I’ve written about Medi-Cal estate recovery in the past, but today I’m going to talk about some big changes that became effective earlier this year. For Medi-Cal beneficiaries who die on or after January 1, 2017, the Medi-Cal estate-recovery rules have changed. Some of these changes only impact recipients of Medi-Cal benefits other than long-term care, but some apply across the board. Let’s see what’s different now for long-term Medi-Cal beneficiaries.

1. Survivors

Under pre-2017 law, Medi-Cal could not recover from someone’s estate if he or she was survived by a spouse or registered domestic partner, but it could recover from the surviving spouse’s or partner’s estate when he or she died.

Under the new law, Medi-Cal cannot recover against an estate if the Medi-Cal beneficiary was survived by a spouse or registered domestic partner, unless the spouse or registered domestic partner was also enrolled in Medi-Cal. In addition, Medi-Cal cannot recover against an estate if the beneficiary was survived by a child who (A) is less than 21 years old; or (B) is of any age and blind or disabled.

2. Non-Probate Assets

Under the old rules, Medi-Cal could make a claim against any property that was in the beneficiary’s name at the time of his or her death, including property that passed outside of probate. This included, for example, property owned by a living trust or as a joint tenant.

Under the new rules, Medi-Cal can only recover against property in an individual’s probate estate. This expands beneficiaries’ planning options dramatically.

3. Modest Homestead Exemption

Pre-2017 law allowed the state to assert a claim against a person’s home after the person (and any surviving spouse) died.
The new law still permits that, but directs Medi-Cal, subject to federal approval, to waive a recovery claim against an estate that is a “homestead of modest value.” A homestead of modest value is a home that, on the beneficiary’s date of death, was worth 50% or less of the average price of homes in the county where it is located.

4. Interest on Voluntary Liens

The old law allowed heirs to pay off a Medi-Cal recovery claim over time. To do so, they would give a voluntary lien to Medi-Cal in the property they received from the Medi-Cal beneficiary. Simple interest on the amount due accrued at a rate of 7% per year.

The new law still allows for these voluntary liens, but it reduces the rate at which interest accrues. Now, interest accrues at the lower of 7% or the annual average rate earned on investments in the Surplus Money investment fund during the prior calendar year. For 2017, that rate is approximately 0.55%.

As you can tell, these changes are a big deal. They change some of the considerations in Medi-Cal planning. But what they don’t change is the need to have Medi-Cal planning. None of these changes affect Medi-Cal’s eligibility rules, so you still need the help of a qualified Medi-Cal attorney before applying.

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