The news is dominated by The Affordable Care Act (a/k/a “Obamacare”). Much of the discussion centers on “Medicaid”, a federal program that enables states to provide medical assistance to impoverished individuals. It is administered by the respective states and goes by different names, according to the state involved. In California, the program is called “Medi-Cal” and this year there was a very important change: Medi-Cal liens are no longer placed on property held in a revocable living trust!!
An individual’s entitlement to Medi-Cal beneﬁts depends on the ﬁnancial resources available to him or her. Once an individual qualiﬁes the program will cover nearly all medical costs, including long term nursing care. Given that nursing home costs range from $3,500 to $7,500 per month, it is for this reason that many people are concerned with obtaining Medi-Cal beneﬁts. However, since the program is designed to assist only those who are truly impoverished, there are strict limits on the income and assets a person can have. Under Medi-Cal rules a person is not required to sell his or her residence to qualify for beneﬁts but the State will have a claim against the residence for reimbursement of beneﬁts paid. This claim for reimbursement, with few exceptions, attaches to the residence upon the recipient’s death. I frequently encounter Medi-Cal liens when handling probates. In fact, the probate court requires a veriﬁed statement regarding whether or not the deceased person was a Medi-Cal recipient and if so will require that Medi-Cal be reimbursed before distribution to heirs can be made. If the estate is distributed without notifying the state or giving the state an opportunity to seek reimbursement, the state can make a claim directly against the heirs of the deceased person that received the property in question!
In the past people who wanted to both qualify for Medi-Cal and preserve their home as an inheritance for their family often transferred the home out of their names and into that of a child or other relative. This was accepted as conventional wisdom and implemented by many people.
Unfortunately, this often lead to unforeseen consequences because the transfer of title was not accompanied by any estate planning. The recipient of the property was free to do what he or she wanted to with the property after the property was transferred, even if the transferor was still alive.
As of this year, Medi-Cal recovery rules regarding the deﬁnition of “estate” have changed and it is no longer wise to transfer the ownership of the family home to another individual to avoid the Medi-Cal lien after death. While it is still true that Medi-Cal can place a lien on a person’s estate during the probate process, Medi-Cal liens are no longer applied to property held in a revocable living trust!! As a result of this important change in the law, rather than putting your property in someone else’s name to avoid the Medi-Cal lien after death, simply create a revocable living trust and place your property under its umbrella. That way you can preserve your family home for your heirs and also receive the much needed medical care.
© 2017 by Marlene S. Cooper. All rights reserved.
(Marlene S. Cooper, a graduate of UCLA, has been an attorney for over 35 years. Her practice is focused entirely on estate planning, estate administration and probate. You may obtain further information at www. marlenecooperlaw.com, by e-mail at Marlene@ MarleneCooperLaw.com, by phone at (626) 791-7530 or toll free at (866) 702-7600. The information in this article is of a general nature and not intended as legal advice. Seek the advice of an attorney before acting or relying upon any information in this article).