Using Estate Planning to Prepare for Medi-Cal
As you are probably already aware, long term nursing home care is expensive, very expensive. According to Medi-Cal, the average cost in California for one month of skilled nursing careis$10,298. Proper planning can help your family prepare for the financial toll and protect assets for future generations.
After a brief period of Medicare coverage, most patients end up paying for nursing home care out of their personal savings until they run out, at which point they can usually qualify for Medi-Cal to pick up the majority of the ongoing cost. Long Term Care Medi-Cal rules require that recipients have reduced “countable” assets. Any excess assets need to be “spent down” before you can qualify for Medi-Cal. Unfortunately, a transfer of “countable” assets before you apply for Medi-Cal can create a penalty period during which time you cannot receive benefits. After you die, Medi-Cal also has the right to recover monies it spent on your care from your estate.
Careful planning in advance can help protect your estate for your spouse or children. If you make a plan before you need long term care, you may have the luxury of distributing or protecting your assets in advance. This way, when you do need long term care, you will quickly qualify for Medi-Cal benefits. The following are some tools that can be used in an estate plan to prepare for Medicaid:
Trusts. One of most important estate planning tools you can use is “revocable” trust with Medi-Cal planning language or, in some cases, an “irrevocable” trust designed to shelter otherwise “countable”
assets or to divert income. Various strategies are available that can be implemented through a trust to more quickly qualify for Medi-Cal benefits and potentially reduce income resulting in a lower co-payment obligation. Trusts are also an important tool in avoiding potential Medi-Cal estate recovery against your assets upon your passing, allowing you to pass your assets to your named beneficiaries.
Annuities. Annuities are another tool married couples can use to prepare for Medi-Cal. An immediate annuity, in its simplest form, is a contract with an insurance company under which the policyholder pays a certain lump sum of money to the insurer and the insurer sends the policyholder a monthly check for the rest of his or her life. If done properly, the purchase of an annuity is not considered to be a transfer for purposes of eligibility for Medi- Cal, but is instead the purchase of an investment. It transforms otherwise countable assets into a non-countable income stream. As long as the income is in the name of the spouse who is not in the nursing home, it’s considered “non-countable.”
Protecting your home. After a Medi-Cal recipient dies, the state must attempt to recoup from his or her estate whatever benefits it paid for the recipient’s care. This is called “estate recovery.” For most Medi-Cal recipients, their house is the only asset available, but there are steps you can take to protect your home. If done properly, trusts, life estates and other strategies are available to protect your home (and other assets) from potential Medi-Cal estate recovery. Protection of your home should only be done with the guidance of a knowledgeable attorney as often times there are significant tax implications that must be addressed to position you and your beneficiaries properly.
For more information please contact the Law Office of Sean D. Ethington at (661)295-4604 or visit our website at www.ElderLawSite.com.
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