Medi-Cal estate claims

Dear Len & Rosie,

My very good 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. My friend was advised by an attorney at that time that, as a widow, her house would automatically pass on to her children, but I read that the state could step in and her children would have to fight to get their inheritance.


Dear Margaret,

After your friend’s death, the executor or administrator of her estate, or the trustee of her revocable trust, is required by law to notify the California Department of Health Care Services (DHCS) of her death. DHCS will then mail back an estate claim. If your friend owns an interest in the home upon her death, then the half of the home she received from her husband upon his death, and everything else she received from her husband when he died will be subject to the Medi-Cal estate claim.

That’s if she dies in 2016. If she is deathly ill and may pass soon, she should probably hire an elder law attorney right now to create an irrevocable trust to shelter the home.

Fortunately, the rules are changing. If your friend survives until January 1, 2017, then there is no estate claim. Under recent legislation enacted by the California Legislature, as of next year, there will be no estate recovery at all of a Medi-Cal recipient is survived by a spouse or registered domestic partner.

Also, for those persons who are on Medi-Cal benefits today, if they hold on until next year then there will be no Medi-Cal estate claim for any assets outside of their probate estates. This means that property held in joint tenancy, in a ordinary revocable trust, or which passes to a pay-on-death beneficiary will be exempt from Medi-Cal estate claims.

What happened is that there are two federal laws related to Medicaid estate recovery claims. Under the Omnibus Budget Reconciliation Act of 1993, the federal government created an “expanded estate” definition that the States were given the option to adopt, which California did. In the new law, California had eliminated the optional recovery rules, but has to keep to the mandatory rules from 1988, which can be changed only by the federal government.

This is all very good news for Californians who rely on Medi-Cal benefits, because avoiding estate claims will be much easier. Irrevocable trusts, however, still have a place in Medi-Cal planning, especially when there’s a need to shelter rental income or the proceeds of the sale of a home. If you or anyone reading this knows someone who needs long term care, consult with an elder law attorney who understands the new rules as well as the old.

Len & Rosie