San Diego Estate Planning Lawyer Blog
An estate is not only responsible for distributing property after your death. It must also pay any valid debts to the extent your assets allow. Medical debts are a common expense most estates must pay. And if the deceased received health care benefits from the California Medical Assistance Program (Medi-Cal), the estate may have to reimburse the State of California for some of those expenses.
Estate Recovery
This is known as estate recovery. Medi-Cal is part of the federal Medicaid program. Medicaid rules require states to try and recoup the costs of certain long-term care from the estates of now-deceased recipients. California law goes even further and seeks recovery of costs for most covered services provided to people ages 55 and over. The Affordable Care Act (aka “Obamacare”) prohibits California from conducting estate recovery if the beneficiary was under 55 and received coverage under the low-income expansion to Medicaid and Medi-Cal.
If a beneficiary, regardless of age, is permanently institutionalized and owns a home, Medi-Cal may place a lien on the beneficiary’s residence during his or her lifetime. Otherwise, estate recovery may not begin until after the beneficiary’s death. If the beneficiary was married, recovery may not begin until after the spouse’s death. There may also be no estate recovery if the beneficiary left minor or disabled children.
Estate recovery is limited to the lesser of the costs claimed by Medi-Cal or the value of the estate’s assets. There are also hardship exemptions available for certain low-income individuals.
Estate Recovery In Practice
A recent California appeals court decision illustrates how estate recovery works. Merver Lee Mays died in 2006. She owned a home in Stockton. She left no will but two surviving children. One of the children, Betty Bedford, was named administrator of the estate, which consisted mostly of the house, which was valued at about $245,000.
The Department of Health Care Services (DHCS), which administers Medi-Cal, filed a creditor’s claim to recover approximately $84,000 for services provided to Mays. Bedford should have paid this claim from the proceeds of the sale of her mother’s house. However, Bedford’s brother had deeded the house to himself, using a power-of-attorney signed by their mother just before her death. A probate judge later held the estate still owned a 50% interest in the house. Bedford later waived this interest in exchange for cash payable to her, not the estate.
Meanwhile, nobody bothered to pay the DHCS. The Department ultimately filed a civil suit against both siblings, maintaining they were now personally responsible for the unpaid $84,000 claim. The probate court-and the Court of Appeal-sided with the DHCS and found that Bedford was personally liable for paying back the DHCS since she personally benefited from her mother’s estate without first bothering to properly administer it.
Planning Ahead
This was a case where a personal representative’s carelessness proved costly. In developing your own estate plan, it is essential you select agents who will comply with the law and not try to circumvent legitimate creditor’s claims. This goes doubly so when dealing with a potential Medi-Cal recovery. If you have any questions, contact the Law Office of Scott C. Soady in San Diego.