MEDI-CAL BASICS: HOW TO PROTECT A HOME FROM MEDI-CAL’S ESTATE RECOVERY

The law states that if a child moves back home and cares for a parent, and if that child’s care has kept the parent out of a nursing home for at least the last two years, then the home may be given to the child without Medi-Cal penalties. In last Tuesday’s Elder Law Topic Tuesday, we met Sarah, a wonderful daughter who had moved back home and was taking care of her Mom for the last three years

However, what if Sarah was not able to go to her Mom’s aid and instead Mom went into a facility without gifting the home? Since it is an exempt asset, Mom would be able to keep the house during her lifetime but what would happen after she dies? Will the state force the family to sell the home?

ESTATE RECOVERY FEARS

As we learned in our 2nd Issue, a primary home is an exempt asset. This means that Sarah's Mom would not be disqualified for Medi-Cal’s nursing home benefits simply because she owns a home. She can keep the property while she is on Medi-Cal.

However, if she keeps the house in her name without transferring it to Sarah, then upon her death the state of California would have the right to take the house and sell it to pay for the care Medi-Cal covered for her Mom.

This process is called “Estate Recovery” and it refers to the right of the state to take Medi-Cal recipients’ properties after they pass. In certain cases, this process will start after the Medi-Cal recipient’s surviving spouse also passes.

In Sarah’s situation, she is lucky that her Mom can give her the home without any penalties.

However, what if Sarah could not move in with mom? It is not uncommon in our busy world for children to be unable to act as full-time caretakers for their parents.

Additionally, in many situations the care level might be higher than the children could ever provide in the home. In these situations, does it mean that the home is lost to the state for Estate Recovery?

HOW TO AVOID ESTATE RECOVERY

All hope is not lost for families that need to put their parents or relatives into a facility for care.

In California, it is still possible to protect the home through other legal and ethical means without incurring an ineligibility penalty or subjecting the home to future Estate Recovery. One such method is to transfer the home into a properly drafted Irrevocable House Trust so that the children will inherit the home instead of the state.

Another method would be to use a properly drafted Revocable Living Trust. In addition to protecting the home, a Revocable Living Trust is an excellent way to avoid probate and offer protection to your other assets against Estate Recovery.