CunninghamLegal – The Living Trust Lawyers
This year, Governor Brown signed into law SB 833 which will bring major changes to Medi-Cal estate recovery laws beginning January 1, 2017. Generally speaking, the state is required to seek reimbursement for Medi-Cal benefits paid out to an individual over age 55 or to an individual of any age who is an inpatient in a nursing facility.
Federal law requires that states maintain a Medicaid recovery program but federal law does not require certain expanded estate recovery provisions which California adopted in 1993. The changes in California’s estate recovery laws are essentially limiting estate recovery to the bare minimum of what Federal law requires.
Some of the key changes brought about by SB 833 include:
- No recovery when there is a surviving spouse or surviving registered domestic partner;
- Limited recovery for those Medi-Cal recipients 55 years of age or older to nursing home and home and community based services expenses;
- Recovery only against assets in the probate estate;
- Waiver of recovery claim for “homestead of modest value.”
What follows is a more detailed explanation of each key change along with how the current law stands.
No recovery when there is a surviving spouse or surviving registered domestic partner
Current Law: When a Medi-Cal recipient dies leaving a surviving spouse or registered domestic partner, the survivor’s estate is subject to recovery upon his or her death for the benefits paid to the Medi-Cal recipient.
SB 833: Recovery is prohibited when there is a surviving spouse or registered domestic partner. If a Medi-Cal recipient dies prior to 2017, leaving a surviving spouse, it is unclear whether there will be recovery once the surviving spouse dies. Of course, if the surviving spouse was also on Medi-Cal, then there may be recovery at least for the benefits he or she received.
Limited recovery for those Medi-Cal recipients 55 years of age or older to nursing home and home and community based services
Current Law: The amount of recovery is equal to the payments received for all health care services by a Medi-Cal recipient over the age of 55.
SB 833: Only benefits paid out for nursing facility services, home and community based services, and related hospital and prescription drug services are recoverable for a Medi-Cal recipient over the age of 55.
Recovery only against assets subject to California probate
Current Law: Upon a Medi-Cal recipient’s death, the state is required to recover against all property in which that individual had any legal title or interest. This includes assets passing through probate and assets conveyed through non-probate methods such as trusts, joint tenancy, and survivorship to name a few.
SB 833: Limits recovery to the Medi-Cal recipient’s probate estate. Therefore, there is no recovery against out of probate transfers. However, there are some unresolved issues with this provision. For example, it is unclear whether a Probate Code § 13100 small estate affidavit transfer or if a Heggsted petition under Probate Code § 850 to transfer property to a trust without a probate will avoid estate recovery.
Waiver of recovery claim for “homestead of modest value”
Current Law: There is no waiver of claim for a homestead of modest value.
SB 833: No recovery on a “homestead of modest value” which the new law defines as a home whose fair market value is 50% or less than the average price of homes in the county where the homestead is located, as of the date of decedent’s death. “Fair market value” would generally mean minus encumbrances. A methodology for determining the average price of homes should be put in place by January 1, 2017.
For those who want more information on the new changes and to see the text of the new law, you can visit goo.gl/5wQi1i (please note that this web address is case sensitive).
Stephen M. Wood is an attorney at CunninghamLegal in Camarillo, where he handles estate planning, trust administration, elder law, and probate matters.
