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.

Margaret

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

Inheriting a house occupied by slobs

Dear Len & Rosie,

The property that my mother is leaving to me upon her death is currently inhabited by other family members. They have chosen to live in filthy conditions and have never cleaned their home in any way and have basically trashed the residence. However, my mother has told me that in her will it is written that it is necessary to give them three months to leave the residence and that they are not responsible for leaving the property in a clean condition. The residence is extremely dirty, especially since they shared their home with four cats that soiled the carpets and flooring. I do not feel that this is fair and I have always been under the impression that each landlord expects their tenants to leave their residence in a clean state and that it is not up to the landlord to incur the costs associated with cleaning out the residence.

Olga

Dear Olga,

You are undoubtedly eating your liver over this. You’re going to inherit a house occupied by slobs who don’t pay fair market value rent, and you’ll have to tear up the carpet and maybe even replace the floorboards on your own dime. You aren’t inheriting a home, you’re inheriting a fixer-upper.

This isn’t a typical landlord-tenant relationship. We’re sure that if the family members living in your mother’s rental property weren’t family, she would have gotten rid of them by now. But it’s your mother’s property. She has the right to distribute her property any way she wants to upon her death, and if she wants to give a break to the people you’re going to toss out onto the streets, she can do it.

Keep in mind that you couldn’t get them out of the property within 90 days of your mother’s death, anyway. They are tenants, and if they have lived there for more than a year you have to give them sixty days notice to terminate their tenancy. And you can’t do that until your mother’s will is admitted to probate and you are appointed by the judge as executor, and that shall take at least a month after your mother’s death.

If your mother creates a trust and transfers the property into it, not only will her assets avoid probate, you, or whoever the successor trustee is, can legally send notice terminating the tenancy of your less than neat and clean relatives. But be very careful while talking to your mother. She could react poorly to your request and give them the home instead of you.

Len & Rosie