Exemption of Principal Residence

An applicant/recipient's home, interest in a home or life estate, will continue to be the exempt principal residence (PR) if any of the following circumstances exists. Only one residence may be exempt at a time.

Intent to Return

During any absence, a principal residence is exempt based on a person’s subjective intent to return. The intent to return is indicated by the individual or their representative marking the appropriate box on the “Application for Health Insurance” (CCFRM 604). Verification of the individual’s ability to return to the principal residence must not be required unless the individual or his/her authorized representative requests the income deduction for upkeep and repair of the home. A person’s physical ability to return to the principal residence is not considered when determining principal residence.
ExampleExampleAn 84-year-old client has been living with her son in San Jose for more than a year now. She has a home in Oakland which is being rented to non-relatives for more than a year since she started living with her son. She claims her home in Oakland as her principal residence (though she currently doesn’t live there) and intends to return to her home in the future (any day in the future, no time limitation). As long as the client intends to return to her home in Oakland, it can be an exempt principal residence.

Out of State

If the applicant declares a principal residence outside of California, then California residency must be questioned. The EW must review the circumstances to see if the principal residence is exempt and if other facts support the applicant's claim of California residency. The following areas should be considered:

Any evidence that contradicts the client's declared California residency
Whether the property should be treated as other real property
Circumstances surrounding the client's decision to come to California
Physical presence with no intent of leaving
At the time of application, whether the client already had plans to leave California.

Example 1: Exempt out-of-state principal residence and CA residencyExample 1: Exempt out-of-state principal residence and CA residency

The applicant and his spouse own a home in Arizona which was their former residence. They state that they intend to return to their home. Their adult son now resides in the home, however they have no present intent to leave California. They are renting an apartment in Santa Clara County. The EW establishes that the former home is an exempt principal residence and that the couple are residents of California.

Example 2: Not a principal residenceExample 2: Not a principal residence

The facts are the same as in Example 1, but the couple has never lived in the house in Arizona. They intend to retire there someday. Since it is not their former home, it cannot be defined as a “principal residence”. It must be treated as “Other Real Property”.

Example 3: Two homesExample 3: Two homes

The facts are the same as in Example 1, except the couple lives in and owns their home in Santa Clara County (instead of renting an apartment). Only one property may be exempt as a principal residence. The couple must decide which to exempt. The other home is treated as “Other Real Property”. They may still have California residence, as long as the facts indicate that they are living here.

Out-of-County Property

If the property is located out-of-county, MC eligibility may exist. However, this county may not be the county of responsibility. Refer to Inter County Transfers.

Intent to Return is Questionable

A client may have declared intent to return, yet later the EW determines that the property was transferred. Intent to return becomes questionable at the time of transfer.

The client (or the representative) has 10 days to report a change in his/her intent.
A possible overpayment may result.
If the property is transferred to someone who is willing to let the client return to the home should he/she be able to do so, the home remains exempt. Obtain an affidavit from the new owner.

Child, Spouse or Dependent Relative in Home

If during any absence, the applicant/recipient's spouse, children under 21 years of age, a dependent relative, or a blind/disabled child age 21 or older lives in the principal residence, it is exempt. A medical determination of disability or blindness must be provided. If such determination is not readily available, the individual’s statement of dependency is an acceptable alternative to exempt the principal residence.

Blind Child Age 21 or Older

A person is considered blind if there has been a medical determination that he/she has either of the following conditions:

Central visual acuity of no more than 20/200 with correction
Tunnel vision, which is a limited visual field of 20 degrees or less.

Disabled Child Age 21 or Older

The child must meet the federal definition of disability per Title II or XVI (Social Security Act). Acceptable verification includes, but is not limited to:

A copy of SSA/SSI check, or
A Letter from a doctor stating the type and duration of the disability.

Dependency Requirements

If there is a dependent relative, obtain a written statement from the individual and/or the dependent relative describing the nature and degree of dependency. No further follow-up is required until the next annual RD unless it is questionable.

Dependent relative status may be medical, financial or emotional.
The EW is responsible for making the determination of the degree of dependency.
Documentation of reason for the decision must be clear.

Legal Obstacles to Sell

If during any absence, the individual does not intend to return, and no specific relative resides in the residence, but the home cannot be sold because there are legal obstacles preventing the sale, it is exempt. Legal obstacles can include any reason that prevents the client from liquidating the property or his/her share or interest in the property such as, but not limited to:

Another lien (non-county imposed lien,) or
Clouded title
Other individuals on the property who refuse to sell, including a spouse from whom the individual is separated, or
A comatose or incompetent individual who is unable to act for him/herself and has no legal guardian or conservator.

As long as the legal obstacles to the sale exist, the property does not have to be listed for sale. When possible, the individual must submit statements from other parties who refuse to cooperate. If the other parties refuse to provide statements, acceptable verifications include but are not limited to:

Statement of a realtor that legal obstacles prevent the sale of the property.
Copies of registered/certified letters sent from the recipient to other party(ies) requesting their cooperation in listing the property for sale.
As a last resort, the sworn statement of the applicant/beneficiary. In the case of an incompetent applicant/recipient, a statement from an individual or organization having knowledge of the applicant/recipient’s status. In this case, the EW would make a referral to the Public Guardian/conservator.

Note: These obstacles must be reviewed quarterly. New statements/evidence must be submitted to substantiate the continuation of legal obstacles. Document on the Maintain Case Comments window.

Client Not in LTC, Property Listed for Sale

If during any non-LTC absence, the individual does not intend to return, and no specified relative resides in the residence, but a verified effort is being made to sell the property, it is exempt. If property value is under $6,000 plus the property reserve, the client must be offered the choice of listing the property for sale or meeting utilization requirements.

Note: There is no time limit for the length of absence.

The following verification of the listing is required:

An appraisal of the property from a qualified real estate appraiser, and
A copy of the tax assessment, and
A copy of the real estate listing.

The property must be listed at its Fair Market Value (FMV). FMV is the value established by a qualified real estate appraiser. FMV, as it pertains to listing the property for sale is defined as the amount for which comparable properties are being sold in that particular market area as determined by a qualified real estate appraiser.

ExampleExampleIf the assessed value is $89,000, then the Market Value is $89,000. This is not the Fair Market Value. If the appraisal is for $100,000, the Fair Market Value (FMV) is $100,000. The listing must show a price of at least $100,000.

County Level Review (Bagley v Rank)

The client has the right to a County Level Review (CLR) and a state hearing prior to recording of the lien or imposing any requirement to list the property.

An LTC/SNF individual or their representative may request a CLR of the circumstances surrounding their case within 30 days of the date the “List Property for Sale Persons in Long Term Care” (MC 239 W) was sent to the client.

If an applicant requests such review, eligibility must not be approved until after the review and, then, only if the applicant complies with the review decision and is otherwise eligible.

Issues which may be explored are:

Whether or not the individual is absent from the property but intends to return to the principal residence to live.
Whether there are any regulations which would allow the claimant to remain or become eligible for benefits without listing the principal residence for sale, (i.e., a dependent relative resides on the property).
Whether there is any reason why the recipient is unable to comply with the requirements to list the principal residence for sale.

EW Actions

The EW must conduct and document the content and results of the CLR on the CalSAWS Journal Detail page.

The EW must review documents submitted by the recipient or the representative, which may consist of any type of written verification documenting that legal obstacles to sale exist.

The recipient must be informed that the property in question must not be transferred or sold during the County Level Review/State Hearing process, or eligibility for MC may be jeopardized. This information is contained on the MC 239 W.

Note: Property transfered by court-order or that is transferred to the joint tenant upon the death of the recipient may be transferred without an impact to MC eligibility.

The EW must reach a decision about the CLR prior to the date of the State Hearing, if any, but no later than 30 days from the date of request for the county review.

If a State Hearing is pending, and the County Level Review is favorable to the recipient, immediately contact the Appeals Unit for the purpose of obtaining a withdrawal of the request for the hearing.

Reminder: The EW must send a “Notice of Action - Result of County Review” (MC 239 Z) and a copy of the result of the CLR to the recipient.

List Requirements (Non-LTC)

List requirements apply, if during any non-LTC absence, the individual does not intend to return to his/her principal residence and no specified relative resides in the residence. A verified effort must be made to sell the property.

Applicants/recipients with a principal residence having a net market value of less than $6,000 must be offered the choice of listing the property for sale at Fair Market Value or meeting utilization requirements.
Applicants/recipients with a principal residence whose market value is more than $6,000 must list the property for sale at Fair Market Value.

Note: There are no lien requirements for non-LTC clients.

When a non-LTC individual has an interest in a principal residence which must be listed for sale, or, which the client chooses to list for sale, the EW must send an “List Property for Sale Persons Not in Long Term Care” (MC 239 X) which explains:

In order for MC to be established or continued the property must be listed for sale at its fair market value with a licensed real estate broker, and
A copy of the listing contract from the real estate agent and a copy of a written appraisal from a qualified real estate appraiser must be provided by the applicant/recipient, and
Verification of this listing and appraisal must be received within 30 days of the date of the NOA.

Applicant's/Recipient’s Response, Listed at FMV

Once the NOA has been mailed, the EW must take the following actions, according to the client's response:

Establish/continue MC if the listing and appraisal is received within 30 days of the date of the NOA.
Obtain a new listing verification on a quarterly basis.
Once verification is received that the principal residence is listed for its FMV, the property is considered exempt. Per the Beltran v. Myers court decision, exempt property may be disposed of without adequate consideration. If the owner should transfer the property, the EW must only consider whether timely notice of the transfer was given by the owner to the EW.

Listing not Provided

If an individual fails to provide the listing as required, determine the net market value (assessed value minus encumbrances) of the property in question.

If the net market value of the property is over $6,000 and the portion of the market value in excess of $6,000, together with all other non-exempt property, exceeds the property limit, deny/discontinue the client for excess property.
If the market value of the property is under $6,000, the property becomes “Other Real Property.” The individual remains eligible provided they meet the utilization requirements.
If the value of the property is unknown, deny or discontinue the case for failure to provide.

Lien Procedures

When the listing, the appraisal, and the copy of the deed are received, establish/continue MC eligibility. The property is now considered exempt. In addition, a lien must be placed on the property. The EW must:

Complete the “Property Lien Referral” (DHCS 7014). File or scan a copy via IDM on fastener two, top.
Send the original of the DHCS 7014 and a copy of the deed to the State Department of Health Services, Recovery Branch.
Complete a “Change of Status-Liens” (DHCS 7013) if, in the future, each time there is a change in any of the information previously provided on the DHCS 7014. Examples of change include, but are not limited to:
1. A Medi-Cal ID number change
2. Client is discharged from LTC and returns home
3. Client is deceased.
Send two copies to the State Department of Health Services, Recovery Branch. Document all actions on the Journal Detail page.

Effective Date of Lien

The recorded lien will take effect only after the Medi-Cal beneficiary:

Sells the property, or
Dies, and there is no surviving spouse; or, the beneficiary has no surviving children who are under age 21, blind or disabled.

The charges against the lien begin either on the date of application, or the date the “Medi-Cal Notice of Other Real Property Denial/ Discontinuance” (MC 239 Y) was sent to the client.

Liens are only effective until, and if, the individual is discharged to return to his/her principal residence. Once the individual returns to the principal residence (and the DHCS 7013 is completed and sent to DHCS,) the lien is dissolved.

Note: A move from an LTC facility to Acute Care or a temporary visit outside the home does not dissolve the lien.

Non-Cooperation

If an LTC individual (or their representative) fails to provide the listing, the appraisal, or the copy of the deed or contract as required, the EW must determine the market value of the property, subtracting encumbrances to arrive at the net market value of the property.

If the net market value of the property is over $6,000, and the portion of the market value in excess of $6,000 together with all other non-exempt property, exceeds the property limit, deny/discontinue the client for excess property.
If the net market value of the property is under $6,000, the property becomes Other Real Property. The individual remains eligible provided they meet the utilization requirements set forth.
If the value of the property cannot be determined, deny or discontinue the case for failure to provide essential information.

Reporting Responsibilities

The exempt status of the Principal Residence is often based on the intent of the applicant/ beneficiary. Therefore it is important for the EW to stress to the individual or their representative that changes in intent must also be reported in a timely manner. Changes that must be reported include, but are not limited to:

The individual no longer has intent to return to the principal residence.
The applicant/recipient's spouse or other specified relative no longer lives in the home.
Legal obstacles preventing the sale of the home no longer exist.
Changes which are not reported within ten days must be treated as a potential overpayment.

Mandatory Informing Notices

The following forms must be provided at the time of application:

“Notice Regarding Standards for Medi-Cal Eligibility” (DHCS 7077)
- The DHCS 7077 must be provided to all LTC clients.
“Notice Regarding Transfer of a Home for Both Married and Unmarried Applicant/Beneficiary” (DHCS 7077 A)
- The DHCS 7077 A must be provided to all MC applicants, the applicant’s spouse, legal or authorized representative. It includes a signature line for clients to document that the form was received. It also indicates that failure to sign the form will NOT result in ineligibility. The EW must document in the Journal Detail page the client’s refusal to sign the form.