Categories assigned to this post:

⭒ CANHR Advocate Did You Know Articles

Avoiding Estate Recovery

That you can avoid a Medi–Cal estate claim?

Many Medi–Cal beneficiaries have called the CANHR office after receiving the “yellow” notice from the Department of Health Care Services. This notice informs Medi–Cal beneficiaries that the state will collect from their estates after they die for the costs of Medi–Cal services received. It goes on to state that they can collect from life insurance policies, retirement accounts and life estates.

What the notice does not say is the following:

  • The state can make a claim only if there is something left in your estate. The best way to avoid a recovery claim is to have nothing in the Medi–Cal beneficiary’s name at the time of death.
  • The state cannot collect from a life insurance policy or a retirement account if you have named a beneficiary of the policy or account. They can only recover if the state is named as the beneficiary or if the policy reverts back to the estate. For example, if the beneficiary of your life insurance policy dies before you do, then the proceeds from the policy may revert back to your estate when you die, unless you have named a secondary beneficiary. Take a look at your life insurance policies and retirement accounts, and make sure you have named the appropriate beneficiaries.
  • The state cannot claim from a life estate where there has been an irrevocable transfer of the interest in the property. If, for example, you irrevocably transferred your home to your children while you are alive and retained a life estate, there will be no recovery against your home.
  • The home is usually exempt as a principal residence, and an exempt asset can be transferred at any time without affecting your eligibility for Medi–Cal. There is no “look back” period or penalty when you transfer an exempt asset.

There are a number of ways to avoid Medi–Cal recovery, and you don’t always need to transfer your home. Any such transactions should be discussed with a qualified estate planning attorney who is familiar with the Medi–Cal rules. If you have questions about Medi–Cal recovery, call the CANHR office or visit our web site for our fact sheet on the Medi–Cal recovery program.