Conservatorships

Dear Len & Rosie,

My friend has resided in a nursing home due to stroke for eight months and has a county conservator who is now filing for Medi-Cal. The conservator is selling both of his cars, because they are depreciating assets and because my friend will never drive them again because he is paralyzed on his right side. Can a conservator do this? I thought one car was exempt. The county conservator also said he will sell my friend’s house when my lease runs out in another year. Can he do this? Do we need to file a petition and try to get a private conservator who would better serve my friend’s interests and protect his assets?

Marian

Dear Marian,

It’s unfortunate that your friend did not have a comprehensive estate plan, or that his estate plan more or less failed. Conservatorships are to be avoided if at all possible, although they are very useful in protecting people from elder financial abuse. If your friend had a revocable trust or even a good durable power of attorney, he would not be in a conservatorship today, and his home would not likely be sold.

What must have happened was that your friend became incapacitated, and no one stepped forward to take over his affairs, either with a power of attorney or by petitioning the court to be appointed as conservator. Because your friend could not take care of himself, and no one stepped up to take care of him, the county Public Guardian was appointed by the court to provide for his needs.

When the Public Guardian’s office serves as conservator, it usually consolidates the conservatee’s assets to make it easier to administer the estate. That’s why the Public Guardian wants to sell your friend’s home and vehicles. However, this is not the best thing to do. Your friend can continue to own his home while receiving Medi-Cal benefits. By selling the home, the conservator will turn an exempt asset (the home) into a non-exempt asset (cash). Not only will your friend lose his Medi-Cal benefits, he may have to pay capital gains tax as well.

A conservator will never get in trouble for spending money on the conservatee. The Public Guardian is doing nothing illegal, but it’s not really acting in your friend’s best interest. Even if his home will be subject to Medi-Cal estate claims after his death, he’s better off being on Medi-Cal instead of paying privately for his care, because it will cost him less in the long run.

You or another friend or relative could petition the court to take over the conservatorship, but the court is not likely to remove the Public Guardian as conservator unless you can prove it mismanaged your friend’s estate beyond refusing to do Medi-Cal Planning. A better approach would be to petition the court to appoint an independent attorney to represent your friend as conservatee. This attorney can stand up for your friend’s rights, and perhaps prevent the Public Guardian from selling his home.

Len & Rosie

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