California Senator Ed Hernandez says that Medi-Cal recovery forces homeowners who are over age 55 and who need Medi-Cal to choose between their own health care or passing their modest homes to their children. Many have echoed the same sentiment that millions of low-income Californians age 55 and older are reluctant to enroll in Medi-Cal because they are afraid that the state will take their house when they die. It is true that California's Medi-Cal program has long looked to the house that mom and dad have left to their children to recoup public money spent on the parents' healthcare in the last years of their parents' life. Some studies have shown that when Medi-Cal seeks reimbursements from these limited assets homeowners once they pass away it contributes to generational poverty. A new day has finally arrived, Governor Jerry Brown has made this concern a thing of the past by signing SB 833 on June 27, 2016, which essentially does away with Medi-Cal taking a Californian's home, IF the California homeowner knows what to do. This is an extraordinarily generous new law that homeowners should take advantage of so that their family homes can be passed on to their children. The new law is effective for those who die on or after January 1, 2017. The new law will enable more Medi-Cal recipients to leave their homes for their children or families without having to pay back the state on their death.
Under California's current law, Medi-Cal will come after the decedent's assets in a living trust, joint tenancy, tenancy in common, TOD account, POD account and even life estate. However, effective January 1, 2017, Medi-Cal will only be able to come after those assets in a Medi-Cal recipient's " probate estate". Thus, if a homeowner is using Medi-Cal, then all he or she has to do is: avoid probate. A homeowner avoids probate by transferring the title of the home into a living trust via a document known as a “trust transfer deed.” The same is true for assets held in joint tenancy or life estate because these pass automatically at death without the need for a probate, thereby escaping Medi-Cal recovery as well. The concept of transferring the home into a living trust to avoid a probate and keep Medi-Cal from taking your home is priceless; it is an opportunity for Medi-Cal planning using a revocable trust. For Medi-Cal recipients who wish to pass their homes to their children or loved ones, it is obvious that having a living trust becomes a must. In the past, Medi-Cal recipients would have to put their houses in an irrevocable trust or give it away in order to avoid Medi-Cal recovery, which meant a loss of control over their own homes.
In other words, any homes or assets transferred into a living trust prior to the Medi-Cal recipient passing on or after January 1, 2017 will be protected from Medi-Cal recovery. A word of caution for homeowners who only draft wills: a will ends up in probate which means the assets in the will are fair game for Medi-Cal recovery. You cannot rely on a will to protect your assets from Medi-Cal.
All homeowners in California should have a living trust to avoid a probate and now with the new Medi-Cal law; it has become even more important for Medi-Cal recipients to have a living trust in order to protect and preserve their homes for their children.