If a parent or loved one received Medi-Cal, you may have heard that the state can “take the house” after they pass away. Medi-Cal estate recovery is real, but it’s much narrower than many families fear, especially since California changed the rules in 2017. Understanding how it works can help you protect your family’s options.

We’ve been buying houses in California since 2003, and we’ve bought more than 100 inherited and probate homes. We’re not attorneys or Medi-Cal specialists, and the rules have important details and exceptions. Please talk to an elder law or estate planning attorney about your situation. Here’s a plain-English overview.

What Is Medi-Cal Estate Recovery?

Medi-Cal estate recovery is the process California’s Department of Health Care Services (DHCS) uses to seek repayment, after a Medi-Cal member dies, for certain benefits the program paid. It’s required by federal Medicaid law, and every state has a version of it.

Recovery doesn’t happen while the member is alive, and it isn’t a lien that forces a sale during their lifetime. It’s a claim that may be made against the member’s estate after death.

What Changed in 2017

For Medi-Cal members who died on or after January 1, 2017, California significantly limited estate recovery. In general:

• Recovery is limited to the probate estate. Assets that pass outside of probate, such as property in a living trust, joint tenancy, or a transfer on death deed, are generally no longer subject to a Medi-Cal estate claim.
• Recovery is limited to certain services. For members 55 and older, recovery is generally limited to nursing facility care, home and community-based services, and related hospital and prescription drug costs, rather than all Medi-Cal costs.
• No recovery from a surviving spouse’s estate. California generally no longer seeks recovery from the estate of the member’s surviving spouse.

This is why estate planning matters so much. If a home is held in a living trust or passes by a transfer on death deed, it generally stays out of probate and out of reach of a recovery claim under current rules. Our guide to the transfer on death deed in California explains one of those tools. Talk to an attorney before changing title, since the details matter.

Who Is Exempt?

Even when a home is in the probate estate, DHCS generally won’t make a claim (or will defer it) if the member is survived by:

• A spouse (or registered domestic partner)
• A child under 21
• A child of any age who is blind or disabled

Heirs can also apply for a hardship waiver. For example, a waiver may be available when the home is of modest value or when an heir would suffer substantial hardship if a claim were enforced. Waivers have specific rules and deadlines, so get help from an attorney or a group like California Advocates for Nursing Home Reform (CANHR). You can read DHCS’s own explanation on its Estate Recovery Program page.

What Heirs Should Do

1. Find out how the house is titled. Was it in a living trust, joint tenancy, a transfer on death deed, or in the person’s name alone? That often determines whether recovery applies at all.
2. Notify DHCS if required. When a probate is opened for someone who received Medi-Cal, the personal representative generally must notify DHCS. Your probate attorney will handle this.
3. Ask for the claim amount in writing. If DHCS makes a claim, you can review it and ask questions. It may be less than you expect.
4. Check exemptions and waivers. Don’t assume a claim must be paid in full.
5. Don’t let the house sit. Property taxes, insurance, and repairs keep coming during probate. Our guide on how long probate takes in California explains the timeline.

What Happens When the House Is Sold

If there’s a valid Medi-Cal claim against the probate estate, it’s generally paid from the estate’s assets, often from the sale proceeds at closing, along with any mortgage and other debts. The claim is typically limited to the value of the estate; heirs aren’t generally required to pay it out of their own money.

If the house also had a reverse mortgage, that loan is paid off first. Our article on what happens to a reverse mortgage after death explains that part.

How We Help Families in This Situation

When a family decides to sell, we can buy the house as-is, with no repairs or cleanout required. We buy from court-appointed administrators in probate and from trustees, and we work with probate attorneys and title companies so any claims and payoffs are handled through escrow. Out-of-state heirs can usually sell without coming to California. Our complete guide to selling an inherited house in California covers the rest of the process.

When a Cash Sale Isn’t the Best Option

If the house is outside the probate estate and in good condition, the family may have time to list it and get a higher price. If an heir qualifies for an exemption or hardship waiver and wants to keep the home, keeping it may make more sense than selling. A cash sale is usually most helpful when the home needs work, the heirs live far away, or the estate needs to settle debts and close.

Frequently Asked Questions

We’re Here to Help

If your family is dealing with an inherited house and questions about Medi-Cal, we’re happy to talk it through and give you an honest, no-obligation cash offer you can share with your attorney. There’s no pressure. Call Lawrence at (510) 824-8710 or fill out the form below.