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.

Marge

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

Pay on Death Clause

Dear Len & Rosie,

My father died recently and the court made me the executor of his estate. I am the last survivor of his four children. My mother died many years ago. I thought I would inherit the entire estate, after Dad’s credit cards were paid off.

Unfortunately, on one investment Dad had a pay-on-death clause that says it’s supposed to go to some woman I’ve never heard of! Dad liked the ladies, especially the loose ones. I want to keep this floozy from getting Dad’s money, but the lawyer says the pay-on-death clause precludes probate, so there’s nothing I can do. He could not explain to me why, but is he right?

Ray

Dear Ray,

Your lawyer is correct. It is not uncommon for bonds, insurance policies, pension plans, and bank accounts to have pay-on-death beneficiaries. Pay-on-death accounts are similar to assets held in joint tenancy, life estates, and trusts, in that none of these assets are subject to probate. Because the pay-on-death account is not in your father’s probate estate, you, as executor, have no jurisdiction over that account.

At the moment of your father’s death, the pay-on-death account automatically became the property of your father’s friend. All she has to do is to have the financial institution retitle the account in her name. She can do it herself by of presenting a certified original death certificate to the financial institution and requesting the transfer.

If, however, the asset is stock in a corporation, a mutual fund or brokerage account, it is a little bit more complicated, because corporation stock transfer agents require letters of instruction, signature guarantees, and affidavits of domicile, before they will retitle assets. If your father’s pay-on-death investment is one of those, then his friend should ask an attorney or broker for help.

Of course, that’s her problem, not yours.

There are provisions in the law for the executor to pull such non-estate property into a probate estate, but you would have to prove that the pay-on-death designation resulted from the friend’s wrongdoing, such as fraud or undue influence.

Hopefully your lawyer explored that possibility. But it’s a long shot at best. To prove undue influence you have to show that the girlfriend so manipulated your father as to destroy his free will and bend him to her influence. If she managed to pull that off, then why did she stop at just one investment?

It is more likely that your father added the pay-on-death designation because he wanted his friend to get that one asset when he died. Just because you feel this is unfair is not enough to keep her from getting the money. You should just be glad your father did not put his girlfriend’s name on all of his property. She could have wound up with everything.

Len & Rosie