We often recommend Medi-Cal planning as an important component of estate planning. They also suggest including a Medi-Cal trust as well because they help to protect your eligibility for Medi-Cal benefits. But one question many clients ask is what happens if you never actually need your Medi-Cal trust? Do you get your assets back? The answer is no and here is why.
The benefits of Medi-Cal planning
The purpose of Medi-Cal benefits is to assist low-income California residents in paying for medical services. Because Medi-Cal is a needs-based program, recipients can have no more than $2,000 in assets. The goal of Medi-Cal planning is to keep you from exhausting all of your resources in order to be eligible for benefits.
Also, if an applicant for Medi-Cal gives away property or assets right before submitting an application, those transfers of property can be seen as fraudulent and result in your benefits being delayed or denied. However, with careful Medi-Cal planning, you can avoid the appearance of fraudulent transfers.
Health insurance typically does not cover the expense of long-term care
Unfortunately, far too many people misjudge the real cost of long-term care, which is typically rather expensive. The average annual rate of long-term care in California is over $100,000. Add to that the likelihood that nearly half of the California citizens age 65 and older need long-term care for approximately five years. That can be overwhelming enough. Yet, there is a common misconception that Medicare and private health insurance will be sufficient to cover the costs of long-term care. In reality, they cover very few of these costs.
Even healthy people may need long-term care
Even if you are particularly health right now that does not mean you won’t need long-term care when you get older. This is a common misconception shared by many. The truth is, you don’t have to be sick to need Medi-Cal planning. You may not have health issues at the moment, but who can predict how healthy they will be in 40 years? An unexpected injury could also leave you with health issues that require long-term care as well. In fact, more than two-thirds of all individuals over the age of 65 need long-term care at some point in their lives. It would be a mistake not to discuss your needs with a Sacramento Medi-Cal planning attorney.
An irrevocable Medi-Cal trust provides benefits during your lifetime
When you create one or more irrevocable Medi-Cal trusts, you can transfer your home and other property into the trusts, which will then be managed by your chosen trustee. Your trustee can be anyone you trust, other than your spouse. If the trust is created properly, then you will retain several benefits, including the legal right to stay in the home as long as you and your spouse are living and the legal right to designate the trust as “income only” allowing you to collect the income the property may generate (e.g. rental property).
You can also sell your home during your lifetime and purchase a new home. The irrevocable Medi-Cal trust can also provide benefits for your children or other beneficiaries, as long as the principal does not go directly to you or your spouse.
An irrevocable Medi-Cal trust can protect your assets
Because Medi-Cal trusts are irrevocable, they can protect the trust assets from creditors and legal judgments. This is helpful for beneficiaries as well, especially those who may not be as good at managing their finances generally. If you gift your home to the trust, it will remain sheltered and out of the reach of creditors, including the creditors of your beneficiaries. Let your Medi-Cal planning lawyers help you include the correct provisions in your trust to provide asset protection.
A Medi-Cal trust must be irrevocable
Using an irrevocable trust as part of your nursing home planning can help you to qualify for Medi-Cal . When you make the transfer of property, you effectively deplete your estate of disposable assets. But, the trust can provide you with income produced from the assets it holds. On the other hand, if you never actually need to apply for Medi-Cal benefits, what happens to the assets you transferred to your Medicaid trust will depend on the terms of the trust agreement.
Download our FREE estate planning checklist today! If you have questions regarding Medi-Cal trusts or any other estate planning matters, please contact us at the Northern California Center for Estate Planning and Elder Law for a consultation. You can contact us either online or by calling us at (916) 437-3500. We are here to help!