Medi-Cal Planning: Avoiding Medi-Cal Recovery
Medi-Cal planning is essential for anyone receiving, or likely to receive, Medi-Cal benefits. A major concern for anyone on Medi-Cal is California’s Medi-Cal Estate Recovery Program. Even if you or a loved one is not currently on Medi-Cal, due to the high costs of nursing home care, you may qualify for Medi-Cal in the future and should consider the following.
Current Medi-Cal Planning
Currently, the California Medi-Cal Recovery team will collect a Medi-Cal recipient’s assets once they die to recover any benefits paid. Most often, this means that they will go after the Medi-Cal recipient’s house, as this is one of the few assets that is exempt during a Medi-Cal recipient’s lifetime. Until now, the only way to avoid Medi-Cal recovery was to give away the Medi-Cal recipient’s interest in his or her home. There are a variety of vehicles to accomplish this task (life estates and irrevocable trusts), however, they are very expensive and require the Medi-Cal recipient to give away some interest before death. These vehicles are used because California could not go after your assets if you no longer owned them at your death.
The Medi-Cal recovery program stems from federal law which requires each state to seek adjustment or recovery from an individual’s “estate” for specified medical assistance, including nursing facility services regardless of age if the person was permanently institutionalized, home and community-based services, and related hospital and prescription drug services, if the individual was 55 years of age or older when he or she received the medical assistance. Many states have taken the position that “estate” only means assets that pass through probate. However, California has historically taken the position that “estate” means all assets you own, whether they are transferred by probate or not. In other words, assets held in a Trust or Joint Tenancy would be subject to Medi-Cal reovery.
Changes to Medi-Cal Planning
On June 27, 2016, Governor Jerry Brown signed the SB 833 legislation. Under SB 833, Medi-Cal will only be able to recover against assets that are part of the deceased Medi-Cal recipient’s “probate estate.” The probate estate is limited to those assets that would be included in a probate were the deceased recipient’s estate to be probated. Presumably this applies regardless of whether or not the deceased recipient’s estate is ever actually probated or not. The new law is effective as of January 1, 2017.
Medi-Cal Planning Using a Revocable Trust
The new law offers a great planning opportunity for Medi-Cal recipients. Now, rather than giving your assets away, you only need to ensure that all of your assets are in your Revocable Trust. The Medi-Cal recipient no longer needs to lose control of his or her assets in order to protect them. Of course, transferring your house to your Revocable Trust has always been recommended in order to avoid Probate. However, with the new Medi-Cal recovery laws, it is even more important to have an estate plan. Failing to establish a trust and transferring your home to your trust before your death will subject the home to probate and to Medi-Cal recovery.
Medi-Cal Planning Attorney
As a Certified Specialist in Estate Planning, Trust and Probate Law by the California State Bar, we are experienced in the areas of estate planning, and specifically estate planning related to protecting Medi-Cal planning. If you have any questions about Medi-Cal planning as it relates to estate planning, please call our Orange County Estate Planning Attorney, John L. Wong to discuss your options at (949) 371-5003.
John Wong advises on all aspects of estate planning, probate, asset protection and trust administration. He believes that estate planning is about planning for life; while having protections in place should the unexpected occur.
