After a Medi-Cal recipient dies (or if married, when the surviving spouse dies), the state will attempt to recoup whatever benefits it paid for the person’s care from his or her estate. This process is called “estate recovery.”
For most Medi-Cal recipients, their house is the principal asset available and is an “exempt” asset at the time of qualification for benefits.
At death, unless the estate recovery claim is otherwise paid, the state can move to have the house sold so the claim can be satisfied. Therefore, the Medi-Cal recipient will be unable to leave his or her family home to a beneficiary.
There are some techniques though, that may help protect at least a share of the family home. How well these techniques work depends on the methods used and where the house is located. However, it is worth exploring with an attorney whether they would work for you.
Life Estates. One idea is to transfer the house to your children, but to retain a “life estate,” which is the right to live in the house for as long as you are alive. After you pass away, the house will go to your children automatically, so it will not be part of your “estate” when you die.
Trusts. Another idea is to place your home into an irrevocable trust. Again, when you pass away, the house will not be part of your estate, because it will be owned by the Trust. Trusts can provide you with more flexibility than life estates, but they are also more complicated and more expensive.
With both life estates and trusts, there can be significant restrictions and consequences for gift, estate and capital gain taxes, so you will want to consult with an expert before you take any action.
Ms. MacDonald’s practice is limited to estate planning, probate, elder law and trust administration. Ms. MacDonald maintains her practice in the Santa Clarita Valley at 25115 Avenue Stanford, Suite B-124 in Valencia, California. She can be reached at 661-294-6464.