Understanding Some Hidden Challenges of Inheriting Property: Medicaid Estate Recovery

Written By: Mylene Marcelo

Dennis inherited his home in Tennessee from his mother, Alice, who passed away five years ago at the age of 82. Although Dennis had been living in the home, the property was never formally transferred into his name. Alice did not leave a Will, and her estate was never probated. As her only child and sole heir, Dennis assumed the process would be straightforward. Not all inherited property cases are easy, sometimes things could get complicated.

To move forward with a mortgage, Dennis needed proof of ownership. Instead of going through the lengthy probate process, we at ARS would sometimes accept the use of an Affidavit of Heirship (AOH). This legal document is signed by two disinterested parties who would know the decedent and would confirm and provide detail of the heir’s relationship setting forth any facts or containing a statement of any facts pertinent to make certain that the person is legally the entitled heir at the time of the decedent’s death. It is important that the AOH is submitted to ARS along with supporting information for review and approval.

After determining and proving that Dennis was the only heir, another issue has surfaced: Medicaid Estate Recovery or what is referred to as “clawback”. Alice had received long-term care through Medicaid before her passing. Many don’t realize that if a Medicaid recipient owns a home, the state may place a lien on the property they owned after they die. This is known as Medicaid Estate Recovery, and it allows states to recover care costs from the value of the home. In Tennessee, it is called TennCare. There are different terms used in different states, as it is called “MassHealth” in Massachusetts to name another one. Statutes of limitations regarding Medicaid Estate Recovery vary with different states because each state has different rules and all are subject to change, so it is always best to check.

In our case, Dennis contacted the state to check for any claims—and discovered that Alice’s estate owed $82,000 to Medicaid. It is a title insurance requirement to obtain release from the estate before the transaction can be closed.

Dennis’s story is a powerful reminder that inheriting property can come with unexpected legal and financial challenges. If your loved one received Medicaid benefits, it’s essential to investigate potential estate recovery claims early. Seeking professional guidance can help avoid surprises and protect your family’s legacy.

Written By: Tina Meilinger, Senior Vice President

Over the past few months, we have noticed an increase in the number of borrowers we are seeing in Foreclosure. A reverse mortgage is a wonderful program for so many and especially those that may be struggling to make ends meet and alleviate the chance of losing their home in foreclosure.

Since the states vary on guidelines and requirements, here are some helpful questions to ask at the onset.

1. Are you current on your payments now?
2. Have you entered into any modification agreements with your current lender?
3. Do you receive notices that you are delinquent on payments?
4. Obtain a copy of their current mortgage statement, this shows the payment due and can show how late they may be on their payments.

These are just a few of the questions that can help borrower and lender as you move through opening escrow. Some states record a Notice of Default which would tell when a home may be going to sale, other states file a Lis Penden, some lenders work through their loss mitigation team. Asking early on if the foreclosure sale can be postponed often allows additional time to get the reverse mortgage closed and paid off. Foreclosures can occur not only due to a payoff but can happen on delinquent taxes, after a period of years

Remember, each state differs and some may not have any rights of redemption, so understanding and confirming at the onset will be extremely helpful.

We all want to help the borrowers and most importantly limit the chance of losing their home in foreclosure.

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