Deadline looms to grandfather in protective home, farm deeds

By Robert C. Anderson


The Elder Law Firm of Anderson Associates, P.C.

IRON MOUNTAIN – Wisconsin’s Medicaid agency, the Department of Health Services, recently announced the effective date of Wisconsin’s expanded Estate Recovery Program (ERP) is Aug. 1, 2014. This program was passed by Wisconsin legislators last year.

Medicaid Estate Recovery seeks repayment of long-term care Medicaid Benefits provided to nursing home residents from their estates upon their deaths.

Prior Medicaid law exempted life estates and joint ownership deeds that were in place for more than 60 months under Medicaid’s look-back rule. This will no longer be the case after Aug. 1.

In a life estate deed, an owner transfers title to loved ones (usually children) and retains a lifetime right to use and occupy the home. The retained life estate has a definite market value based on the owner’s life expectancy.

Under the new law, the value of the Medicaid recipient’s life estate created after Aug. 1 will be subject to recovery -even if the deed is in place for more than five years.

Example: On Sept. 1, 2014, Mary, age 70, transferred her home to her daughter and retains a life estate. Ten years later, on Sept. 1, 2024, Mary obtains Medicaid after entering a nursing home because her cash assets are less than $2,000.

Upon her death, Wisconsin Medicaid will file a claim equal to its Medicaid assistance against her retained interest in her home. This will happen despite the fact the deed was in place for more than five years.

Up until Aug. 1, homeowners who wish to use life estate deeds to protect their homes from the new rules need to act soon. If they are signed on July 31 or earlier, they will be grandfathered in.

Certain other probate avoidance deeds, such as deeds in revocable trusts and joint ownership deeds should be used because they are subject to Medicaid liens that can be imposed at the time of Medicaid qualification.

Outright transfer deeds of 100 percent to loved ones will cause tax problems to the named beneficiaries who will get hit with unnecessary capital gains taxes when the home is sold.

Also, the popular transfer-on-death deeds also known as lady bird deeds will be subject to ERP rules – even if they are set up before Aug. 1.

If you miss the Aug. 1 deadline, homeowners will have to do complete transfer deeds, such as to irrevocable trusts, outright transfers, or homeowners will need to give up substantial or total control. Irrevocable trusts are preferred over outright transfers because of the capital gains tax issue mentioned earlier and because an outright transfer of a home leaves the former owners at the mercy of the new owners.

A copy of DHS Operations Memo 14-20 (issued 6/4/14) may be obtained by calling the Elder Law Firm of Anderson Associates, PC (906) 228-6212, or online at