New budget law incorporates changes to the Medi-Cal estate recovery program

Dear Readers,

 On Monday, June 27, 2016, Governor Jerry Brown signed the new state budget bill for the next fiscal year. The new budget law incorporates changes to the Medi-Cal estate recovery program that will be of significant benefit to the families of Medi-Cal recipients.

If you follow this column, you should already know about Medi-Cal estate recovery. When a Medi-Cal recipient dies, then the California Department of Health Care Services (DHCS) is required to assert a claim against assets owned by a Medi-Cal recipient upon his or her death.  The amount of the estate claim is the amount of money Medi-Cal spends on nursing home residents, at any age, and other Medi-Cal recipients, for benefits paid after they turn age 55. This hasn’t changed.

What has changed is that for Medi-Cal recipients dying on or after January 1, 2017, there will be no estate claim against the estate of the surviving spouse. This means that there will no longer be estate recovery when a married recipient dies and when that recipient’s surviving spouse dies (unless the surviving spouse gets Medi-Cal benefits of his or her own).

In addition, and this is big, DHCS Medi-Cal estate claims will be asserted only on estates subject to probate. Any property held by joint tenancy deed, or held within an ordinary revocable trust, will be exempt from estate claims. This means it will be a lot easier for the families of Medi-Cal recipients to avoid having to reimburse the State of California for benefits paid on behalf of their parents or loved ones.

Since 2002, we have prepared specialized irrevocable trusts for our Medi-Cal clients. While these trusts may no longer be necessary to avoid Medi-Cal estate claims, they are also very useful. For example, if a Medi-Cal recipient sells his or her home, the proceeds of the sale will disqualify that person from continued benefits. However, if the home is sheltered within an irrevocable trust, the home can be sold and the proceeds of sale would be protected. Also, any rental income earned by property sheltered within an irrevocable trust won’t have to be paid to a nursing home as part of a Medi-Cal recipient’s monthly share of cost.

What this new law really does is to provide families with new planning opportunities for long term care to help them avoid the hardship of having to spend the accumulated savings of a lifetime on medical care instead of passing it on to their families. If you or a loved one is on Medi-Cal benefits, or faces the prospect of long term care, you should consult with an elder law attorney experienced in Medi-Cal planning.

Keep in mind, however, that the new law comes into effect on January 1, 2017. Until then, the current rules apply, and Medi-Cal recipients who own homes should definitely look into creating an irrevocable trust.

Len & Rosie