Medical Estate Recovery

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Dear Len & Rosie,

My friend’s husband died two years ago after spending a year in a nursing home. He was a recipient of Medi-Cal. After his death, the state sent out an estate claim form asking about his assets. She was advised by an attorney at that time that, as a widow, her house would automatically pass on to her children. Last month, the director of the funeral home I know said that it wasn’t so. He said that the state could step in and her children would have to fight to get their inheritance.


Dear Marge,

Your friend the funeral home director knows what he’s talking about. Medi-Cal spent money on your friend’s husband’s care and it wants that money back. Prior to 1993, Medi-Cal could assert an estate recovery claim against only an estate subject to probate in the courts. Back then, a revocable trust or a joint tenancy deed was enough to defeat a Medi-Cal estate claim. In October 1993 the federal government enacted new laws that extended Medi-Cal estate claims to an “expanded estate” including assets held in joint tenancy or in revocable trusts.

The estate claim for a married Medi-Cal recipient is deferred until the death of the surviving spouse. That means when your friend passes, her children will have to deal with Medi-Cal. They will receive a letter from the Department of Health Care Services Recovery Section demanding repayment of the money spent on their father’s behalf by Medi-Cal. The amount of this claim will be limited to the value of the services provided by Medi-Cal or the value of the assets he owned on his death, whichever is less. If he died owning half of the home, then that half of the home will be subject to Medi-Cal estate claim if your friend owns it upon her death. If he died owning nothing at all, then Medi-Cal gets nothing.

There are some exceptions. Medi-Cal may not recover anything if your friend is survived by a minor, blind, or disabled child. Medi-Cal may also grant hardship exceptions to its collection attempts, although frankly we have never heard of a hardship waiver actually being granted. To prove a hardship exists, you usually have to prove that the children provided care to their parents and kept them out of a nursing home, and off of the Medi-Cal rolls, at least for awhile.

Your friend’s children can appeal the collection through an administrative hearing, and they can try to negotiate a settlement with Medi-Cal. They, and anyone else who receives a Medi-Cal recovery claim, should consult with an elder law attorney to see what can be done to fight it.

The bottom line is that your friend does not have to worry about herself. The State will not take her home away, and it will not force her to pay her husband’s nursing home bills. But if she does nothing, her children will lose part of their inheritance. It is not too late to deal with this problem now. If she’s willing to do so, she can shelter her home in an irrevocable trust that will be exempt from the Medi-Cal estate claim. She should consult with an elder law attorney experienced in Medi-Cal planning to discuss what can be done.

Len & Rosie