The Probate Process in California
Responsibilities of Executor or Administrator
Out-of-State Issues During Probate
IMPORTANT CHANGE IN MEDI-CAL RECOVERY RULES
California’s Medi-Cal applicants and beneficiaries are often confused about their rights regarding Medi-Cal and are particularly concerned that the State of California will “take” (“claw-back”) their homes after they die if they received Medi-Cal benefits. Medi-Cal applicants, beneficiaries and their spouses should always be aware of the Medi-Cal Recovery rules and plan ahead if they want to avoid recovery on their home or other assets.
Your home may be an exempt asset while you are alive, and not counted for Medi-Cal eligibility purposes. However, without proper planning, upon death, the decedent’s estate or any recipient of the decedent’s estate may have to pay the costs of care back under federal and state law. Repayment will come from the assets of the deceased Medi-Cal beneficiary (typically the home) and will not exceed the asset value. Repayment only applies to benefits received by these members on or after their 55th birthday and who own assets at the time of death, If a deceased member owns nothing when they die, nothing will be owed.
However, for Medi-Cal members who die on or after January 1, 2017 (See below re: Changes to Estate Recovery effective January 1, 2017 due to Legislation SB 833):
- Repayment will be limited only to estate assets subject to probate that were owned by the deceased member at the time of death (emphasis added).
- Repayment will be limited to payments made, including managed care premiums paid, for nursing facility services, home and community based services, and related hospital and prescription drug services received when the member was an inpatient in a nursing facility or received home and community based services.For Medi-Cal members who die prior to January 1, 2017:
- Repayment will be sought from all assets owned by the deceased member at the time of death,
- Repayment will be owed for payments made for most services received and/or monthly managed care premiums paid on behalf of the Medi-Cal member.
On June 27, 2016 Governor Brown signed SB 833 legislation sponsored by State Senator Hernandez. SB 833 that greatly reduces the future scope of California’s Medi-Cal Estate Recovery against the estate of deceased Medi-Cal beneficiaries. For Medi-Cal recipients who die on or after January 1, 2017, claims by California Medi-Cal Estate Recovery will be reduced to what is minimally required under federal law. The new law will be found at Welfare and Institutions Code 14009.5.
Governor Brown signed into law Senate Bill 833. It is codified as Welfare and Institutions Code § 14009.5. The new law limits Medi-Cal recovery in the following ways:
- Prohibits claims on the estates of surviving spouses and registered domestic partners;
- Limits recovery for those 55 years of age or older to only the amounts spent on nursing home and home and community based services;
- Limits recovery to only those assets subject to California probate;
- Restricts the amount of interest that the state can charge on liens;
- Requires the state to waive the claim as a substantial hardship when the estate subject to recovery is a homestead of modest value; and
- Requires the state to provide to current or former beneficiary or their authorized representative a copy of the amount of Medi-Cal expenses that may be recoverable.
While all the above limitations are an important triumph for Medi-Cal recipients, the most significant development is the one in bold. After January 1, 2017, only those assets subject to probate are recoverable. Put another way, if you hold assets in a living trust, they are not subject to Medi-Cal recovery. This change in the law eliminates much of the complexities of Medi-Cal recovery planning. With a living trust, your assets will be shielded from Medi-Cal recovery.
The same is true for assets held as joint tenancy or a life estate. These pass automatically at death without becoming part of the decedent’s probate estate. Likewise, it would appear that the same outcome will also apply for real property transferred by means of the new Transfer on Death Deed.
Since assets held in a decedent’s revocable living trust will, as of January 1, 2017, avoid both probate and Medi-Cal recovery and, as a result, preserve your estate for your loved ones – it is now, more than ever, important to plan for your loved ones by establishing a revocable living trust. I am also an estate planning attorney who can assist you with an estate plan to avoid the claw-back rules. To do so, please contact me through this website’s contact feature.