How will the new Medi-Cal recovery law affect estate planning?


For more than two decades Medi-Cal, California's state Medicaid program, has had the right to assert claims against the estates of people who received Medi-Cal benefits when aged 55 or older. Avoiding a Medi-Cal recovery has been a major estate planning priority for many people. This is about to change significantly. Under a new state law, Medi-Cal's recovery rights will be significantly more limited with respect to the estates of people who die on or after January 1, 2017.

The new law will provide a number of protections for families of Medi-Cal recipients. It will restrict recovery to benefits paid for nursing home and specified community and home-based services, as well as hospital and prescription expenses related to those services. The state will no longer be able to seek recovery for other health services, including doctor visits and prescription expenses, not related to nursing home, community-based or home-based services.

The new law will also prohibit Medi-Cal claims on a person's estate if they leave a surviving spouse or registered domestic partner. Significantly, the new law also allows a Medi-Cal recovery only against assets in probate. Finally, it obligates the state to waive its recovery claim, on the basis of substantial hardship, when the estate consists of a homestead of modest value.

For families of Medi-Cal beneficiaries, some fairly straightforward estate planning can shield assets from the a Medi-Cal recovery claim under the new law. Because the state's recovery rights will be limited to assets in probate, avoiding probate through a revocable trust, or through non-probate asset transfers such as joint tenancy or beneficiary designations, could provide significant asset protection. Depending on a family's situation, lifetime asset transfers may also be advisable.

Source: California Advocates for Nursing Home Reform, "The New Medi-Cal Recovery Laws Effective January 1, 2017," accessed Nov. 19, 2016

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