The Need for Medi-Cal Planning

Estate planning involves more than simply deciding how your estate assets will be distributed upon your death. In fact, a well thought out estate plan should also protect, and help grow, those assets while you are alive and ensure that they are used to provide for your loved ones when you are gone. To do that, your estate plan must consider all of the potential threats to your assets, both now and in the future. Although you may not have yet considered this, the cost of long-term care (LTC) could be a significant treat to your assets in the future. In the following passage, we will explore the part that Medi-Cal planning can play in protecting your assets from the LTC threat. Will You (or a Spouse) Need LTC? Like most people, you would probably prefer not to dwell on the thought of you (or a spouse, if your married) ending up in a nursing home during your “Golden Years.” Failing to consider the possibility, however, could be a very costly mistake. Moreover, the odds of ending up in a LTC facility of some sort, at some time, during your retirement years is probably higher than you realize. When you enter your retirement years at age 65 you will stand about a 50 percent chance of eventually needing some type of LTC. Those odds increase with each passing year. If you are fortunate enough to still be here at age 85, the odds of needing LTC will have increased to about a 75 percent chance. Keep in mind that your spouse shares the same odds as you when it comes to LTC. How Much Will LTC Care Cost You? You may also be underestimating the financial impact of LTC. In California, the average for a year in a skilled nursing facility for 2017 is almost $100,000. When you consider that the average length of stay in a LTC facility is 2.5 years, the overall cost of LTC could easily run you well over a quarter million dollars in the next decade. But I Have Medicare (or Private Health Insurance)! One of the costliest mistakes people make is assuming that Medicare and/or their private health insurance coverage will pay for their nursing home expenses. Medicare only covers LTC expenses under very specific circumstances, e.g., rehabilitation, and not for more than 100 days. Most health insurance policies exclude LTC costs unless you purchased a separate LTC policy or rider at an additional cost. Medi-Cal to the Rescue! (Maybe) There is some good news. Medi-Cal will help pay for your nursing home expenses – if you qualify for benefits. Eligibility for Medi-Cal is based, in part, on your income and the value of your “countable resources.” Unfortunately, the countable resources limit is typically so low ($2,000 for an individual) that many seniors do not initially qualify for Medi-Cal if they failed to plan ahead. If your assets exceed the limit, Medi-Cal will impose a waiting period during which time you will be expected to “spend-down” your assets. In essence, this requires you to sell your excess assets and use the proceeds to pay for your LTC during the waiting period. No one wants to lose their nest egg in this fashion. The key to protecting your assets from the Medi-Cal spend-down rule, and ensuring that you will be eligible for Medi-Cal if you need it in the future, is to include Medi-Cal planning in your overall estate plan well ahead of time. Medi-Cal planning uses legal strategies and tools, such as a Medi-Cal trust, to protect your assets and reduce the value of your countable resources. Consequently, you will be in a position to be eligible for Medi-Cal benefits when you apply, should you need to do so in the future. Contact Us If you have additional question or concerns regarding Medi-Cal planning, please call us at (916) 437-3500.