When it comes to the potential need for long-term care, Medi-Cal planning is needed to protect your assets, especially your home, from Medi-Cal recovery. One way to do that is to create an irrevocable Medi-Cal trust. But, what if you want to revoke that trust later on? Here is what you need to know.
The benefits of Medi-Cal planning
The purpose of Medi-Cal benefits is to assist California residents in paying for medical services. Because Medi-Cal is a needs-based program, unmarried 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.
What is the purpose of a Medi-Cal Trust
The goal of a Medi-Cal trust is to protect your assets from Medi-Cal recovery while allowing you to keep a limited amount of income from the trust. The trust can also be used to leave behind remaining asset to your beneficiaries. The most important benefit of a Medi-Cal trust is that having one does not affect your eligibility for long-term care benefits through Medi-Cal.
So, using this type of trust allows you to have asset left over to share with your heirs after your death. The assets you transfer to a Medi-Cal trust are counted in determining your eligibility for long-term care benefits under Medi-Cal, California’s Medi-Cal program. We can explain all of these benefits to you.
Medi-Cal trusts must be irrevocable
Medi-Cal trusts work to protect your assets and your eligibility because they are irrevocable. Being irrevocable means the terms of the trust cannot be changed or amended once it has been executed. Medi-Cal laws required that this type of trust be irrevocable so that your assets remain exempt for purposes of Medi-Cal eligibility. So, as part of your Medi-Cal planning, you should understand that if you receive any part of the principal of the trust, then the trust becomes a countable asset and will affect your eligibility.
Medi-Cal planning allows you to maintain some control
Despite the fact that a Medi-Cal trust cannot be revoked or modified, there are ways that you can still maintain control over your assets. This can be especially helpful if you later determine that you do not need the trust. Medi-Cal planning can help you with this task.
In some situations, after creating a Medicaid trust people find out that they no longer need Medi-Cal benefits because they don’t need long-term care. As we can explain, there are a few steps you can take to regain control of your assets if you no longer need the trust.
Retaining a limited power of appointment
During your lifetime, you have the option to retain the power to modify your beneficiaries. This requires a limited power of appointment, which allows modification to the beneficiaries through a will or other estate planning document that references the trust. Consequently, by having a limited power of appointment, you do not need to give up complete control of your assets.
What does “estate recovery” mean for Medi-Cal recipients?
It is a requirement that, when a Medi-Cal recipient age 55 or older passes away, the state of residence must seek recovery of payments from that person’s estate. This is known as “estate recovery.” However, because of the eligibility requirement that Medi-Cal recipients have no more than $2,000 in countable assets, recovery payments from an estate is often a complicated endeavor.
An exception to estate recovery for undue hardship
Another exception that may apply is based on undue hardship. If it can be shown that estate recovery efforts would result in an undue hardship on the heirs, then estate recovery would be improper. For example, if a surviving dependent makes a living from an estate asset, such as a family business or farm, then those assets cannot be recovered.
Download our FREE estate planning checklist today! If you have questions regarding Medi-Cal trusts or any other Medi-Cal 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!