How to Avoid Medi-Cal Estate Recovery in California

Short Answer

To avoid Medi-Cal estate recovery, California residents can use asset protection strategies such as revocable living trusts, irrevocable trusts, joint tenancies, and estate planning tools that legally transfer or shield assets from estate claims after death — ensuring that beneficiaries and heirs receive their inheritance without government liens or recovery actions.

Introduction: Understanding the Hidden Cost of Medi-Cal Benefits

For many California families, Medi-Cal provides essential coverage for nursing home care, hospital services, and prescription drugs. However, few realize that after a recipient’s death, the state may recover the cost of those Medi-Cal benefits from the recipient’s estate. This process — known as Medi-Cal Estate Recovery — can place liens on a home, real property, or other assets, impacting your beneficiaries and estate settlement.

At Moravec Varga & Mooney, our experienced elder law attorneys help clients protect their estate, home, and inheritance through strategic Medi-Cal planning. By understanding California law and the available exemptions, you can prevent unnecessary recovery and preserve your family’s financial future.

1. What Is Medi-Cal Estate Recovery?

Under federal and state law, the California Department of Health Care Services (DHCS) can file an estate claim to recover the cost of Medi-Cal services paid on behalf of a deceased Medi-Cal beneficiary who was 55 or older or received long-term care.

Key Points:

• Recoverable services include nursing home, hospital, and prescription drug costs.

• Recovery applies only to assets owned by the deceased at the time of death, such as their home or real property.

• Estate recovery occurs through the probate process, unless assets are legally shielded or transferred.

• Certain assets are considered exempt property, and hardship waivers may also apply.

Without proper estate planning, your estate value could be reduced by thousands of dollars due to state recovery claims.

2. Who Is Affected and When Does Recovery Happen?

If you are a Medi-Cal applicant or recipient over 55, your estate may be subject to recovery after your death. DHCS typically files a claim after being notified via the death certificate or estate notification by your personal representative.

Recovery may occur when:

• The deceased owned a home or real property at the time of death.

• Assets go through probate court under the California Probate Code.

• No surviving spouse or disabled child is living in the home.

• There is no trust or joint ownership arrangement shielding the assets.

However, if your property passes through a trust or joint tenancy, or qualifies as exempt, it often avoids estate recovery altogether.

3. Proven Legal Strategies to Avoid Medi-Cal Estate Recovery

Avoiding Medi-Cal recovery requires proactive estate and asset protection planning. Below are the most effective, legally compliant strategies recognized under California law:

A. Establish a Revocable Living Trust

A revocable living trust transfers ownership of your assets to the trust during your lifetime.

• Keeps property out of probate, thus beyond the reach of estate recovery.

• Allows you to maintain control while alive.

• Simplifies estate settlement and property transfer to beneficiaries.

B. Use an Irrevocable Trust

An irrevocable trust offers stronger protection because assets placed in it are no longer legally yours.

• Shields homes, pension funds, life insurance, and savings.

• Reduces estate value subject to recovery.

• Requires professional guidance to comply with Medi-Cal policy and federal law.

C. Joint Tenancy or Life Estate Arrangements

Transferring property into joint tenancies or life estates can help protect a home from future liens.

• On your death, ownership passes directly to the survivor, bypassing probate.

• Must be established correctly under California state regulations.

D. Transfer Property Before Death

Gifting or transferring property to heirs during your lifetime — while ensuring you retain adequate resources — can reduce the estate claim exposure.

• Must comply with federal approval and Medicaid look-back periods.

• Should only be done under legal counsel to avoid penalties or eligibility issues.

E. Claim the Home Exemption

Under California’s home exemption rules, if a surviving spouse, minor child, or disabled heir resides in the property, the state cannot pursue recovery until their death or transfer of ownership.

F. Apply for a Hardship Waiver

When estate recovery causes significant financial hardship to heirs, DHCS may grant a hardship waiver.

• Applies to estates of modest value or when the home’s fair market value is low.

• Must be requested promptly after receiving the estate claim notice.

4. Common Misconceptions About Medi-Cal Recovery

Many families misunderstand how Medi-Cal estate recovery works, often leading to costly mistakes.

Myth vs. Reality

• Myth: “If I have a home, Medi-Cal will take it.” Reality: Proper asset protection using a trust or property transfer can prevent this.

• Myth: “I can’t qualify for Medi-Cal if I transfer property.” Reality: Certain transfers and trusts are legal under California and federal law when done with professional guidance.

• Myth: “Recovery applies to all my assets.” Reality: Exempt property, such as a burial plot, life insurance, or pension funds, may be excluded.

Understanding your legal rights and the probate code is critical to preventing unnecessary estate claims.

5. The Role of Legal Counsel and Estate Planning Professionals

Avoiding Medi-Cal estate recovery isn’t about loopholes — it’s about lawful asset management and informed planning. Working with an elder law attorney ensures your estate plan is compliant with state and federal law, while maximizing asset shielding.

At Moravec Varga & Mooney, we offer tailored Medi-Cal planning, trust administration, and estate management strategies designed to protect your estate and honor your final wishes. We handle all legal documentation, property management, and probate avoidance steps, providing peace of mind and clarity for you and your family.

Conclusion: Protect Your Estate Before It’s Too Late

Proactive planning is your best defense against Medi-Cal estate recovery. Don’t wait for a crisis — take steps now to protect your home, estate, and inheritance from government claims.

At Moravec Varga & Mooney, we’re dedicated to helping California families preserve their assets, reduce liens, and secure their legacy.

📞 Call Moravec Varga & Mooney today to schedule your confidential consultation and learn how our Medi-Cal planning attorneys can help you build a secure future for your beneficiaries and heirs.