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Medi-Cal Articles


If we think of life as a "terminal" condition, we are left with two basic conclusions: We will all die, and some of us will get sick before we die. For our loved ones who get sick and face financial destitution due to the costs of long‑term custodial care, it is vital to consider how Medi-Cal benefits might be available.

There has been a lot of confusion regarding how Medi-Cal works, and when Medi-Cal planning is appropriate. This article will help you understand Medi-Cal eligibility in the setting of long-term custodial care in a skilled nursing facility.


Medicare is federally funded health insurance for the elderly and disabled. Medicare has no income or resource requirements that must be met. Medicare and supplemental insurance policies will pay for up to 100 days of "skilled nursing" care in a convalescent hospital, provided there has been a three day prior hospitalization. For most folks though, skilled care is rehab or "skilled" nursing care, not the "custodial" care required when “rehab” ends, or for dementia-type cases. Neither Medi-Care nor supplemental insurance policies pay for "custodial care" in skilled nursing facilities.

Consequently, Medi-Cal has become a primary source of funding for many of California's long-term care patients. As such, Medi-Cal is designed as a "need-based" entitlement program. However, since the enactment of the federal Medicare Catastrophic Coverage Act in 1989 (MCCA), there have emerged a variety of planning options designed for the middle-class, to avoid the financial destitution of the at-home spouse. This article focuses on planning options for spouses but also discusses planning options for single people.

The Deficit Reduction Act (The DRA) was recently enacted by the federal government in an effort to address perceived “loop holes” in Medicaid eligibility regulations. The DRA, when implemented in California, will impact planning options.

Think of the Medi-Cal application as triggering a "snap-shot" of your financial circumstances. As of the date of application the eligibility worker will categorize your assets as exempt , non-exempt , or unavailable , and then apply certain rules.


"Exempt assets" are not countable resources for Medi-Cal “eligibility” purposes (though they are for “recovery” purposes). Thus, the value of exempt assets are irrelevant in the eligibility analysis and will not be considered by the eligibility worker. Exempt assets include :

  • One motor vehicle
  • Burial lots
  • Personal belongings
  • Personal property used in a trade or business
  • Musical instruments
  • Principal residence
  • Livestock and crops
  • Term Life Insurance
  • IRAs, and other “qualified” plans in name of at-home spouse
  • Real property used in business or a trade, for self-support
  • Whole Life Insurance with a face value of $1,500 or less
  • Up to $6,000 equity value in certain other real property
  • Community Spousal Resource Allowance ($109,560)
  • Term Life Insurance

The principal residence can be a mobile home, duplex, 40 acre ranch or apartment complex, as long as it is in fact the principal residence. Interestingly, the term "residence" also includes all parcels of land directly adjacent to the residence.

Under the Deficit Reduction Act, there is now an “equity cap” on the value of the personal residence. California caps the amount of equity of the exempt residence at $750,000. This home equity limit will not apply if the person's spouse or minor, blind or disabled child is living in the home.

Fortunately, the “value” of the residence will be either the tax-appraised value (which will be relatively low for long-time owners) or the appraised value of the home, whichever is lower.

Remember, however, just because the home is “exempt” for eligibility purposes, does not mean it is protected from potential Medi-Cal recovery claims on the estate of the deceased Medi-Cal beneficiary. More planning is necessary!


Some times otherwise non-exempt resources can be treated as "unavailable". Unavailable resources won't be counted against you for spend-down purposes unless and until they become available. One example would be a rental house that is considered non-exempt until it is put up for sale. Until it is sold, the property is "unavailable" and won't be the cause of eligibility problems. Another case of unavailability might be where co-owners of a fractional interest in real property provide a letter indicating their refusal to sell their interest.

IRAs and qualified retirement plans held in the name of a single person, or the institutionalized spouse, will be considered "unavailable" so long as there is a "periodic" (at least once a year) "distribution" (pay out) of "accumulated income and principal" (all interest actually earned and at least $1 of principal). Thus, virtually all retirement plans can be protected with proper planning.


"Non-exempt resources" basically means everything else; i.e. whatever is not exempt or unavailable. This includes cash, stocks, bonds, mutual funds, securities, limited partnerships, deeds of trust, notes and accounts receivable, cash values of certain life insurance policies, and so on. If an item is non-exempt, it may be subject to being "spent-down" on long-term care costs. Real property used as rental property, rather than for self-support or self-employment, is now also treated as non-exempt property.


If an annuity was purchased prior to 8/11/93, the principal balance is considered unavailable if the person is receiving periodic payments (of any amount) of interest and principal.

If an annuity was purchased between 8/11/93 and 3/1/96, and cannot be restructured to meet new federal and state requirements, the annuity will continue to be treated under the old rules. Medi-Cal will require written verification from the company or agent who sold the annuity that the annuity cannot be restructured.

For annuities purchased on or after 3/1/96, a person must take steps to receive periodic payments of interest and principal. Payments must be scheduled to exhaust the balance of the annuity at or before the end of the annuitant's life expectancy. Any annuities structured to exceed the life expectancy will result in denial or termination of benefits because they will constitute a “gift” of non-exempt assets.

Many annuities are marketed to family members as a way to “shield” someone's money.

Beware: Annuities purchased by the applicant/beneficiary on or after 9/1/04 will be subject to Medi-Cal recovery when the beneficiary dies.

The Deficit Reduction Act of 2005 also takes aim at annuities. The DRA provides for the disclosure of annuity terms, and with certain annuities requires the State be named as the recipient of amounts payable after death. Other annuities will be exempted from DRA regulations: e.g. annuities that are irrevocable and non-assignable are actuality sound, and made fixed, equal payments with no deferral or balloon payments.


There has been an effective 30 month look-back period in California designed to prevent gifting of non-exempt resources in order to prematurely qualify for Medi-Cal. Many gifting strategies have developed in efforts to work around this 30 month rule (“one-half a loaf” gifting, cumulative or stacked gifting, and so on). The DRA regulations will implement a 60 month look-back period! Remember, though, the 60 month look-back period is not the law until implemented by Department of Health Care Service (DHCS) regulations (which are not expected until 2012-2013).

Asset gifting…a topic filled with risk and peril. Many people who face the prospects of long-term care in a skilled nursing facility (SNF) want to know if and how they can gift assets in order to qualify for Medi-Cal. First off, you must be very careful and precise in analyzing “what” you are gifting: exempt assets or non-exempt resources.


“Exempt”assets (such as the principal residence, the car, personal property, jewelry and the like) are not defined by Medi-Cal as resources which are subject to a “spend down” before Medi-Cal eligibility can be established. Thus, such exempt assets can be gifted at any time, without impact on a person's Medi-Cal eligibility in a SNF.

Indeed, that is precisely the reason not to be in a hurry to gift your exempt assets… they can always be transferred after you achieve Medi-Cal eligibility in a SNF. Premature transfer of exempt assets puts you at risk for all of the liabilities and poor judgment of those you transferred the asset to. Plus, you may lose financial control of assets you may one day wish to sell and use for your in-home or assisted care (so that you don't have to go to a SNF!).

I believe the best strategy for the transfer of exempt assets like the home is to put proper “pre-planning” in place. I am suggesting to many of my clients that they amend their existing estate plans by adding “Medi-Cal planning” language to their family trust and powers of attorney.

In a nutshell, these changes make it possible to transfer the residence and other assets out of your name to your spouse or children if, and only if, certain conditions occur:

1. You are in a skilled nursing facility for a continuous period of at least three months (which correlates to the 100 day Medicare period).

2. Your treating physician states in writing that you are no longer mentally competent and are unlikely to be able to return to your home.

3. Your agents work with an elder law attorney who confirms that the transfers won't impair your Medi-Cal eligibility (an increasingly challenging task, given complex transfer restrictions in Medi-Cal laws).

4. Any transfers made must be made proportionately to the then-existing beneficiaries of your estate plan.

This way, you can have all the benefits of ownership up to the time you are in a SNF, and are not likely to be able to return home…which sets up the likelihood of a large Medi-Cal recovery claim on your assets when you die. Your agent can then (and only then) transfer your assets in order to defeat the potential Medi-Cal recovery claim.

Please note that as regards the residence, I recommend any transfer be subject to a retained life estate in the name of the now-institutionalized person. The retained life estate offers many advantages:

  • No sales or new mortgages are possible on the residence while the life-tenant lives.
  • When the life-tenant dies there is a stepped-up tax basis, so that capital gains taxes are avoided or minimized.
  • Medi-Cal does not place recovery claims on these retained life estates.
  • If by some miracle the life-tenant ever recovers sufficiently to leave the SNF, the life-tenant still controls the use of the residence and can either return there to live or rent it for more income for assisted care.


Non-exempt resources are those assets that Medi-Cal expects to be spent on care before Medi-Cal eligibility in a SNF can be established: cash, stocks and bonds, bank accounts, investments such as life insurance with certain cash surrender values, rental property, notes secured by deeds of trust as well as unsecured notes and loans, certain annuities, cars, boats, motor homes, and the like. Essentially, if not “exempt” or “unavailable”, it is defined as “non-exempt”, and subject to potential “spend down” and “look-back” gifting restrictions.


When someone applies for Medi-Cal for the costs of care in a SNF, there is a question on the application: “Has anyone listed on this form transferred, sold, traded, or given away such items as those listed above in the last 30 months?”

If you answer yes to this question you will have to provide additional information about the items. If you are referring to “exempt” items, a positive answer cannot cause any period ineligibility. The same is true if you transferred, sold or traded the item for fair market value. The problem also arises if you answered yes and transferred a “non-exempt” resource for less than fair market value, which made at least a portion of the transfer a “gift”.


Since the late 80's, California law has dealt with such gifts under The Medicare Catastrophic Coverage Act (MCCA). MCCA, which is still in effect today, provides that transfers of non-exempt resources can result in a period of ineligibility, which is the lesser of : (A) 30 months; or (B) the value of the transferred items divided by the “average private pay rate” (APPR) then in effect in California (currently $7,549).

Let me give you some examples from our good friends at CANHR:


If Mr. D transfers $15,000 to his son in January 2013, and applies for Medi-Cal in April of 2013, a transfer period will be triggered. The amount transferred ($15,000) is divided by the 2013 APPR ($7,549), and Mr. D will be subject to a period of ineligibility of 1.98 months. Since California does not count partial months, he will be ineligible for 1 month, running from the date of transfer (January 2013). Thus, Mr. D will not be eligible for January and February of 2013 but he would be eligible as of February 1, 2013.


If Mr. D transfers $7,500 to his son and $7,500 to his daughter in January 2013, each transfer is calculated separately. Each amount transferred ($7,500) is divided by the APPR of $7,549, and each gift results in an ineligibility period of .99 months. Since there are no “fractional” monthly penalties, Mr. D will be eligible for Medi-Cal in January of 2013 (this is an example of “aggregate” or “stacked” gifting).

You should be aware, however that there is an important exception to these “gifting penalties”: you can transfer any amount of assets, at any time, to a blind or “disabled” child of any age (though you need to be careful when you have a child who is receiving SSI benefits!).


Because of perceived problems with gifting of non-exempt assets under MCCA, Congress passed the Omnibus Reconciliation Act of 1993 (OBRA93) in an effort to make Medicaid laws more restrictive. The “look back” period for gifts was extended to 36 months, and “aggregate”, or “stacked”, gifting techniques referred to in example 2 above were taken away.

However, for reasons too complex to get into here, OBRA93 was never enacted in California, and the less restrictive MCCA laws remain in place.


The Deficit Reduction Act of 2005 (DRA) was enacted by Congress to plug perceived “loopholes” of OBRA93 (which never became law in California, anyway!). Under The DRA, many very restrictive rules will eventually become law in California:

  • The look-back period is increased to 60 months, and any period of ineligibility will typically begin on the month of application.
  • Partial months of ineligibility may be assessed (the State will not “round down”).
  • All transfers made during the look-back period may be treated as one transfer to determine periods of ineligibility (aggregate or “stacked” gifting would be penalized).

The DRA is not the law in California, and will not be until implementing regulations are enacted (probably 2012-2013). Until then, transfers of non-exempt assets will continue to be treated under the more liberal MCCA laws in effect since the late 80's. Currently, we do not anticipate that the DRA, when it is implemented, will be retroactive. Thus, transfers currently made under MCCA should not be subject to the more restrictive DRA until the State actually files the new DRA regulations with the Secretary of State.


While gifting non-exempt assets might be a viable strategy for some California seniors, there is an increasing likelihood of a referral for potential elder abuse in many cases:

  • Bank employees and caregivers are now “mandatory” reporters of potential elder abuse.
  • Powers of Attorney and Trusts contain inherent duties of loyalty under California law, “self-dealing” is a conflict of interest and is prohibited by explicit California statutes (unless expressly” permitted in the document itself…which it rarely is!).
  • Medi-Cal eligibility workers are often frustrated by transparent gifting designed to qualify a senior for long-term care Medi-Cal, and are increasingly referring such cases to APS for investigation into possible elder abuse.

Bottom line: don't attempt “gifting” strategies without the timely advice of an elder law attorney. Otherwise, you may be playing with fire.


A. California Law: Present Status

There are a number of exceptions to the general transfer rules. One exception states that an individual shall not be ineligible for Medi-Cal assistance if the transfer is made "for a purpose other than to qualify for medical assistance."

Current California law is clear that all exempt assets, such as the primary residence, may be gifted without regard to the transfer rules. If a person already qualifies for or is receiving Medi-Cal assistance, it is logically inescapable that the proposed transfer is being done for a reason "other than to qualify for medical assistance" (Medi-Cal).

The California Department of Health Services has accepted this argument in the past, and has acknowledged in writing that no period of ineligibility will result from a transfer of a home when a right to return home is retained. One common strategy with an incompetent institutionalized person is to seek a court order transferring the person's home, while retaining a life estate for the institutionalized person. This life estate not only protects the person's right to return home, if he or she is ever able (although unlikely), it also provides compliance with the DHS transfer requirement that the Medi-Cal beneficiary have a right to return home. The person's Medi-Cal support will not be affected by the transfer.

Although gifts of residences are often discouraged because of adverse capital gains tax implications, there would be no problem in this case. The Medi-Cal recipient would retain a life estate, which is enough to include the asset in his/her taxable estate, which results in a new, stepped-up, tax basis at the death of the institutionalized person. This means the residence could be sold after the institutionalized person dies, with no capital gains taxes.

Thus, a competent person can gift his or her home at any time, even if already on Medi-Cal in a skilled nursing facility. People who are no longer competent may still transfer the home if a family member petitions a Superior Court for an order authorizing the transfer.

The key question is: should the court allow such an order? What rules must the court consider before saying yes to the transfer?

A relatively recent case clarified the application of these rules, Conservatorship of Hart, (1991) 228 Cal.App3rd 1244, 270 Cal. Rptr. 249. It held that the issue before the court in substituted judgment proceedings is not necessarily what the Conservatee would have done under the circumstances, but what a hypothetical prudent person would do. In most cases it is clear that a prudent person would transfer the home to his or her intended beneficiaries, when there are virtually no drawbacks to doing so, and almost certain loss to a Medi-Cal recovery claim if no transfer occurs.

One particular aspect of discretion that needs to be addressed is whether or not the Court should authorize an action that will prevent DHS from recovering the value of benefits it has paid. The overriding standard in such cases is the best interest of the institutionalized person. The interests of public agencies and other potential creditors are not included among the considerations mentioned by the substituted judgment statute, are outside the scope of courts duties, and simply not relevant to the decision of whether to transfer the house!

There is no meaningful difference between the transfer planning described here and transfer planning for tax avoidance. Petitions for substituted judgments are most commonly used for tax avoidance, and this use is specifically approved by Probate Code. Indeed, this line of reasoning has been followed by local courts in similar cases involving the transfers of residences. If wealthier citizens can use the assistance of the courts for tax avoidance, less wealthy citizens should be able to request the assistance of the court for legally authorized public benefits planning.

Remember, the only reason that the matter would be before the court is because the person is incompetent. If he or she were able to execute a deed, they would certainly do so. If a court were to deny the transfer out of concern for the interest of the state, it would deprive citizens of their legal rights and planning opportunities solely on the basis of their disabilities .

B. California Law: Proposed Changes

Under The Deficit Reduction Act, there is an “equity cap” on the value of the personal residence which can be transferred. The DRA caps the amount of equity of the exempt residence at $750,000, with a yearly cost of living increase built in.

Presumably, a gift of the personal residence to a non-qualified person, to the extent the “value” (either determined by property tax value or appraisal) exceeds $750,000 will trigger an ineligibility penalty.


Once property is categorized as either "exempt" or "non-exempt", there is a determination of property limits. For a single person, only $2,000 worth of non-exempt resources may be retained to qualify for Medi-Cal. This is not the case where a spouse enters long-term care.

The "community spouse" (the at-home spouse) may keep up to $115,920 of the couple's combined community and separate property "non-exempt" resources as a "Community Spousal Resource Allowance" (CSRA). Unless the CSRA is increased by court order or fair hearing, the community spouse must "spend-down" to the $115,920 CSRA level. And yes, a spouse's inherited or previously acquired separate property goes into the pot for purposes of calculating the CSRA.


Under the Spousal Impoverishment Protection Act, the community spouse may retain all of his or her monthly income, regardless of the amount, as long as it comes in his or her own name (this is the "Name of The Check" rule). There is also, however, another rule establishing a Minimum Monthly Maintenance Needs Allowance (MMMNA) for those community spouses with more limited monthly income. The MMMNA in California is currently set at $2,898 per month. The MMMNA is designed as a "level of dignity" so that a community spouse can retain sufficient income to avoid impoverishment. Like the CSRA, the $2,898 MMMNA may be increased by either court order or fair hearing under appropriate circumstances.


Remember the $115,920 CSRA that the community spouse gets to keep? Well, you can use the MMMNA rule to increase the CSRA amount via court order or fair hearing. Here's how it works:

Assume the following about an elderly couple, Bill and Sally: Bill is 70, has been institutionalized due to Alzheimer's and receives a combined Social Security and retirement income in his name of $1,400 per month. Sally is 66, and receives $400 per month from Social Security. They have $250,000 worth of non-exempt resources (diversely invested in certificates of deposit, savings account and stocks) producing an average monthly income of $500. Sally is worried about what will become of her. Under the Spousal Impoverishment Act, Sally can retain the $250,000 in non-exempt resources and still qualify her husband for Medi-Cal! Here's how:

1. Remember that though the ordinary CSRA is set at $115,920, this amount can be increased by a court order "against" the institutionalized spouse for the "support" of the community spouse.

2. Remember the MMMNA amount set at $2,898 per month? Applying this to Sally we see "her" income of $400 per month (under the "name of the check" rule) is woefully short of the $2,898 MMMNA. Sally is entitled to a court order "against" Bill ordering the entire $250,000 into Sally's name, as her sole and separate property, as her new increased CSRA.

The rationale for the court order is this: (A) Sally's income of $400 is far below the $2,898 MMMNA;(B) Even when Bill's income ($1,400) is added to Sally's income, the result ($1,800) is still below the $2,898 MMMNA; and (C) All of the investment income ($500 per month) is necessary to bring "her" income closer to the $2,898 MMMNA. Since her total income is only $2,300 ($500 + $400 + $1,400 = $2,300), she is still below the $2,898 MMMNA.

Now assume the roles are reversed, and that Sally has Alzheimer's disease. Bill could also justify a court order or a fair hearing increasing the CSRA to fully fund the MMMNA. What happens if either spouse has significantly more assets or income? The matter becomes much more problematical.


For individuals in skilled nursing facilities the standard allowance of non-exempt property is $2,000. For those individuals, and for married persons with excess resources and who cannot qualify for an increased CSRA, some “spend down” of excess resources must occur. Options include:

A. Spend down on various medical bills, debts, mortgages, loans and the like.

B. Convert the non-exempt resources into exempt or unavailable assets, eg., by buying a new home or car, or purchasing burial plots, funeral plans and so on. You can also "fix-up" the residence by replacing the roof, putting in new carpets, etc.

C. Make "cash" gifts (a course fraught with peril, see section on gifts).

D. Purchase "immediate" annuities in the name of the at-home spouse. Remember, there is no limit on the amount of monthly income an at home spouse can receive in his or she name, so long as he or she retains no more than the $115,920 CSRA (this strategy is not recommended with unmarried persons in skilled nursing facilities). If the annuity is actuarially sound, and provides for fixed, equal payments, and no balloon payments, the State will not have to be named as a beneficiary under the DRA.


For many years I have helped families find their way through the maze of Medi-Cal regulations and laws when a loved one enters a skilled nursing facility. There are two typical scenarios that often require me to go to court.

1. When an incompetent spouse enters long-term care we usually want a court ordered transfer of assets (including the home) into the name of the at-home spouse. We do this to defeat the possibility of a Medi-Cal claim on the estate of the surviving at-home spouse, for the money Medi-Cal spent on the institutionalized spouse. We also often seek an Order of Support to enable the at-home spouse to keep all of the income of the institutionalized spouse.

2. When a single person enters long-term care we often need to arrange for a court order allowing the transfer of the person's residence to the children or other family members. Otherwise there will be a Medi-Cal recovery claim placed on the home when the person dies.

Going to court is expensive and somewhat risky, because these transfers are always in the discretion of the judges. On the other hand, clients are legitimately concerned about prematurely transferring their homes and assets to the children because of their fear of “potential” Medi-Cal recoveries if they end up in long-term care. I am suggesting too many of my clients that they amend their existing estate plans by adding, “Medi-Cal planning” language to their family trust and powers of attorney.

In a nutshell, these changes make it possible to transfer the residence and other assets out of your name to your spouse or children if, and only if , certain conditions occur:

1. You are in a skilled nursing facility for a continuous period of at least three months (which correlates to the 100 day Medicare period).

2. Your treating physician states in writing that you are no longer mentally competent and are unlikely to be able to return to your home.

3. Your agents work with an elder law attorney who confirms that the transfers won't impair your Medi-Cal eligibility (an increasingly challenging task, given complex transfer restrictions in Medi-Cal laws).

4. Any transfers made must be made proportionately to the then-existing beneficiaries of your estate plan.


The best explanation I have ever read regarding Medi-Cal Recovery regulations was recently presented by my friends at The California Advocates for Nursing Home Reform (CANHR). I present it complete, without any editorial comment .

“Fact Sheet”:

Medi-Cal Recovery Frequently Asked Questions (FAQ)

By the California Advocates for Nursing Home Reform

California's Medi-Cal applicants and beneficiaries are often confused about their rights regarding Medi-Cal and are particularly concerned that the state will “take” their homes after they die if they received Medi-Cal benefits. The following “Frequently Asked Questions” attempts to answer some of these concerns and to provide consumers with the information necessary to make informed choices about their estates when they are applying for Medi-Cal.

I. 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 example, your home may be an exempt asset while you are alive and is not counted for Medi-Cal eligibility purposes. However, if the home is still in your name when you die, the State can make a claim against your estate for the amount of the Medi-Cal benefits paid or the value of the estate, whichever is less. Thus, if your home or any part of it is still in your name when you die, it is part of your "estate" and can be subject to an estate claim.

II. 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 January 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.

III. 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.

IV. 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 is 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.

V. Are There Any Exceptions to an Estate Claim?

A. Surviving Spouse: The state is prohibited from recovery while a surviving spouse of a deceased Medi-Cal beneficiary is alive. However, after the surviving spouse dies, recovery may be made against any property received by the spouse through distribution or survival, e.g., property left under a will or community property. However, if the home is transferred out of the nursing home resident's name while he or she is alive, no claim can be placed on the home. Spouses should be careful to "transmute" the property, i.e., through a court order or by having the nursing home spouse sign a declaration relinquishing his/her interest in the property.

B. Minor, Blind or Disabled Child: If a minor child under the age of 21 or a blind or disabled child of any age survives the beneficiary, a claim is prohibited by federal and state laws. The surviving minor child or his/her representative only needs to send proof, such as a birth certificate or adoption papers, that they are the child of the decedent or, in the case of disabled child, documentation of disability or blindness, such as a Social Security or SSI award letter and a birth certificate showing they are the child of the deceased. If the surviving child does not have documentation of disability from the Social Security Administration, he/she can still file for a disability determination with the Department of Health Services. It is important to note that the surviving child does not have to live in the home (or even in the State, for that matter) in order for recovery to be barred.

C. When There is Nothing Left in the Estate: Since most deceased Medi-Cal beneficiaries leave nothing but their homes, it is most important to look at the deed to the property. Whose name was on the property at the date of death? If the beneficiary transferred the property outright prior to death, then send a copy of the deed, along with a letter explaining that the beneficiary left nothing in his/her estate and ask that the case be closed. If the beneficiary transferred the home outright while he or she was alive and reserved a life estate or an occupancy agreement, send a copy of the deed showing the property was transferred before the beneficiary died.

VI. What Else Besides My Home Can the State Claim Against?

Under current law, "estate" is defined as any real or personal property and other assets in which the individual had any legal title or interest at the time of death (to the extent of such interest), including assets conveyed through joint tenancy, tenancy in common, survivorship, life estate, living trust or other arrangement. Anything left in the decedent's bank accounts, for example, can be subject to recovery, after estate and burial expenses or other documented expenses are paid. The State can also recovery from annuities purchased by a beneficiary on or after September 1, 2004, regardless of whether the remainder interest in the annuity is a lump sum or a stream of income. Call the CANHR office if you have specific questions regarding what assets are subject to recovery.

Life Estates: Under the new recovery rules, claims on irrevocable life estates are waived, but the state is placing claims on "revocable" life estates. For example, if you retain a life estate and, "upon death the remainder to the children," this would not be considered a transfer and your home could be subject to recovery. If the gift deed transfers the home outright to the individual(s) and you retain a life estate, this would be considered irrevocable and would be immune from recovery.

The State cannot recover from IRAs, work-related pension funds or term life insurance policies, unless they name the state as the beneficiary or they revert to the estate. This is rare, as most people name a beneficiary for pension funds and insurance policies.

VII. How Does the State Know When a Medi-Cal Beneficiary Dies?

A. Notice of Death: When a Medi-Cal beneficiary dies, the County Medi-Cal office notifies the Department of Health Services in Sacramento and benefits are terminated. However, for recovery purposes, the burden of notifying the State of the death is still on the beneficiary's estate. California law, under Probate Code §215, requires that, when a deceased person has received or may have received health care benefits or was the surviving spouse of a person who received such benefits, the estate attorney, the beneficiary of the estate, the personal representative or the person in possession of the property is required to notify the Director of the Department (at the Sacramento office of DHS) no later than 90 days after the person's death. A copy of the death certificate is required to be sent.

Although most consumers simply notify the county Medi-Cal office, this does not count as proper notice and it is important that you send the notice and death certificate to the correct address, if you want the matter to be addressed in a timely manner. The notice of death and the death certificate should be sent by registered or certified mail to: Director of Health Care Services, Estate Recovery Unit, MS-4720, P.O. BOX 997425, Sacramento, CA 95899-7425. That way, you have proof of mailing.

B. Filing The Claim: If the estate is subject to probate or trust administration, the State has four months in which to file a claim. If a claim is not filed within this time, it is forever barred. However, many estates are not subject to probate or trust administration. In these cases, although the State has indicated its policy is to respond within four months, there is no law requiring this. By law, in non-probated estates, the Department must file a claim within three years of receipt of the notice of death.

C. Beware of Forms: The Recovery Unit has sent out a number of questionnaires to consumers implying that they are under a legal obligation to complete and return them. The only legal obligation under law is to send a notice of death and a copy of the death certificate when a deceased Medi-Cal beneficiary or the spouse of a deceased beneficiary dies. If the State has sent an estate claim, then the questionnaire is a way for them to find out what property, if any, is left in the deceased beneficiary's estate. If there was no property left in the deceased's name, then completion of the form (or an attached letter) should be an easy matter. Enclose a copy of the deed to show the property was transferred during the life of the beneficiary. If the estate is more complicated, then consumers should seek advice from their attorney, legal services or CANHR before completing and returning any questionnaires or forms.

VIII. How Does a Survivor Appeal an Estate Claim?

A. Hardship Waivers and Estate Hearings: State regulations provide that the applicant (i.e., the dependent, heir or survivor of the decedent) may file for a hardship waiver within 60 days of notice of the claim. The hardship application is provided with the notice of the claim and the itemized billing, along with a copy of the regulations. Consumers are advised to complete the hardship application as completely as possible and to submit substantial documentation to support any hardship. A written decision regarding the hardship application must be sent to the applicant within 90 days of submission of the application. (Although the Department rarely responds within the legal timelines). Under the new regulations, only the applicant's "proportionate share" of the claim will be waived. So, if there is more than one heir, for example, all must file for hardship waivers, unless there is an exempt survivor, e.g., a spouse, a minor or a disabled child.

The applicant may challenge the Department's hardship waiver decision by requesting an estate hearing within 60 days of the date of the Department's hardship waiver decision. The estate hearing is an administrative law hearing and is required to be set within 60 days of the date of the request and must be conducted in the court of appeals district in which the applicant resides. Always try to preserve your appeal rights by filing within the time limits and try to get legal representation at the Administrative Law Hearing.

B. Caregiver Exemption: The new regulations state that the Department shall waive the applicant's proportionate share of the claim if he/she provided care to the decedent for two or more years that prevented or delayed the decedent's admission into a medical or long term care institution. The applicant does not have to be related to the beneficiary, but must be a dependent, heir or survivor. The applicant must have resided in the decedent's home while the care was provided and continue to reside there. The applicant must still complete the hardship waiver form and must also submit written medical documentation that shows that the applicant provided a level of care for at least two years that delayed the deceased beneficiary's entry into a medical facility. This includes a statement from the doctor or other medical provider attesting to the deceased's condition prior to entering the medical facility and what specific level and frequency of care the deceased received from the applicant. Declarations from medical providers, copies of pertinent medical records, etc. can be useful in documenting the extent of the caregiving provided.

C. Judicial Review: Estate hearing decisions can be appealed judicially by filing a writ of mandate with the appropriate court. The state may also refer the claim to the Office of the Attorney General if the claim is not paid and their collection efforts are unsuccessful.

D. Legal Representation: The hardship waiver and appeal processes can be complicated and many surviving beneficiaries of the estate cannot afford legal representation. Contact your local office of legal services if your case is complicated and you cannot afford legal representation. You can also contact the CANHR office for consultation or a referral to the appropriate legal services office.

IX. How Do I Avoid an Estate Claim?

The best way to avoid an estate claim is to leave nothing in the estate. Most Medi-Cal beneficiaries leave nothing but a home. If the property is transferred out of the beneficiary's name during life, the state cannot place a claim. Any transfer of real property can have tax consequences that may outweigh a Medi-Cal estate claim. Currently, there are a number of legal options (irrevocable life estates, occupancy agreements, certain types of trusts) available to avoid probate, avoid tax consequences and avoid estate claims. Anyone considering a transfer of real property should consult an attorney experienced in the Medi-Cal rules and regulations.

For specific questions about avoiding recovery or the recovery process, call the CANHR hotline @ (800) 474-1116.

  “In the past, Medi-Cal has not pursued estate recoveries on “life estates” held in the name of the Medi-Cal beneficiary. After much debate and public comment, Medi-Cal has now determined it will continue the policy of no estate recovery claims on the life estate interest held by a Medi-Cal beneficiary.”

My thanks to CANHR for the above analysis!


I have three general observations on the "morality" of planning for Medi-Cal.

First, how many of us have owned a home with a mortgage on it? Probably most of us. How many of us have deducted our mortgage interest payments on our tax return? Probably all of us. How many of us have had moral or ethical qualms about arranging our financial affairs (i.e. the purchase of a home) to take advantage of the benefits available under the Tax Code? Probably none of us! Why should planning for the protection of our assets be morally different under either the Tax Code or Medi-Cal laws? Both sets of laws exist as social policies of our government.

Next, ponder the fact that our federal health care insurance system (Medicare) refuses to cover prescriptions, or "custodial care" in convalescent hospitals. The result is gross discrimination against elderly women, who tend to live longer than men and therefore suffer more chronic diseases. Unlike men, whose more common "acute" life-threatening illnesses are covered by Medicare, women face higher disease rates and lower death rates. As a result, women are hardest hit by a Medicare system that refuses to fund prescriptions and long-term custodial care. Elderly women especially must look to Medi-Cal planning for protection against impoverishment.

Finally, it strikes me as absurd that whether an elderly American is insured for illness depends on whether the illness is "politically correct"! Heart surgeries, catastrophic injuries, renal failure, and cancer, are all diseases that can cost countless thousands of dollars to treat. Under what rational basis do we say to these people “you have the right disease, you're covered", and then turn our backs on those afflicted with Alzheimer's, ALS, and stroke or broken-hip induced custodial care? We need a rational, comprehensive, national health care system. In the mean time, we need to make sure that our senior citizens have the fullest protection of the laws. In California that includes a thorough understanding of how Medi-Cal might fund long-term custodial care.


The above analysis is just the tip of the iceberg in terms of options and strategies involved with Medi-Cal planning. Not included is any analysis of the ethical burdens and responsibilities of the attorney, or the appropriateness and personal consequences of Medi-Cal planning.

The focus of this article is simply this: to ensure that when someone you know is faced with prospective entry into a long-term care facility (regardless of their assets!), you can make them aware of the possibility of planning for Medi-Cal and can then get them to an Elder Law attorney!


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