At some point during your retirement years, there is a chance that you may need to qualify for Medi-Cal to help cover the high cost of long-term care. It is for this reason that including Medi-Cal planning in your overall estate plan is commonly recommended to ensure that your assets are protected when you apply for Medi-Cal. Creating a successful Medi-Cal plan requires an understanding of which assets count for Medi-Cal eligibility and which assets are exempt. In this blog, we offer an overview of exempt and non-exempt assets for Medi-Cal eligibility purposes.
Why Is Medi-Cal Planning Important?
Although we all hope to live out our retirement years in our own homes, the reality is that with every passing year your odds of needing some type of long-term care (LTC) increases. In fact, by some estimates, when you enter your retirement years you will already stand a 50 percent chance of needing LTC before the end of your life and that by age 85 those odds will increase to a 75 percent chance. If you are married, your spouse shares the same odds, dramatically increasing the likelihood that you will face LTC expenses at some point down the road. It is the high cost of LTC that causes many seniors to look to Medi-Cal for help. In 2018, the average annual cost of a stay in a skilled nursing in California is in excess of $100,000. The real problem, however, is that neither Medicare nor most health insurance policies will cover LTC expenses, prompting over half of all seniors currently in an LTC facility to depend on Medi-Cal to cover the cost of their care.
Medi-Cal Eligibility Guidelines and Your Assets
If you have never before needed to rely on Medi-Cal, you probably know very little about the eligibility guidelines. Because Medi-Cal is a “needs-based” program that is intended to help low-income individuals and families with healthcare expenses, the program uses both income and assets limits when determining eligibility. An applicant cannot own countable resources (assets) valued at more than the limit or the application will be turned down. As an unmarried applicant, your countable resources cannot exceed $2,000. Fortunately, some assets are exempt from consideration when determining eligibility, such as:
- Principal residence
- Other income producing real property
- Real property used in a business
- One motor vehicle.
- Personal property used in a trade or business.
- Personal affects. This includes clothing, heirlooms, weddings and engagement rings,
- and other jewelry with a net value of under $100.
- Household items.
- IRAs, KEOGHs, and other work-related pension plans.
- Irrevocable burial trusts or irrevocable prepaid burial contracts.
- One revocable burial fund or revocable prepaid burial contract with a value of up
- to $1,500 plus accrued interest per person.
- Burial space items.
- Musical instruments.
- Recreation items including TVs, VCRs, computers, guns, collection, etc.
- Livestock, poultry, or crops.
- Countable property equal to the amount of benefits paid under a state-certified, long-term care insurance policy.
- Life insurance policies. Each person may have life insurance policies with a combined face value of $1,500 or less accrued interest and dividends.
Note: Many of the non-exempt assets have monetary limits or other restrictions that are subject to change each year and of which you need to be aware. Always check with an experienced and qualified elder law attorney for current exemption information.
What Happens If Your Non-Exempt Assets Exceed the Limit?
If, at the time you apply for Medi-Cal, your non-exempt assets exceed the limit your application will be denied. At that point, you will have to spend-down assets until you reach the point at which you will qualify. Ultimately, failing to plan ahead for the possibility that you will need to qualify for Medi-Cal could result in the loss of some, or even all, of your retirement nest egg.
Contact Us For Further Assistance
Please download our FREE estate planning checklist. If you have additional questions or concerns regarding Medi-Cal planning, contact us at the Northern California Center for Estate Planning & Elder Law today by calling (916)-437-3500 or by filling out our online contact form.