“Is My Home Really Protected Under Medi-Cal?”
Neil A. Harris, Certified Elder Law Attorney (CELA)
Harris & Plottel, LLP
Perhaps one of the most misunderstood concepts in Medi-Cal is the principal residence exemption. Unfortunately, discovering the limitations of that exemption often occurs too late for corrective action. The following is a brief overview of Medi-Cal’s treatment of a principal residence both during life and subsequent to death.
As many of you already know, in determining Medi-Cal eligibility, the Eligibility Worker will divide your assets into two general categories, exempt and non-exempt. While, under current law, there is no value limit on your exempt assets, the total value of all of your non-exempt will be limited.
In most cases, the most valuable and important exempt asset is your principal residence. The principal residence is defined as a dwelling, fixed or mobile, located on land or water. While many people believe that the principal residence is restricted to a house, the exemption is much greater than just a dwelling. It includes all of the land on which the dwelling is located as well as all of the land and/or buildings that surrounds, is contiguous to or adjoins the land on which the dwelling is located. The principal residence can be a single family house, a duplex, a ranch or farm of many acres, an apartment complex, the house next door or even the house across the street as long as the residence and house across the street are only separated by a public thoroughfare. Under current law, there is no principal residence value limitation. When the yet to be promulgated new Medi-Cal regulations are enacted, the value of the principal residence will be capped at $750,000.00 as determined by the most recent property tax assessment bill.
The principal residence will be considered exempt as long as the Medi-Cal applicant or recipient resides in the residence. If the applicant or recipient is not able to live in the residence, the residence exemption will continue if the applicant or recipient’s spouse, dependent (under 21 years of age), disabled (as determined by the Social Security Administration) or legally blind child resides in the residence. If none of the above is possible, the residence will remain exempt as long as the applicant or recipient subjectively intends to return to the residence. The subjective intent to return is simply a willingness to return if and when the applicant or recipient is able. The actual ability to or the likelihood of return to the residence is not relevant to continued exemption. This is an extremely important issue in applying for or maintaining continued eligibility when a person is in a skilled nursing facility. In almost all cases, when asked if the applicant or recipient intends to return to the residence, the response should be yes even if return is unlikely or impossible.
Even though many people understand that the principal residence is exempt even if the applicant or recipient is not physically living in that residence, some fear that Medi-Cal will impose a lien on the principal residence upon eligibility for Medi-Cal. In actuality, the State of California is prohibited from placing a lien on the exempt principal residence. The State may impose a lien where a person is placed in a skilled nursing facility and that person declares that s/he does not intend to return to the residence. The applicant or recipient may change that declaration at any time and the State is required to remove the lien upon the applicant or recipient’s declaration of intent to return or when the applicant or recipient actually returns to the residence.
While the principal residence exemption exists as long as the applicant or recipient maintains a subjective intent to return, that same exemption does not survive the death of the applicant or recipient’s death.
At the death of the Medi-Cal recipient, the State must be given actual notice of the death by sending a copy of the recipient’s death certificate to the Sacramento office of the California Department of Health Care Services (DHCS). The State is mandated to recover the Medi-Cal payments made on behalf of any person who received such services after reaching age 55 or for any benefits paid on behalf of any resident of a skilled nursing facility regardless of his/her age. The State is authorized by federal law to recover the amount paid of Medi-Cal benefits on behalf of a recipient or the value of the assets owned by the recipient at death, whichever is less. Since the most valuable of the exempt asset allowed to a Medi-Cal recipient is usually the principal residence, most recovery actions are tied to the value of the principal residence.
The State is prohibited from recovery while the deceased Medi-Cal recipient’s spouse is still living. At the death of the recipient’s spouse, however, the State must be formerly notified of the surviving spouse’s death. Thereafter, the State will seek recovery of the value of the deceased recipient’s assets (usually an interest in the principal residence) passing to the surviving spouse by Will, Trust, joint tenancy or any other form of succession. Again, this recovery is limited to the value of the recipient’s assets passing to the surviving spouse not all of the assets owned by the surviving spouse at his/her death. If the recipient did not own an interest in any assets at his/her death, the State is prohibited from recovery against the surviving spouse at his/her death.
The State is prohibited from any recovery where the Medi-Cal recipient is survived by a dependent, disabled or blind child even if that child does not receive any of the recipient’s assets.
As should be noted from the above discussion, exempting the principal residence is an eligibility issue but that exemption does not normally extend to the recovery process following the recipient’s death. Good long term care planning should include options for eligibility as well as asset protection from recovery. Knowledge is the first step in good long term care planning.