On June 27, 2016 Governor Brown signed the SB 833 legislation sponsored by State Senator Hernnndez. SB 833 will greatly reduce the future scope of California’s Medi-Cal Estate Recovery against the estate of deceased Medi-Cal beneficiaries. For Medi-Cal recipients who die on or after January 1, 2017, claims by Federal law requires the states to seek adjustment or recovery from an individual’s estate for specified medical assistance, including nursing facility services regardless of age if the person was permanently institutionalized, home and community-based services, and related hospital and prescription drug services, if the individual was 55 years of age or older when he or she received the medical assistance.
Under SB 833, Medi-Cal will only be able to proceed against assets that are part of the deceased Medi-Cal recipient’s “probate estate”. The probate estate is limited to those assets that would be included in a probate were the deceased recipient’s estate is to be probated. Presumably this applies regardless of whether or not the deceased recipient’s estate is ever actually probated or not; that is, assets inside the estate of a decedent which is appraised at under the $150,000 probate threshold would presumably be considered to be a part of the decedent’s probate estate for Medi-Cal estate recovery even though no probate is required.
This offers a significant planning opportunity: Effective January 1, 2017, assets that transferred into a living trust prior to the deceased settlor’s death are, therefore, not subject to Medi-Cal Estate Recovery claims against the deceased settlor. The same is true for assets held as joint tenancy estates and or life estate assets, these pass automatically at death without becoming part of the decedent’s probate estate. Likewise, it would appear that the same outcome will also apply for real property transferred by means of the new Transfer on Death Deed. This should motivate those who receive Medi-Cal to consider how best to keep their assets outside of their probate estate (one way or another) to avoid Medi-Cal recovery against their estates and so protect their loved ones.
That assets held in a decedent’s revocable living trust will avoid both probate and Medi-Cal estate recovery simultaneously is very important. Living Trusts can provide more protections to decedent’s intended beneficiaries and offer more “what if contingency planning than is true of joint tenancy, life estates or "Transfer On Death" Deeds. Avoiding probate saves time & money and avoids the uncertainty associated with court proceedings.
The foregoing is great news. Start planning now to protect and preserve your assets and take care of your loved ones.