Estate Planning: Good News for Medi-Cal Recipients

Tamara Polley
By Tamara Polley December 15, 2016 19:13

If you’re an older Medi-Cal recipient, you can breathe easier.

Thanks to new legislation signed into law by Gov. Brown in 2016, the state can no longer seize your home and other assets after you die to cover costs of care you received under the program.

The new law severely restricts the state’s right to recover against property held by Medi-Cal recipients who die on or after Jan. 1, 2017. The only costs the state may now recover are for long-term care received after age 55 – and even that is limited.

Formerly, the only way to avoid Medi-Cal recovery efforts was to die virtually penniless, without a home or other assets in your name.

Medi-Cal is California’s version of the federal Medicaid program, which for decades has provided free or low-cost medical assistance for those who can’t afford it. (By contrast, Covered California is the state’s version of the Affordable Care Act’s health insurance exchange. Because it is not a Medi-Cal program, its tax credits or subsidies are not subject to Medi-Cal recovery.)

Last year some 13 million Californians received benefits under various Medi-Cal programs, with eligibility determined in part by income, age, disability or assets.

For many years, law has allowed the state to make reimbursement claims against estates of those who received any Medi-Cal benefits after age 55. The only exception: parents of children under the age of 21 or parents of disabled children of any age.

Under the new law, exemptions are greatly expanded, making it easier to avoid recovery without giving up ownership and control of your assets during your lifetime. It makes it much easier to leave your home to your children – possible under the prior law, but more complicated.

Some of the key changes:

Survivors In the past, the state could not recover costs from a surviving spouse or domestic partner, but it could go after the cash after that person died. Now it has no claim on those spouses’ and partners’ estates.

Recovery limit Prior to passage of the new law, the state could seek recovery of all medical costs from a dead client’s estate. Now it may only seek reimbursement for nursing-home care and related expenses, and some community-based services (specific programs as defined in the statute), or care costs of “permanently institutionalized” recipients under age 55.

Hardship exemption If a Medi-Cal client’s sole estate is a home whose market value is 50 percent or less of the average dwelling in his or her home county, the state must waive any reimbursement claim.

Probate limit Only assets subject to probate (court review to determine how assets are allocated) will be subject to Medi-Cal recovery. This means assets transferred to survivors through living trusts, joint tenancies, survivorship or life estate escape untouched.

Disclosure The state must now report to Medi-Cal recipients or their representative the amount of expenses recoverable upon death.

Changes in the law notwithstanding, Medi-Cal recipients can still protect their estates from any recovery through effective planning. Here are some basic steps that should be taken:

Designate beneficiaries Make sure that all your life insurance policies and retirement accounts have designated beneficiaries. If there are no beneficiaries or your estate is the named beneficiary, these assets will be subject to state recovery.

Protect bank accounts Hold them jointly with another person or in a revocable living trust, or name transfer-on-death or pay-on-death beneficiaries.

Avoid probate Make sure your real estate does not have to go through probate to transfer to your heirs. Options include joint titling, life-estate deeds, transfer-on-death deeds and revocable living trusts.

Each of the alternatives above, however, has legal and tax consequences. So you should consult with an estate-planning attorney familiar with the Medi-Cal rules before taking action.

Moreover, Medi-Cal recovery should not be the only issue considered in creating a comprehensive estate plan. Issues such as family relationships, taxes, estate management, final arrangements and expenses, and your ultimate legacy goals should also be discussed.

Tamara Polley is an attorney with the Sonora law firm of Gianelli & Polley.

Copyright © 2016 Friends and Neighbors Magazine

Tamara Polley
By Tamara Polley December 15, 2016 19:13
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