Dear Len & Rosie,

I am writing because I have received a questionnaire from Medi-Cal regarding a trust. I am the trustee. The only asset of the trust is my mother’s home which was transferred into the trust in 2008 via a quitclaim deed. Can Medi-Cal force me to sell the home and claim the equity in the home?  My mother was not on Medi-Cal at for at least the past year, maybe longer.  There is a reverse mortgage on the home which I am hoping to procure funds to payoff to keep the home in the trust and to build trust assets. Please advise.



Dear Lisa,

The California Department of Health Care Services (DHCS) keeps detailed records of the funds spent on every Medi-Cal recipient. Upon your mother’s death, everything she owned upon her death became subject to a Medi-Cal estate recovery claim. The amount of this claim is limited to what Medi-Cal spent on her after she turned age 55, in addition to what Medi-Cal spent on her for long term nursing home benefits at any age.

There are exceptions. If there is a surviving spouse, the estate claim is delayed until the survivor’s death. If your mother was survived by a minor or blind child, or a child receiving Social Security disability benefits (either SSDI or SSI), then there is no estate claim, even if such a child inherits nothing from your mother’s trust. There is also a hardship waiver you can apply for if you provided care for your mother at home to keep her out of a nursing home.

The big question is whether or not the assets held within your mother’s trust are subject to the Medi-Cal estate recovery claim. If your mother’s trust was initially created as an irrevocable trust designed to avoid Medi-Cal estate claims, you shouldn’t have to reimburse DHCS at all, but you’ll have to provide them with a copy of the trust instrument and the deed funding the trust so that they may verify this.

If the trust is the ordinary sort of revocable trust that people create to avoid probate, that is, the kind of trust that your mother had the power to amend or revoke up until her death, then you are out of luck. You will either have to pay back DHCS, or give them a voluntary lien on your mother’s home that earns the state 7% interest.  Getting a new loan would probably be cheaper.

Keep in mind, that since there is a reverse mortgage on the home, you will have to sell the home or refinance the loan no matter what as reverse mortgages are due upon the death of the borrower.

Len & Rosie