The Medicaid program is administered by the state government in conjunction with the federal government. Each state has a bit of latitude with regard to the exact way that the program is implemented. We practice law in the state of California, and in our state, the program is called Medi-Cal. This program is only available to people who can prove that they have financial need.
Medi-Cal is important for many senior citizens who were never financially needy, because it will pay for long-term care. Most seniors will qualify for Medicare, but Medicare does not pay for living assistance.
The Medicaid/Medi-Cal asset limit for an individual is just $2000. There is additional protection for married couples. As a result, people often give away assets so that they can qualify for coverage to pay for long-term care.
Across the country, there is a five-year Medicaid look-back period. You are penalized and your eligibility is delayed if you give away assets within five years of applying for coverage.
As we mentioned previously, each state has some individual latitude. In California, the look-back period is 30 months at the present time.
Because of the look-back period, you may have to divest yourself of assets well in advance of submitting your application for coverage. You could give resources to your loved ones directly, but another option exists. You could alternately convey assets into Medi-Cal planning trusts. Typically, one is used for the personal residence and another for other assets such as financial accounts. Under current California law, you may be able to transfer significant sums into these trusts even within the 30 month look back period. However, the procedure to do so is complex and should not be attempted without the assistance of an experienced and qualified elder law attorney.
These special trusts are irrevocable trusts. As the name would indicate, you cannot revoke or dissolve this type of trust and take back the the assets that you conveyed into it.
The loss of access to the resources is the primary disadvantage. Since you may have to act in advance, you could create and fund a Medi-Cal trust and ultimately find that you never need long-term care. As a result, you would have less financial flexibility.
Some people create income-only Medi-Cal trusts. With this type of trust you cannot access the principal, but you could continue to receive distributions from the earnings of the trust.
There is a disadvantage here as well. If you eventually qualify for Medi-Cal, you are required to assist with the costs if you are receiving income. The income from the trust may wind up going toward the cost of your care.
Medi-Cal Planning Report
We have provided some basic information about Medi-Cal and Medi-Cal trusts in this post. If you would like to learn more, download our special report.
This report is being offered free of charge, and you download it on the Reports section of our website.
Long Term Care Planning Consultation
Our firm regularly assists families in planning and qualifying for various Veterans Administration and Medi-Cal benefits. To request an appointment, please contact our office
- Living Trusts and Incapacity Planning - March 31, 2020
- Estate Planning and Charitable Giving — Key Points - March 29, 2020
- Over-Funding Your Retirement Plan: A Potential Estate Planning Problem - March 27, 2020