WHAT MEDI-CAL TAKE FROM YOUR ESTATE AND YOUR SURVIVING FAMILY

One question posed by many of my clients relates to whether the State of California can take money from an estate after death. Prior to 2017, Medi-Cal Estate Recovery had the right to seek recovery for any benefits paid from assets in which the surviving spouse of recipient had an interest at the time of their death, including assets held in living trusts or in joint tenancy. While the formation of a revocable living trust, under the current law, was effective to avoid probate, it did not offer any protection against Medi-Cal’s ability to seek reimbursement from your assets for the amount of benefits Medi-Cal paid for the medical or long-term care costs they paid during your or your spouse’s life. This recovery mechanism was criticized for its devastating effect on families of recipients who were forced to sell a family home to pay for Medi-Cal benefits received by family members.

For decedents dying after January 1, 2017, assets held in a living trust would be immune from recovery. Under SB 833, Medi-Cal’s ability to seek reimbursement for amounts paid from a Medi-Cal recipient’s estate would be limited to assets which pass as part of the deceased Medi-Cal recipients “probate estate” – the assets outside a trust, in other words.

Assets that would typically be a part of a person’s probate estate and therefore, would be subject to reimbursement, are those which are either (1) held in the decedent’s name alone or (2) designated to pass pursuant to a decedent’s Last Will and Testament. Assets that would not typically require a probate and which will avoid the devastating Medi-Cal clawback, include assets held in a living trust and assets held in joint tenancy, as they pass to beneficiaries outside of probate.

Since assets held in a decedent’s revocable living trust will, as of January 1, 2017, avoid both probate and Medi-Cal recovery and, as a result, preserve your estate for your loved ones – it is now, more than ever, important to plan for your loved ones by establishing a revocable living trust.

The beneficiary’s estate that can be subject to recovery now includes only real and personal property or other assets included within the individual’s estate, as defined for the purposes of State probate law.  Thus, if the property is not subject to probate in California, the State cannot recover it.  California’s state probate law excludes property held in living trusts, joint tenancies, life estates, and other types of probate-avoiding transactions.

Amy K. Nett, Esq., Managing Partner

Law Offices of Nett & Nett, PC

May 2022