By Timothy P. Murphy
© 2016 All Rights Reserved
Incapacity planning is a broad area of law that covers how you are cared for if you become physically or mentally unable to care for yourself. The type of care could range from simple tasks like buying groceries, paying bills, and handling financial matters to more important decisions such as selling real estate or gifting assets to your children.
Within the realm of incapacity planning, there are also arrangements that deal specifically with decisions regarding steps taken to obtain Medi-Cal benefits. A Living Trust with “Medi-Cal Tools” comes into play in this regard by moving forward with decisions that you would have handled yourself, if you were still legally competent to do so. The types of decisions required in this area of planning can vary. For instance, you may outline instructions for a nursing home stay or the repositioning of assets to allow you to qualify for Medi-Cal without completely extinguishing the value of your estate.
When you determine that you want to move forward with this type of planning, it is necessary to work with a qualified estate planning attorney. This attorney will find the optimal solutions for you in the event of your legal incapacity (defined as the inability to manage your own affairs). Because there is a 50-50 chance that the average adult will spend at least one year in a long-term care facility, it becomes painfully clear this type of planning is not only extremely important, but requires immediate attention to ensure you and your family protect your assets.
As We Age
Even with the knowledge that our life span is increasing, many of us will encounter chronic or debilitating illness in our final years. While these medical challenges can change our lives dramatically in the physical sense, they can also wreak havoc in our financial lives if we haven’t taken the appropriate measures to safeguard our wealth.
Nursing homes today can cost $90,000 per year or more, and a long-term stay can easily impoverish all but the wealthiest families. With proper planning, however, you can shelter assets and keep your family’s wealth intact. Keep in mind, that since there is no “one size fits all” solution, a careful analysis of your situation by a competent legal advisor is your best route for incapacity planning.
When Should You Plan?
The question of when to begin incapacity planning is fairly easy to answer. Since we cannot be sure how soon, how late, or even if tragedy will strike, implementing the necessary changes as soon as possible brings peace of mind knowing that you are covered should you become legally incapacitated.
Reasons to Create a Formal Legal Plan
The reasons for incapacity planning are not vastly different than the ones behind creating a Will or a Living Trust. Let’s review some of the general reasons why having a formal plan such as a Living Trust is so important. With a Living Trust, you can:
- Avoid the delay, time, cost and publicity of probate.
- Provide for a surviving spouse, other beneficiaries, or loved ones.
- Safeguard your children’s inheritance from ex-spouses and creditors.
- Ensure that “special needs” beneficiaries or loved ones who receive government benefits do not lose these benefits such as Medi-Cal, SSI and In-Home Supportive Services.
How is Incapacity Planning Different?
In the arena of incapacity planning, there are additional legal measures you can take to ensure your wishes are honored should you become legally incapacitated. This family of options includes the following:
- An Advance Health Care Directive/Healthcare Power of Attorney (POA)) – this type of POA outlines the specific Medi-Cal decisions that you would like to see made in the event of your incapacity.
- A General Durable POA – this type of POA outlines what will happen with assets held outside your Living Trust upon incapacity.
- Gifting Language – special Trust language that may be drafted and included with your Trust document and POA to outline your specific wishes.
- Medi-Cal Tools – these tools can put into motion the shift of assets out of the name of the person who is incapacitated.
With the appropriate incapacity language in place, you can effectively designate who will manage your affairs if you become incapacitated. Using legal tools such as a Revocable Living Trust, Durable Power of Attorney, and gifting or sheltering plans, you can set the stage to allow your chosen agents to properly manage your assets should you need nursing home care and be unable to do these things for yourself.
The special language in a Trust with “Medi-Cal Tools” can give your trustee the authority to handle certain types of planning, even though you – the person applying for Medi-Cal – are not capable of signing the necessary documents.
What Incapacity Planning Does Not Cover
Now that you have a handle on the reasons to plan, and what planning can cover, it’s important to know what your Trust with Medi-Cal Tools will not do for you. Your Trust will not establish your eligibility for Medi-Cal, or serve as long-term healthcare insurance. Establishing Medi-Cal eligibility and purchasing healthcare insurance are separate actions that require the execution of special forms unrelated to your Trust documents.
Additionally, Medi-Cal Tools will not guarantee your Medi-Cal qualification because eligibility and qualification are based on a number of financial variables and the type of illness you have. Whereas Medi-Cal Tools do not change the size of your estate, they can outline how assets could be restructured to help you qualify for Medi-Cal.
A fundamental advantage of having Medi-Cal Tools outlined in your Living Trust, is the peace of mind that comes from knowing the proper steps to apply for Medi-Cal benefits will be carried out on your behalf, just as if you were competent. Should a person become incompetent before including Medi-Cal Tools in his or her Living Trust, it would likely mean these important steps would not occur, and this could signify a loss of potential Medi-Cal benefits. It’s another reason to handle this matter now, while you are still managing your own affairs.
Establish a Complete Estate Plan with Medi-Cal Tools
Regardless of how solid your health is today, there is no way to know what tomorrow brings. We invite you to take the time to discuss this important topic with us. Call our office today to schedule a meeting. In this meeting, we can address several issues including living probate and disability, Medi-Cal planning options, death probate and taxes.
With the proper plan in place, you can rest easy knowing that whatever the future holds, you have formally outlined your wishes and made the proper arrangements for you and your family.
Don’t Be Penny Wise and Pound Foolish
An old expression sums up the basic advice when it comes to estate planning: Don’t be penny wise and pound foolish. Unfortunately, we have seen too many occasions in our office where folks, in an effort to save a few bucks in setting up their estate plan or to take advantage of some seemingly great tax-avoidance scheme, end up, in the long run, paying far more than they would have if they had sought the assistance of an experienced, estate planning attorney in the first place.
These days there seems to be an almost endless supply of inferior, incomplete and often defective planning schemes out there, including;
- Do-It-Yourself Books
- Do-It-Yourself Software
- Do-It-Yourself Web Sites
- Bargain basement trusts prepared by non-lawyers, aka “trust mills”
- Bare bones trusts by Joe the Lawyer which lack critical Medi-Cal Tools
What these schemes all have in common is that they will probably not provide the help you and your loved one may need when facing the often overwhelming burden of long term care costs. This important planning is now place to cut corners in an effort to save a few bucks.
Watch Out For Scams
It is an unfortunate fact of life that when you have money, there will be someone who will try to take it from you. Common victims of such efforts are seniors citizens, especially those that are frail and vulnerable.
One of the latest areas of these despicable acts are the self-proclaimed “Medi-Cal Experts” and “Medi-Cal Specialists”. They are typically nonlawyers with phony credentials who often use scare tactics to extract many thousands of dollars out of seniors with a claimed ‘guarantee” of getting the senior qualified for Medi-Cal benefits at some undetermined future time.
The first problem with these “experts” is that they very likely do NOT have the training and experience to deliver on their promises. Even more worrisome is that they typically want payment up front of many thousands of dollars without any services immediately rendered in return. There is a very real risk that when services may be needed in the future, these con artists will be long gone with your money.
The best way to minimize this risk is to just say NO!
It is in your best interest to have your estate plan with Medi-Cal Tools prepared by a local, experienced estate planning and elder law attorney so that you can have the peace of mind that you deserve. The time to do this critical planning is now, before you face a medical crisis or untimely death which can force your family to incur many unnecessary costs and trouble.
If you have been unfortunate enough to have purchased a bargain basement plan, have it reviewed immediately and corrected now, before it’s too late.