As many of our clients know, we regularly assist families facing daunting long term costs with planning aimed at obtaining available financial benefits from both the Veterans Administration and the Medi-Cal program. This planning is often very complicated but, nevertheless, extremely worthwhile for families struggling with these expenses. Valuable tools commonly used in our planning are various Medi-Cal Trusts. In this series of articles we’ll introduce you to these various trusts, and how they work.
Medi-Cal Long Term Care is a financial program designed to help pay for care in a skilled nursing facility, or in certain limited circumstances, in an assisted living facility. Medi-Cal is not commonly used for in-home care due to the rigid limitations for this coverage. There are very strict asset limitations imposed by Medi-Cal. Medi-Cal Trusts can often be used to help meet these limitations.
There is some confusion about the trusts which estate planning attorneys often prepare for clients. Commonly referred to as “living trusts”, these trusts are typically revocable trusts, meaning that they can be revoked or amended by the person who created them. For Medi-Cal purposes, due to the control the trust creator has over the assets in the trust, these assets generally are considered “countable” when determining Medi-Cal eligibility. For this reason, living trusts by themselves, are often not effective in Medi-Cal planning.
Most Medi-Cal Trusts are irrevocable trusts which generally means that they can’t be changed after they’ve been created. Some trusts make both income and principal unavailable to the creators. However, other such trusts provide that income can be payable to the creator of the trust but, if the trust is properly established, the principal is protected and can be inherited by the creator’s heirs.
A critical component of Medi-Cal planning is the so-called “look back” period, which is the period during which the possibility of penalties, generally in the form of delayed eligibility for Medi-Cal, for transfer of countable assets might be imposed. For most states, that period is five years. However, California has not yet adopted this change in federal law and the look back period for California is 30 months. Such transfers must be disclosed on a Medi-Cal application. Not all transfers made during the look back period will result in penalties. Experienced and qualified elder law attorneys know what can and cannot be done legally in terms of transfers. They also know how and when to use Medi-Cal Trusts to help accomplish the client’s goal of obtaining Medi-Cal eligibility.
In the next installment, we’ll look at the pros and cons of specific types of Medi-Cal Trusts.
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- A Living Trust Allows for Estate Privacy - May 6, 2023
