Medi-Cal reimbursement

Dear Len & Rosie,

Medi-Cal is seeking reimbursement from my Dad’s assets for my Mom’s benefits. They are both deceased and I am executor of my father’s will. I know nothing about how Medi-Cal was involved in paying for Mom’s time in the nursing home. His only asset, if it can be called that, is a mobile home that has been for sale. Since there are no buyers and we can’t pay the space rent anymore we are thinking of giving it away to get rid of it. 

I think from reading some of your columns at www.lentillem.com that the pay-on-death accounts, survivor’s benefits from my Dad’s retirement, and his meager possessions are exempt. So with the mobile home not selling, can they attach anything else?

Nancy

Dear Nancy,

The California Department of Health Care Services (DHCS) operates an estate recovery program to collect assets owned by deceased Medi-Cal recipients. The basic idea is that Medi-Cal gets paid back for what it spent on your mother, before you get to inherit what’s left, but it is more complicated than that.

Since your mother was married upon her death, the estate claim was deferred until your father died. The only assets subject to the DHCS claim are assets owned by your mother upon her death. Mom was in a nursing home, and that means she owned less than $2,000 in a bank account, and maybe she was on title to the mobile home with your father. This is important. If your mother owned half of the mobile home on her death, then that half is subject to the estate claim. But if she gave the mobile home to your father while she was still alive, then there shouldn’t be any repayment to DHCS at all. You should examine the mobile home’s title document to see for yourself.

Your father’s retirement benefits, if any, and the money he held in his bank accounts are not subject to the DHCS claim at all, unless it was actually your mother’s money that passed to him upon her death.

Since the mobile home doesn’t seem to be worth anything, you could just leave it alone. You are not the executor of your father’s estate, even though you are named as executor in his will. You become executor only if your father’s will is admitted to probate in the Superior Court. You could simply tell DHCS that your father owned a mobile home, and if they want it they can go get it themselves. It’s important to understand that you do not have a legal duty to do Medi-Cal’s work for them, unless you have personally received assets subject to a Medi-Cal estate claim, or you are the executor of your father’s estate in probate, or you are the trustee of his trust.

It is also important for other readers to remember that Nancy’s potential solution of just walking away can work only because her father died with nothing of value. If Nancy’s mother owned half of a valuable home when she died, Nancy would likely have to reimburse Medi-Cal for what it spent on her mother’s care. If a family member is on Medi-Cal benefits, you should get sound legal advice about how to help that person shelter his or her assets from a DHCS Medi-Cal estate recovery claim.

Len & Rosie

Understanding Life Insurance & Retirement Account Distributions

Dear Len & Rosie,

A friend of mine had been married for about one year. Her husband just died tragically. At the time of his passing, he had not yet changed the beneficiary on his life insurance policy to his wife. His parents are still named as the beneficiary. Does the surviving wife have any claim on the life insurance, or is she out of luck? It’s certain that some of premium payments would have been paid with community property funds.

Randy

Dear Randy,

As a rule of thumb, when you get married or register as a domestic partner with the California Secretary of State, or if you get divorced, it’s time to take a look at all of your estate planning documents, including pension and life insurance policy beneficiary designations.

It’s also important to understand that it doesn’t matter what your will or trust says about your life insurance and retirement accounts. These accounts will pass to their designated beneficiaries no matter what the estate plan says. If you want to change who gets your insurance or retirement accounts upon your death, the only way to do it is by filing out new beneficiary forms obtained from the insurance company or retirement account custodian.

Your friend’s rights depend on what kind of insurance her husband held, and when the policy premiums were paid. If he owned a fully paid up whole life policy, and didn’t make any policy payments during the marriage, then your friend has no rights at all. The policy was her husband’s sole and separate property. The same applies if her husband paid the policy premiums from separate property assets, such as inherited or gifted money, or money he already had prior to the marriage.

However, if he paid the policy premiums out of his earnings, and there’s no pre-nuptial agreement saying his earnings are separate property, then he used community property half owned by his wife to pay for his insurance. Under California law, a spouse cannot give away community property without the consent of both spouses. So, your friend would have a claim on part of the life insurance.

If the policy is a term life policy with no cash surrender value, then she should be entitled to a full half of the proceeds of the insurance. If, however, the insurance is a whole life policy that is part insurance, part investment, then she won’t get half. She’ll be entitled to only half of the portion of the policy purchased with community property.

She should contact the life insurance company. They’ll put a hold on distributing the policy so that she and her husband’s parents can work it out. If they can’t, the life insurance company will likely surrender the policy to the court in a legal procedure called “interpleader” and allow your friend and her in-laws to fight over the policy in court without the insurance company’s further involvement.

Len & Rosie