Sacramento Estate Planning Attorney | California Probate and Trust, PC
Your home is likely your most valuable asset. For many Sacramento families, decades of mortgage payments, home improvements, and appreciation have built substantial equity-often $500,000, $800,000, or more in areas like Granite Bay, Folsom, and Roseville.
But here’s what most homeowners don’t know: if you need long-term nursing care and qualify for Medi-Cal, the State of California can place a claim against your home after your death to recover benefits paid.
This is called “Medi-Cal estate recovery,” and it can force your heirs to sell your family home to satisfy the state’s claim-even if you spent years carefully planning your estate.
The good news? With proper legal planning, you can protect your home while still qualifying for the Medi-Cal benefits you need to pay for long-term care.
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Under California Probate Code § 215, the Department of Health Care Services (DHCS) has the authority to seek reimbursement from your estate for Medi-Cal benefits paid when you were 55 or older for:
– Nursing facility services
– Home and community-based services
– Related hospital and prescription drug costs
This means: If you own a home when you pass away and you received Medi-Cal long-term care benefits, the state can file a claim against your estate-and your home is often the primary asset available to satisfy that claim.
There’s no cap. If you received $300,000 in nursing home care over several years, California can seek to recover the full $300,000 from your estate, including your home.
For a Sacramento family with an $800,000 home, this could mean:
– State files $300,000 claim
– Heirs must sell the home to pay the claim
– Estate administration costs add another $20,000-$40,000
– Net inheritance is reduced by $320,000-$340,000
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Many people believe that if they create a living trust, their home is “protected” from Medi-Cal recovery. This is false.
A standard revocable living trust does not protect your home from Medi-Cal estate recovery. The home remains part of your estate and is subject to recovery claims after death.
Even transferring your home to an irrevocable trust doesn’t automatically solve the problem-if done improperly or at the wrong time, it can:
– Trigger Medi-Cal penalty periods
– Create tax consequences
– Complicate your estate plan
– Still fail to prevent recovery
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This is the most common question estate planning attorneys hear: “Can I just deed my house to my kids to protect it?”
Short answer: Not without serious risks.
California has a 30-month look-back period for asset transfers. If you transfer your home for less than fair market value within 30 months of applying for Medi-Cal, you’ll face a penalty period of ineligibility.
Example:
You transfer your $800,000 Granite Bay home to your children in January 2025. In June 2026 (18 months later), you have a stroke and need nursing home care.
At approximately $8,000/month for nursing costs, an $800,000 transfer creates a 100-month (over 8 years) penalty period during which you’re ineligible for Medi-Cal.
Result: You must either:
– Private-pay $8,000/month out of pocket (but you just gave away your biggest asset)
– Rely on your children to pay
– Forego necessary care
Even if you transfer your home well before the 30-month look-back period, you face:
1. Loss of Control
Once you deed your home to your children, it’s legally theirs. They can:
– Sell it without your consent
– Mortgage it
– Lose it in bankruptcy or divorce
– Have it seized by creditors
2. Capital Gains Tax Consequences
When you transfer property during your lifetime, your children inherit your original cost basis. If you paid $100,000 for a home now worth $800,000, your children face capital gains tax on $700,000 when they sell.
If instead you keep the home until death, they receive a “step-up in basis” to current market value-eliminating capital gains tax entirely.
3. Property Tax Reassessment
In California, transferring property can trigger Proposition 13 reassessment, potentially increasing annual property taxes by thousands of dollars.
4. Medicaid/Medi-Cal Eligibility Issues
Improper transfers can delay eligibility by years, leaving you without coverage when you need it most.
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Rather than simply “giving away” your home, several legitimate legal strategies can protect your property while preserving Medi-Cal eligibility.
