Q. Mother recently died after spending two years in a nursing home on Medi-Cal. Medi-Cal just sent us a bill for about $150,000 and says it will file a claim against her home.  Yikes!  We thought her home was an exempt asset.  What do we do about the bill?

A. Your situation is all too common: families often confuse the Medi-Cal “eligibility” rules with the “recovery” rules. Her home was, indeed, exempt for eligibility purposes, but that exemption expired upon your mother’s death.  Her home and most other exempt assets then became exposed to a Medi-Cal “payback” claim. This is called “estate recovery”.  Let’s review the basic rules to see if any might give you some relief:

1) Your Own Assets Are Not at Risk. First, know that you and your siblings do not have a personal obligation to pay back Medi-Cal from your own assets.  Only your mother’s assets, including her home, are subject to recovery.

2) If No Probate, then No Recovery:  If her home and other assets do not go through probate, then under current law they will not be subject to recovery. Thus, assets held in a “Living Trust” or in financial accounts with a beneficiary designation will not be subject to recovery. This exclusion is, by far, the most popular exemption from recovery. It also underscores the need for lifetime planning using a “Living Trust” to hold assets and/or naming beneficiaries on bank and financial accounts.

3) If Survived by Spouse or RDP:  If your mother were survived by a spouse, or a Registered Domestic Partner, then there would be no recovery as to those Medi-Cal beneficiaries who died after January 1, 2017, when the law on this point became effective.

4) If Survived by Blind or Disabled Child:  Medi-Cal will withdraw its claim entirely upon proof that your mother is survived by a blind, minor or disabled child, usually established by proof that the child is receiving Social Security disability benefits.  Here, it does not matter whether the disabled child is an adult, nor whether he/she lived in your mother’s home or even relied upon her for support.

5) If Prove “Hardship”, No Recovery:  Medi-Cal will waive its claim if the surviving family members can prove “hardship”, based on one or more of six specific factors.  One factor is a showing that a child lived in the parent’s home and provided care for the parent for at least two years, thereby delaying the parent’s entry into a nursing home.  Another is a showing that allowing the surviving child or other beneficiary to receive his/her full inheritance would enable him/her to go off public benefits and be self-supporting.

6) Home of “Modest Value”:  Medi-Cal will waive its claim as to the home if it is determined to be of one of “modest value”, i.e. valued at less than 50% of the average value of homes in your mother’s county of residence as of her date of death. One can secure this information on the internet, e.g. from the website of “Realtor.com”, or another reliable site.

(7) Offer Voluntary Lien:  If there is no basis to seek waiver or deferment of the claim, you might seek a “Voluntary Post-Death Lien” to defer payment.  This lien allows the survivors to continue to reside in the home while paying an agreed monthly installment against the amount of the Medi-Cal claim, which claim does accrue modest interest.  The balance of the claim would be paid when the home is sold or transferred.  To qualify, the survivors must be residing in the home, be unable to pay the claim in full, and be unable to obtain financing to do so.

For families with a loved one currently on Medi-Cal, we urge seeking the advice of an elder law attorney to determine whether steps can be taken now to avoid a later Medi-Cal recovery claim and thereby preserve assets for the benefit of surviving family members.  We also suggest planning during your loved one’s lifetime to avoid probate, such as by creating a Living Trust to hold assets. Remember the wise adage: ‘An ounce of prevention is worth a pound of cure’