Woman hugging her mom


The Elder and Disability Law Firm, APC Feb. 29, 2024

Medi-Cal Recovery is a process that the state of California can initiate after the death of a Medi-Cal recipient. It's a way for the state to seek repayment for certain services the recipient received and were paid for by Medi-Cal. If the deceased individual owned a home, the state doesn't put a lien on the property or take it away.  

However, they will send an "estate recovery claim" to the heirs or survivors, requesting payment equivalent to the amount of Medi-Cal benefits paid on behalf of the deceased. If the claim cannot be waived or the payment cannot be afforded, the state may negotiate a "voluntary lien." It's important to note that there are methods to shield your home from Medi-Cal recovery

The law also 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.  

Estate Recovery Fears 

In the last Elder Law Topic Tuesday, we met Sarah, a wonderful daughter who had moved back home and has been 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? 

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 Can You Protect Your Home? 

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

In California, it's still possible to protect your home through other legal means without incurring an ineligibility penalty or subjecting the home to future estate recovery.  

Irrevocable House Trusts Work 

One 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. Irrevocable house trusts function as a key estate planning tool, effectively allowing homeowners to transfer the legal title of their property into a trust.  

Once the property is transferred into an irrevocable trust, it is managed by a trustee who is not the homeowner. The primary advantage of this arrangement is that the property is no longer considered part of the homeowner's estate; therefore, it cannot be claimed for estate recovery purposes upon their death.  

This protects the home from being used to repay Medi-Cal benefits posthumously. It is essential to understand that as the trust is 'irrevocable,' the homeowner relinquishes control over the property and cannot revoke the trust or change its terms after its creation. 

Revocable Living Trusts 

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. 

Revocable living trusts are favored for their flexibility. These types of trusts are created during a person's lifetime and can be altered, changed, or revoked entirely at the discretion of the grantor, as life circumstances evolve. The grantor typically serves as the trustee, maintaining full control over the trust's assets during their lifetime.  

Upon the grantor's passing, the trust becomes irrevocable; this means that no further changes can be made, and the successor trustee steps in to manage the assets or distribute them to the beneficiaries.  

However, it's important to note that while offering probate avoidance and flexibility, assets in a revocable trust remain accessible for estate recovery until the grantor's death, at which point their status may change depending on the trust's design and any protective measures taken.

Seek Experienced Legal Counsel 

No matter what, it's advisable to seek professional advice from an elder law or estate planning attorney. The attorneys at The Elder & Disability Law Firm, APC, located in Redlands, California, can provide guidance on asset protection planning and strategies to shield your wealth.  

With their help, you can review your estate plan regularly to ensure it still aligns with your needs. By taking proactive steps and seeking professional advice, you can significantly reduce the risk of estate recovery. 

Remember, protecting your assets from Medi-Cal recovery is a process that requires knowledge, planning, and professional guidance. Let The Elder & Disability Law Firm, APC guide you through this complex process to secure your peace of mind.