Question: Last year, I read your column about the steps that a person has to take to safeguard an estate from recovery from Medi-Cal. But I have recently seen that there are some changes being made to the law. Can you tell me how these changes may affect someone like me? I am in my early seventies, own my own home, have a moderate amount of savings. I may need skilled nursing at some point, but I do not know when. I have two kids and a couple of grandchildren and would like to leave something behind for them. Do I need to do anything under the new law?
Answer: You may want to review your estate plan to ensure that the property you intend to leave after death will not trigger a probate proceeding. The new law will change the way California’s Medi-Cal Estate Recovery operates. Don’t panic. For most, the new law may not require any changes to an estate plan and may even put to rest the fears that many have about what will happen after one is, in fact, put to rest.
For those who qualify, Medi-Cal pays for medical services, including skilled nursing care. To qualify for Medi-Cal, a single person cannot possess more than $2,000 in assets. Even though the person may own a valuable home, that property is “exempt” as a personal residence and will not disqualify the person for Medi-Cal benefits. While the Medi-Cal recipient is alive, the state will not touch a person’s personal residence. But after the recipient of skilled nursing benefits dies, California’s Medi-Cal Estate Recovery may recoup funds from the person’s estate, including previously exempt assets such as the personal residence. The money obtained by recovery is ostensibly brought back into the system and used for medical care of other needy people.
Some seniors fear that accrued charges from the skilled nursing facility or end of life care will significantly erode their legacy. Under the current law, holding the property in a living trust or joint tenancy is not sufficient to preclude state recovery. As a result, lawyers developed Medi-Cal planning strategies that change the way a senior holds title to a personal residence. Attorneys often advise a client to deed the personal residence to the heirs and reserve a “life estate” in the property. The “life estate” deed transfers the property on the senior’s death in such a way that the heirs are protected from any state recovery efforts.
The new law, however, will greatly reduce the state’s access to assets for recovery. As of January 1, 2017, Medi-Cal’s Estate Recovery unit will only be able to access those assets that become part of the “probate estate.” If the senior simply places all of his or her property in a living trust, this will avoid probate and thereby avoid estate recovery. With the great number of people who already have a living trust in place, the sources of recovery will diminish quickly, leaving nothing for the recovery unit to collect. Medi-Cal’s Estate Recovery unit could very well become the state-equivalent of the lonely Maytag repairman – with nothing going on and nothing to do.
The new law should serve as a reminder to review your estate plan and ensure that property is in the trust and not subject to probate. Although the living trust is the most preferred method for avoiding probate, there are a number of other ways to organize one’s property to avoid probate. For example, the property can be held in joint tenancy or even transferred under a “transfer on death” deed. So long as property is not in the “probate estate,” a person should be able to avoid any state recovery after death.
Even though the new law puts limits on the state’s recovery of property after the death of a skilled nursing resident on Medi-Cal, it does not modify the qualifications for Medi-Cal. In other words, a person may still have to implement certain strategies to be presently eligible for Medi-Cal. If the need for skilled nursing care is imminent, you would be well advised to speak to an attorney and see what your options may be.
Preston Morgan is a partner at Kopper, Morgan & Dietrich, a Davis law firm specializing in family law, estate planning and trust litigation. His column is published every other week in the Davis Enterprise. To pose a question to Preston Morgan, contact him at www.kopperlaw.com
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