When Californians apply for Medi-Cal, which is our state’s version of Medicaid, they often believe that by listing their home as exemption, they are protecting it from being taken to repay the benefits they’ve received from Medi-Cal. However, that’s not the case. Just because an asset is listed as exempt on the application, that doesn’t mean that it’s exempt from benefits recovery action.
If you or a loved one needs to apply for the Medi-Cal program, there are ways to protect your home for yourself and your heirs. The people at Medi-Cal can’t offer advice on how to exempt your home from a Medi-Cal lien, but a California estate planning attorney with experience helping seniors with their unique issues can provide valuable guidance. Following are several options:
— An irrevocable living trust: This type of trust lets you protect your home from a Medi-Cal lien without having to give it to your children, who may not yet want it or be able to handle the mortgage. In California, unlike other states, you can’t be ruled ineligible for Medi-Cal because you transferred your home and other exempt assets before or during the Medi-Cal eligibility period.– Give the home to a family member: If you have a child or other trusted family member who’s financially able to afford the maintenance and taxes on the home, as well as pay any remaining mortgage, this is an option. However, the person to whom you give the house wouldn’t fare as well under the tax code as if he or she inherited it after your death.– Life estate: Under California law, a life estate allows a person to keep a property for the remainder of their life and then pass it to their heirs. This lets them avoid a Medi-Cal lien on the property, while allowing their heirs to take advantage of the Internal Revenue Service “step-up basis” so that they won’t be taxed on any increase in value of the property. They only face taxes on any increases from the property’s fair market value at the time of the homeowner’s death.
Your home is likely the single most valuable asset you have, so it’s important to protect it. That’s why it’s wise to seek legal guidance before applying for Medi-Cal.
Source: A Place for Mom, “How Can You Protect Your Assets from a Medicaid Lien?,” Kimberley Fowler, accessed Nov. 03, 2016