By JUDD MATSUNAGA, Esq.
If you or anybody you know is residing in a nursing home, you probably have concerns that the state will “take” your home after your death. The following frequently asked questions attempt to answer some of these concerns and to provide you with the information necessary to make informed choices about your homes when they are applying for Medi-Cal.
1. Can the state take my home if I go on Medi-Cal?
The State of California does not take away anyone’s home per se. Your home can, however, be subject to an estate claim after your death for the amount of the Medi-Cal benefits paid or the value of the estate, whichever is less.
“But Judd, I thought my home is an exempt asset?” This is where the confusion lies. Your home is exempt to qualify for Medi-Cal benefits, but not exempt from recovery. If your home is still in your name when you die, the state can make a claim against your estate. “But my home is in a living trust.” Your trust is not an asset protection device, it’s a probate avoidance device.
Thus, if your home is still in your name, or in your trust, when you die, it is part of your “estate” and can be subject to an estate claim.
2. Can the state put a lien on my home?
Consumers often confuse liens and estate claims. Both have been used by the state in attempts to reimburse the Medi-Cal program for payments made to beneficiaries. Liens are placed on living Medi-Cal beneficiaries’ estates to “hold” the property until the person dies. Estate claims are claims made against the estate of the Medi-Cal beneficiary after he or she dies.
As of Jan. 1, 1996, California is not permitted to impose liens against the homes of nursing home residents or their surviving spouses, except in cases where the home is not exempt (i.e., the nursing home Medi-Cal applicant did not indicate an intention to return home) and the home is being sold. Under current law, these are the only liens that can be placed on the homes of living beneficiaries.
Most Medi-Cal applicants’ homes are exempt because a spouse, child or sibling lives there or they do indicate an intention to return home on the Medi-Cal application, so even these liens are rare. After the beneficiary has died, the heirs or survivors may sign a “voluntary” lien for Medi-Cal recovery purposes, if they cannot otherwise avoid an estate claim against the property.
3. What happens after I die if I received Medi-Cal?
After the Medi-Cal beneficiary’s death, the state can make a claim against the estate of an individual who was 55 years of age or older at the time he or she received Medi-Cal benefits or who (at any age) received benefits in a nursing home, unless there is a surviving spouse or a minor, blind or disabled child. Thus, if there are any assets left in the estate of the deceased beneficiary, Medi-Cal will seek to be reimbursed for benefits paid.
It is important to note that, even if you received Medi-Cal at home, any benefits paid while you were 55 years of age or older will be subject to Medi-Cal recovery.
4. How much can the state recover?
California’s definition of “estate” includes such assets as living trusts, joint tenancies, tenancies in common and life estates, although claims on the remainder interest in life estates are limited to those that were revocable. Many consumers place their property into living trusts, thinking that this will protect it from an estate claim. It does not. The state can still make a claim against property held in a living trust, joint tenancy or tenancies in common, as long as the beneficiary’s name is still on the property at the time of death.
However, the amount of recovery is limited to the amount of benefits paid or the value of the beneficiary’s estate, whichever is less. For example, if the appraised value of your home is $200,000 and you left it in joint tenancy with your three children, the state can only collect up to $50,000, which is your part of the estate — even if the Medi-Cal benefits paid to you are more than $50,000.
The value of the estate is also reduced by any outstanding mortgages or debts on the home. For example, if the home had an outstanding mortgage of $100,000, this reduces the value of the estate to $100,000 (the appraised value of $200,000, minus the mortgage). This, in turn, reduces the amount of the estate claim to $25,000. (The value of the home ($100,000) divided by the four joint tenants.) Deducting the amount of burial costs or estate settlement costs can also reduce the claim. Remember to keep receipts and submit them.
When the state files an estate claim, they are also required to send an itemized billing of benefits paid over the deceased’s lifetime. It is important to review the billing to see if there are any errors. Payments made for personal care services under the In Home Supportive Services (IHSS) program, the cost of premiums, co-payments and deductibles paid on behalf of either Qualified Medicare Beneficiaries or Specified Low-Income Medicare Beneficiaries (QMB/SLMB) are exempt from recovery. Thus, if payments for these services are included in the itemized billing, the collection representative should delete this from the billing.
Managed Care: Estate claims can be much higher if the beneficiary is enrolled in managed care. When a managed care beneficiary dies, the estate will receive a claim for the total amount paid by Medi-Cal to the managed care plan, regardless of how much the actual services cost the managed care plan. Any share of cost paid to the nursing home, for example, is not deducted from the monthly amount paid to the managed care plan. If the deceased beneficiary was enrolled in a managed care plan, the itemized bill will only include a lump sum paid to the plan. The plan will have to be contacted to find out what providers were actually paid by the plan.
5. Can I legally protect my home from recovery?
Absolutely! The best way to protect your home from recovery is to leave nothing in your estate when you die. If a spouse enters a nursing home or needs long-term support and services (LTSS), consider transferring the home to the well spouse — then no recovery after the Medi-Cal spouse dies.
Better yet, if you have an adult child that you trust, consider an outright transfer to that child with a Lifetime Right to Occupy. That way, if the well spouse also needs long-term care in the future, the home is protected. Execute a Durable Power of Attorney with gifting and real estate transfer powers.
Finally, a Medi-Cal recipient can legally transfer an exempt property prior to death. But the laws could change. It is important to consider protecting your home and the tax consequences while the laws are still favorable by consulting a Medi-Cal planning attorney.
(The information above was taken from a consumer booklet, “Medi-Cal Recovery: What You Need to Know and How to Avoid It,” by California Advocates of Nursing Home Reform.)
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Judd Matsunaga, Esq., is the founding partner of the Law Offices of Matsunaga & Associates, specializing in estate/Medi-Cal planning, probate, personal injury and real estate law. With offices in Torrance, Hollywood, Sherman Oaks, Pasadena and Fountain Valley, he can be reached at (800) 411-0546. Opinions expressed in this column are not necessarily those of The Rafu Shimpo.