In June this year, Governor Jerry Brown signed the proposed California Budget for 2017. While most newspapers focused on the hot-topics like an increase to the rainy-day fund, there is also a big change for those of us in the estate planning world that we are all still getting to grips with. As of January 1, 2017, the estate recovery rules for Medi-Cal (California’s unique version of the federal Medicaid program) are reworked to limit what assets are available for recovery.
Medi-Cal is a needs-based government program that helps provide homes and living assistance to elderly California residents. In most circumstances, the California Department of Health Care Services submits a claim against the person’s estate after they pass to collect back what was paid. This is like a death tax limited only to people who received the extra service.
Under prior rules, estate recovery was allowed to make claims against assets held in a decedent’s Revocable Living Trust. Under the new rules, California will not be able to make a claim against assets held in a Revocable Living Trust. Previously, costly, complex, and irrevocable planning was needed to achieve this type of estate recovery protection. Now, a standard Revocable Trust-Based estate plan will avoid most Medi-Cal estate recover claims. This is a groundbreaking shift for people who may end up receiving Medi-Cal at some point later in life and have gifts they want to leave to loved ones. Exactly what to do is still uncertain and most Attorneys are waiting for early 2017 to see how things work in practice. One thing is certain though: everyone who was previously okay with doing just a Will now has a strong reason to set up a Revocable Living Trust.
We are members of the California Advocates for Nursing Home Reform (CANHR) and find their seminars and legal updates to be great California-focused resources. CANHR released their new Medi-Cal Recovery Laws Booklet available on their website here with a printed version for $1.00 or for free as a downloadable PDF by clicking the link on their page. CAHNR provides great materials written in simple terms to help summarize the convoluted rules so people who are not legally trained can understand. Most importantly, page 9 includes the updated list of what type of property is exempt from Estate Recovery. We encourage you to take a look, and consider how these rules may affect your estate plan.