"Death Tax" expands state's reach in Wisconsin - WQOW TV: Eau Claire, WI NEWS18 News, Weather, and Sports

"Death Tax" expands state's reach in Wisconsin

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Eau Claire (WQOW) - No one wants to think about it, but there comes a time when decisions have to be made about end of life care. 

One decision by lawmakers expands how far the estate law goes. 

The state budget gives lawmakers more options to recoup property when someone dies.

The end of life "death tax" is designed for the state to recoup money it's spent through Medicaid, which is called estate recovery.

"The estate recovery does not take effect during the life of the surviving spouse, but following that spouse's death, most of the assets will be available for the state to make a claim against," explains attorney Greg Banchy. 

Under the stricter estate law passed by in the governor's budget earlier this year, Wisconsin will be able to claim even more property including small businesses and farms after a Medicaid recipient passes away.

"There needs to be a healthy balance, we want to make sure that people can legitimately pass on family businesses and farms," says Governor Scott Walker.

Because it works like this, say you have $500,000 in assets and are overqualified for Medicaid.  Under the old system you could pass that along to your kids and then have a low enough income to qualify for Medicaid and essentially keep the money out of the state's hands.

"There was some concern that it was too easy to offset assets somewhere else and so people who had means, who were financially well off, would push many of those assets away and then asking the rest of the taxpayers to pay for that," says Governor Walker.

The law has now changed to allow the state to recover all property even if it has been passed to a family member. 

The law also limits the way family farms and businesses are passed along when Medicaid is involved, causing some people to seek radical means to ensure their assets are protected.

"We're going to see, I think, more divorce among older people, not because of a failed marriage, but purely for financial reasons," says Banchy.

Another alternative is passing along property before someone is admitted into the Medicaid system.

"That hasn't really changed, at least under current law.  As long as you're at least five years from the date of application you can make those sorts of transfers," says Banchy.

Although this approach also impacts the desired alternative for all: to save taxpayer money.

"If they don't end up needing that sort of care, they may end up receiving other types of public benefits because they don't have enough money to survive," says Banchy.

Leaving families to decipher what they can do to pass along property to the next generation.

The state believes the expanded law will save taxpayers $4.3 million this year and more than $6 million next year. 

Estate lawyer Greg Banchy is worried the law will impact the middle class the most. 

He believes the wealthy can afford to go without Medicaid and low-income seniors would already qualify for Medicaid. 

He believes the middle class would be affected most because they would have to divert money and property to qualify for care.

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