Medicaid is a need-based government health insurance program that will pay for long-term care. In California, the program is called Medi-Cal.
Medicare will not pay for custodial care, so many people who were never financially needy ultimately look toward Medicaid or Medi-Cal to pay for living assistance late in their lives.
Medicaid is a need-based program, so you must be able to prove that you have very limited resources if you want to qualify. You could create a Medicaid trust to get assets out of your own name before you apply for coverage.
A revocable living trust is just that, revocable. You could rescind or dissolve this type of trust, and it would no longer exist. The assets would once again be in your direct personal possession.
Because you retain this level of control, assets in a revocable living trust would be counted by Medicaid or Medi-Cal. A revocable living trust would be of no assistance if you want to create a trust so that you can qualify for Medicaid.
A Medicaid/Medi-Cal trust would be a trust that is irrevocable. You surrender incidents of ownership when you create a Medicaid/Medi-Cal trust, because you cannot revoke the trust and take back the assets. As a result, assets in the trust would not be counted when your eligibility was being determined by the Medicaid or Medi-Cal evaluators.
Giving up complete control the assets that you convey into a Medicaid/Medi-Cal trust may not be a very appealing prospect given your financial situation. For some people, income-only Medicaid/Medi-Cal trust make sense.
When you create and fund the trust, you are surrendering incidents of ownership, so the principal would not be counted against you. Have however, you could set up the trust so that you can continue to receive income from the trust’s earnings.
This can provide you with more financial flexibility, but there is one drawback that you should take into consideration. Under program rules, if you qualify for Medicaid or Medi-Cal to pay for long-term care, the majority of your income must go toward the cost of your care.
As a result, the income from the trust would go toward the cost of the long-term care that you were receiving if you do ultimately qualify for Medi-Cal or Medicaid coverage.
Learn More About Medi-Cal Planning
Long-term care is very expensive, and paying out-of-pocket can be financially devastating. If you would like to learn more about Medicaid/Medi-Cal planning, go to the Reports section of this web site where you can obtain free Medi-Cal planning reports.
If you would like personalized Medi-Cal planning information, please call our office to schedule an appointment.
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