“Mom Was on Medi-Cal. Does That Mean the State Can Take Her House?”
When Robert’s mother passed away, his first question was not about the inheritance.
It was about the house.
“Mom was on Medi-Cal for years. Are we going to have to sell the house to pay the state back?”
It is a question many California families ask. And it often comes from a misunderstanding about how Medicare, Medi-Cal, and estate recovery actually work.
Medicare and Medi-Cal are not the same program
The names sound similar, but they serve different purposes.
Medicare is a Federal health insurance program primarily for people age 65 and older, as well as certain younger individuals with disabilities and specific medical conditions. It helps cover things like hospital care, physician services, rehabilitation, and prescription drugs.
Medicare generally does not pay for long-term custodial nursing home care.
Medi-Cal is California’s Medicaid program. It provides health coverage for eligible low-income individuals and families and can also help pay for certain long-term care services, including nursing facility care and qualifying home- and community-based services.
For estate planning purposes, that distinction matters.
How Medi-Cal estate recovery works
Federal law requires states to have Medicaid estate recovery programs. These programs allow states to seek reimbursement from the estates of certain Medi-Cal recipients after death for qualifying benefits paid on their behalf.
But California’s rules are more limited than many people realize.
For Medi-Cal beneficiaries who die on or after January 1, 2017, recovery is generally limited to:
- Assets that are part of the deceased person’s probate estate; and
- Certain federally required categories of Medi-Cal benefits, primarily related to long-term care services.
In other words, the question is not simply:
“Did this person receive Medi-Cal?”
The more important questions are:
“What benefits did Medi-Cal pay for?” and “What assets are actually part of the probate estate?”
Why the way assets are owned matters
Robert’s mother had worked with an estate planning attorney years earlier. Her home had been transferred into a properly funded revocable living trust.
Her investment accounts were also titled in the trust.
Because those assets passed through the trust rather than through probate, they generally were not part of the probate estate for purposes of California’s current Medi-Cal estate recovery rules.
The family did not avoid Medi-Cal recovery through a special loophole. Instead, they had an estate plan that was designed to control how their assets would pass after death.
Why this matters for California homeowners
Many people create a revocable living trust because they want to avoid probate, keep their affairs private, and make the transfer of assets easier for their family.
In California, avoiding probate can also affect how certain assets are treated under the current Medi-Cal estate recovery rules.
But a trust is not a one-size-fits-all solution.
Estate recovery depends on the individual circumstances, including:
- The type of Medi-Cal benefits received;
- When the benefits were provided;
- How assets are titled;
- Whether assets are part of the probate estate; and
- Whether certain legal protections apply.
California law also provides important protections in certain specific situations, including when there is a surviving spouse or registered domestic partner, a child under age 21, or a child who is blind or permanently disabled.
The estate planning lesson
The biggest mistake families make is waiting until there is a crisis to ask these questions.
Estate planning is not just about deciding who receives your assets.
It is also about understanding how those assets will pass, how your family will access them, and whether your plan still works when circumstances change.
For California families, a conversation about Medi-Cal, long-term care, and asset ownership can be an important part of making sure the estate plan does what it was intended to do.
Have Questions About Medi-Cal and Your Estate Plan?
If you are concerned about how Medi-Cal, estate recovery, or the way your assets are titled could affect your family, you do not have to figure it out on your own. Schedule a free, no-obligation consultation to discuss your situation, understand your options, and determine whether your current estate plan is structured to protect what matters most to you and your family.
