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Medi-Cal Planning: The Additional Benefits of a Revocable Living Trust

On Behalf of | Oct 27, 2021 | Trusts

So everyone knows (or should know by now!) that there are multiple benefits to creating and holding your assets in a revocable living trust. But one benefit you may not know about is that in the state of California, a change in the law in 2017 now allows you to protect your assets from Medi-Cal recovery if they are in a revocable living trust.

By law, the California Department of Health Services (“DHCS”) must be notified whenever a person dies in California, regardless of whether that person received Medi-Cal benefits during their lifetime. If a person received Medi-Cal benefits during their lifetime, the DHCS will seek repayment from the beneficiary’s estate after the Medi-Cal beneficiary dies, subject to several important limitations. This is known as Medi-Cal recovery.

A recent change in California law represents a profound shift in the Medi-Cal recovery rules. The new law, which applies to Medi-Cal recipients who died after January 1, 2017, greatly expands the assets exempt from Medi-Cal recovery and reduces the medical services provided by Medi-Cal for which DHCS may seek recovery.

Property transferred before death is exempt from Medi-Cal recovery. Property not subject to probate is exempt – this includes property held in a trust, property held jointly, and property that has named pay on death beneficiaries (to include life insurance and retirement accounts, so long as the decedent’s estate is not named as the beneficiary).

People who have a revocable trust already know that a properly funded revocable living trust removes assets from your probate estate. Under the new Medi-Cal recovery rules, assets placed under the umbrella of a revocable living trust are not subject to probate and are now also exempt from recovery for Medi-Cal. Setting up and funding a revocable living trust in your lifetime is easier than you think with more benefits than you ever knew. Don’t delay and get your trust established today.