How Changes to Estate Recovery Rules Target the Frail Elderly

I have been talking on podcasts, my radio program, at seminars and speaking engagements – pretty much everywhere I can for the last 25 years about Medi-Cal recovery. It is not a new topic.

Well here is the news; the recovery rules have changed as of January 1, the first day of 2017. There is now only Medi-Cal recovery for the frail elderly who at the end of their lives need a nursing home. The other 13 million people in California on Medi-Cal will never have to worry.  Seems fair, right? After all, old people in nursing homes don’t vote.

Let’s only focus on the right hand column of the chart below; Deaths after 1/1/2017. Here you will learn who is now subject to Medi-Cal estate recovery. To further focus, look only at the top box. You will note that Medi-Cal can only recover against those folks who needed home and community based care or care in a nursing home. For the most part then, recovery is only enforced against the old and infirm. The other 14 million people on Medi-Cal can have a home, money, cars and more and they will never have to pay back the State. Only seniors in nursing homes. Way to go State Legislature and Governor. The reason for this is simple, people in nursing homes don’t vote, the others do. In addition this will cost the state budget from 60-70 million dollars a year.  There is some good news here. The state can only recover from estates that are subject to probate. Therefore, a well done revocable or irrevocable trust, joint-tenancy, survival of a spouse and other planning devices will avoid estate recovery. The problem is the exception, probate.

Now many people will say, but Bob I have a trust and therefore there will be no probate. Not always true. You have to have put all your assets into the trust. Many people forget real estate, bank accounts, brokerage accounts and more. Some business owners have not put their business or rental properties in the trust.  Many people have not fully or properly funded their trust. This can lead to a probate. In addition I have seen many life insurance policies and annuities over the years in which the beneficiary is listed as “the estate” of the person. This can result in a probate. In addition almost all wills go through probate as do most of the estates of people who die without a will or trust.

The simple idea here is that you must be attentive. You must make sure that your documents are complete and up to date. You need to make sure that your accounts, real estate, investments are titled correctly and you must make sure that your beneficiary designations on life insurance, annuities, pensions and IRAs are correct and up to date.

The State has not gone away, only narrowed their focus to the most frail among us. Don’t believe it?  I just saw an estate claim after an elder died for over $300,000. Outrageous.

Changes to Estate Recovery effective January 1, 2017 due to Legislation SB 833:

Deaths Occurring Prior to 1/1/2017 Deaths Occurring on or After 1/1/2017
Age 55 or older – The Department’s claim includes most services received or monthly managed care premiums paid on behalf of the Medi- Cal member. Age 55 or older – The Department’s claim includes payments made by the Medi-Cal program for nursing facility services, home and community based services and related hospital and prescription drug services.
“Estate” is defined as all real and personal property and other assets in which the decedent had any legal title or interest at the time of death. “Estate” is defined as all real and personal property and other assets in the individual’s probate estate.
Upon the death of a Surviving Spouse, the Department shall make a claim against the estate of the Surviving Spouse for services provided on behalf of the pre­deceased spouse. Recovery is prohibited from the estate of a deceased Medi-Cal member who is survived by a spouse or registered domestic partner.
Voluntary post death lien shall accrue simple interest at the rate of seven percent per annum. Voluntary post death lien shall accrue interest at the rate equal to the annual average rate earned on investments in the Surplus Money investment fund in the calendar year preceding the year in which the decedent died or simple interest at 7 percent per annum, whichever is lower.
Estate Recovery shall waive its claim when the estate subject to recovery is a homestead of modest value. This means a home whose fair market value is 50 percent or less of the average price of homes in the county where the homestead is located, as of date of the decedent’s death.


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