for attorneys in Michigan not to use ladybird deeds. For a long time, we didn't use ladybird deeds because that wasn't the common practice as in Michigan. Much of the time, the recommendation was simply, hey, hold on to the deed with your file. It can always be recorded after your death. So a deed deed would be prepared simply held onto with the idea being that the clients would record it later on. That way, the deed can simply be destroyed if the clients ever had to apply for medicaid. But more recently, we, as many other attorneys, as the use of medicaid I'm sorry, as a use of ladybird deeds is becoming more common, and as more and more, quite frankly, title companies out there seem to now be being comfortable with the way that ladybird deeds work. When we meet with clients who have already transferred their interest in their home to their trust, we will review what type of deed was prepared, will

23:53 determine whether or not it was a ladybird deed. We will discuss with the client deeding the property out of the trust if it wasn't a ladybird deed and that deed has been recorded, deeding that property out of the trust so it will be exempt, and then using a ladybird deed to prevent it from having to go through probate.

24:38 Of course, amand and I, if we've already done work for you, we'd be happy to get together with you or talk to you and review your file to determine what sort of deed had been prepared. Anything that needs to be done for you, and certainly we would be honored to have the opportunity to help you protect your loved ones by putting together in a state plan for you, perhaps a man ending a plan that you already have that's been prepared by another law firm, or assisting you in settling a loved ones state Simply head on over to our website. That's where you're going to find all the information that you need or to contact us. That's at DOYLELAWPC dot com. There you're going to find information how you can schedule either a in person consultation in our Grand Rapids location or our East Lansing location, or virtual consultations via zoom or telephone wherever you happen.

25:38 To be in the state of Michigan. And while you're there, if you're looking at simply needing a one document prepared, check out our Legal Store at the website. There you can arrange to have individual not doesn't that be an entire plan Simply individual legal documents can be prepared through the legal Store and you'll also find information on preparing those documents at our Facebook page. So visit DOYLELAWPC dot com for information on all of that and to. Schedule your consultation.

26:24 Well, I think that's going to be it for today though, as always, if you have a comment about the program, a topic that you'd like to have me discuss, questions that you'd like to have answered, head over to the Tuesday with Tom dot com. That's the website for the podcast, and leave a voice message by clicking on the microphone or send me an email Tom at Tuesday with Tom dot com. Of course, you can follow us on Facebook and we invite you to invite your friends and family to follow us as well. That would be Tuesday with Tom and the Office's Doyle Law Piece. And don't forget to join our email list. Simply head on over to Tuesday with Tom and you'll have the ability to subscribe to our Tuesday with Tom email list. You can also go to DOYLEPC dot com and sign up for We have a monthly e newsletter that we sent out keeping you abreast of various changes out of occurring in the law or topics that might be of interest to you.

27:23 Remember too, the program is available on many of the places where you're going to listen to a podcast, Apple Podcasts, Spotify, Amazon Music, Google podcast, iHeartRadio, speaker, and you can always ask your smart speaker to play Tuesday with Tom. Well, thanks again for spending some of your time with us today, and as always, I hope that you have an awesome day and an awesome week in Michigan. Stay safe. Tuesday with Tom has been brought to you by the estate planning attorneys at Doyle Law PC. To learn how we can help you with your estate plan or with settling a loved one's estate, please call us today at five one seven three two three seven three sixty six.

28:14 That's five one seven three two three seven three sixty six.