Medi-Cal Planning

One of the most common estate planning mistakes a person can make is to overlook the importance of long-term or end-of-life care. The reality is most people will need assistance or treatment by trained health care professionals once they reach a certain age. These services can be extremely expensive and often bankrupt the patient in just a few short years.

Thankfully, the state of California has a program that directly addresses this issue. Medi-Cal is both a federal and California program designed to assist individuals and families with long-term care costs at a nursing home, skilled nursing facility, sub-acute facility, rehabilitation center, or residential care facility. It is also the only government program that covers the cost of long-term care in a skilled care facility.

However, the program is only available to California residents who qualify, and for many the requirements at first glance seem incredibly restrictive. The eligibility for the program depends on the amount of income and resources you have. Individuals with more than $2,000 in non-exempt property are automatically disqualified from the program, which can be a difficult requirement for some to meet. Luckily, you have options. You and an experienced estate planning lawyer from Botti & Morison Estate Planning Attorneys, Ltd. can utilize various estate planning strategies to zero out excess exempt resources and thus qualify for Long-Term Care Medi-Cal.

California Medi-Cal Planning Lawyers | Ventura, CA

Proper long-term care estate planning will not only ensure you receive proper long-term care at the end of your life, but it will also protect your assets. Get started on the right path with your Medi-Cal planning by calling the experienced California Elder Law lawyers at Botti & Morison Estate Planning Attorneys, Ltd.. Our lawyers can help you secure your assets while simultaneously doing whatever needed to guarantee you qualify for Medi-Cal benefits in the future.

Call Botti & Morison Estate Planning Attorneys, Ltd. today at (877) 585-1885 to set up your first consultation with Chris Botti or Paul Morison. Botti & Morison Estate Planning Attorneys, Ltd. has several locations including Ventura, Santa Barbara, San Luis Obispo, Bakersfield, Westlake Village, and Valencia.

Information Center:

Back to top

What Type of Plan is Medi-Cal?

Essentially, Medi-Cal is considered California’s Medicaid health care program. If you qualify, the program covers a variety of medical services for adults including long-term care. The program is need-based and eligibility for it will depend on your income and the value of any non-exempt assets you own. Long-Term Care Medi-Cal is available to individuals 65 or older and is supported by both state and federal taxes.

In order to qualify for Medi-Cal, you’ll have to pass both a medical and asset assessment. You’ll first need a doctor’s order stating your stay at the nursing home or skilled care facility is “medically necessary.” Once the medical assessment is finished, your next obstacle will be tackling the asset assessment. This tends to be what excludes applicants from the program because they misinterpret how the asset assessment works for Medi-Cal.

Back to top

Medi-Cal Asset Limits

The asset assessment for Long-Term Care Medi-Cal is heavily based on non-exempt property. Exempt property does not count toward eligibility regardless of how much value it may have. What’s considered to be “exempt” vs “non-exempt” will depend on your circumstances. Individuals with exempt property valuing at or more than $2,000 are ineligible for Medi-Cal.

The fact above is where the devastating myth that “you can only have $2,000 in your name” comes from. In reality, nothing could be further from the truth. Listed below are a list of assets that are automatically exempt from the assessment for Long-Term Care Medi-Cal eligibility.

  • Home – Any home you reside in will be exempt if you declare that it’s your principal residence and you’d return home if possible. You don’t have to commit to physically returning back to this residence. All you have to do is declare that you would if it were possible and the county eligibility worker should exempt the property.
  • Community Spouse Resource Allowance (CRSA) – CRSA is designed to prevent the healthy and well spouse of a patient from becoming financially destitute. It allows the spouse who is well to retain additional assets of up to $130,380.00 on top of the home and other exempt assets.
  • IRA and Pensions – One of the biggest assets for most individuals is their IRA or pension. Both of these are exempt as long as you’re taking the required minimum distributions (RMDs).
  • Vehicles – A singular vehicle for transportation reasons will be automatically exempt regardless of its value.
  • Jewelry – Wedding, engagement rings, and family heirlooms are exempt if you’re a single applicant. Any other jewelry with a market value of $100 or less is also considered exempt.
  • Household Goods and Personal Effects – No limit exists for such items.
  • Life Insurance or Term Life Insurance – Life insurance policies valuing at $1,500 or less are exempt completely. However, if the value of the policy exceeds that amount then the cash surrender value will be counted toward the $2,000 limit. If the cash surrender value exceeds $2,000, then the applicant will be considered ineligible until they reduce the policy below $2,000. Term life insurance is automatically excluded without any type of limitation.
  • Burial Plots or Plans – Both burial plots and irrevocable burial plans are excluded from the property reserve. Burial funds valued at $1,500 or less are also exempt.
  • Business Property – Any property used as a business or as a means of self-support are exempt as well. Any real property that’s rented, however, will not be exempt unless the property is currently operating as a viable business. You must provide tax returns and any other financial evidence to ensure the property is properly classified as a business.
  • Certain Annuities — The annuity rules are complex and require evaluation on a case-by-case basis. The best way to determine if yours is exempt is to speak to an experienced Medi-Cal planning attorney.
  • Unavailable Property – If the eligibility county worker determines you made a “bona fide effort” to meet the asset assessment but was unable to do so, you may still be eligible for Medi-Cal. For instance, if you went out of your way to sell non-exempt property but was unable to due to market conditions or any other limitations, then the property will not be included as a countable asset.
  • After Acquired Property – Any resources acquired after you’ve become eligible for Long-Term Care Medi-Cal are exempt from the asset assessment. This includes any gift or inheritance you or your spouse may receive, no matter the value.

Dramatic changes to the Long Term Care Medi-Cal Program in California are on the horizon.  Effective May 1, 2022, Long Term Care Medi-Cal will be expanded to all individuals 50 or older regardless of immigration status. Beginning July 1, 2022, California will begin phasing out the “asset assessment.” Beginning January 1, 2024, the asset assessment will be eliminated as “resources, including property or other assets, shall not be used to determine eligibility under the Medi-Cal program to the extent permitted by federal law.” Stay tuned for further updates concerning these new rules and regulations.

Back to top

How to Qualify for Medi-Cal in CA

There are various estate planning strategies you can utilize so you can pass the asset assessment and thus qualify for Long-Term Care Medi-Cal. What will work best for you and/or your spouse will depend on asset configuration, the size of your estate, as well as your individual medical needs. The best way to determine eligibility and the most effective route towards that goal is to hire an experienced long-term care estate planning lawyer like the attorneys at Botti & Morison Estate Planning Attorneys, Ltd..

Listed below are several estate planning strategies that may help you meet the eligibility requirements for Long-Term Care Medi-Cal.

  • Spend Down Approach – If your non-exempt assets are valued at or above $2,000, then you may want to liquidate those assets and spend that excess money. You can use the cash on any item or service you think will benefit you. It doesn’t have to be used for medical or custodial care needs. There is no limit on how this excess cash can be used as long as the expenditures “benefit” you in some way.
  • Gifting Approach – With this method, you can transfer all of your non-exempt assets using the stacked gifting approach. This strategy is generally not recommended as those assets once transferred would be exposed to creditors. Our lawyers would instead suggest establishing an Irrevocable Medi-Cal Asset Preservation Trust that you can transfer non-exempt assets to.
  • Conversion Approach – You can also attempt to zero out excess non-exempt resources by converting them into exempt assets. How you will convert these assets will depend on your current financial situation. For example, if you had $250,000 in excess resources and had a $300,000 mortgage, then you can convert the non-exempt assets by liquidating them and then use that money to pay off most of the mortgage.
  • Combined Approach – There are no rules to which method you can use to qualify for Long-Term Care Medi-Cal. If needed, you may use a combination of all three approaches including setting up an irrevocable trust to ensure you qualify for Medi-Cal and secure any non-exempt assets.

Back to top

Does an Irrevocable Trust Protect Assets from Medi-Cal?

Another common method utilized by estate planning experts is to create an Irrevocable Medi-Cal Asset Preservation Trust, commonly known as an Intentionally Defective Grantor Trust. The trust will serve as the recipient of all excess resources so you can qualify for Long-Term Care Medi-Cal. All assets placed in the trust will be included in your estate for federal estate tax purposes as long as it values as less than the current Federal Estate Tax Exemption of $11.7 million. That means the contents of the trust will pass on to your beneficiaries tax-free.

Most estate planning professionals would recommend you set up an Irrevocable Medi-Cal Asset Preservation Trust and transfer all your non-exempt assets to the trust. That way you can accomplish the following without issue:

  • Beneficiaries will receive non-exempt assets named in the trust transferred as an inheritance upon death
  • Minimizes potential for family and beneficiary conflict
  • Eliminates the need for conservatorship or probate
  • Allows you to avoid estate recovery on any claims made by the Estate Recovery Station of the California Department of Health Services upon death for any Medi-Cal benefits paid to you during your lifetime
  • Subject your home to inclusion within your federal taxable estate for federal estate tax purposes within the scope of tax rules established by Trotter v. Commissioner, T.C. Memo 2001-250 (2001) and Linderme Estate v. Commissioner, 52 T.C. 305 (1969). By doing this, you can establish a cost basis increase for your home that will occur upon the date of your death. If you simply gift the home to your family upon death, a step-up in basis will not occur.
  • Continue to be eligible for Long-Term Care Medi-Cal
  • Retain the right to name new beneficiaries using a “limited power of appointment”
  • Retain the right to change or add trustees
  • Preserve your IRC §121 capital gains exemption upon the sale of your principal residence if you or the trustee decide at a later time to sell your home
  • Protect trust assets from your beneficiary’s creditors in the event of disability, bankruptcy, divorce, or death

Back to top

Do I Have to Pay Back Medi-Cal?

In some cases, the State of California may seek reimbursement for payments made to beneficiaries under the Long-Term Care Medi-Cal Program. The State does this through the use of liens and estate claims, but this can be avoided through proper planning. A relatively new recovery law was passed in 2017, which stated the following:

  • Recovery claims are prohibited against surviving spouses or registered domestic partners
  • Recovery is limited to individuals who are 55 years of age or older to nursing home as well as home and community-based services
  • Recovery is only permitted to those with assets subject to probate

All of these changes are important, but the last bullet point is the most significant. Any assets placed in a revocable or irrevocable trust will escape recovery since they’re not subject to probate. Additionally, life insurance and retirement accounts can be protected. So, if you have a trust properly set up with all your assets in it, then the State of California will not be able to recover them.

Back to top

Additional Resources

California Advocates for Nursing Home Reform (CANHR) – Visit the official website for the California Advocates for Nursing Home Reform to learn more about Long-Term Care Medi-Cal. Access the site to find links to the application, the various county Medi-Cal offices, Medi-Cal fact sheets, information regarding recovery, and more.

Med-Cal Providers – Visit the website for California’s official Medi-Cal program to learn more about what it offers and if you’re eligible. Access the site to use their learning portal, sign up for their subscription service to keep you up to date on the latest Medi-Cal news, and use their automated provider services for claims, eligibility inquires, and other services.

Back to top

California Attorneys for Long-Term Care Medi-Cal | Ventura, Botti & Morison Estate Planning Attorneys, Ltd.

It’s an unfortunate reality that nursing home care costs Californians an average of $120,000 annually. These shockingly high costs sadly leave thousands and thousands of elderly individuals and couples bankrupt despite many years of financial success. The best way to avoid this scenario is to implement proper long-term care planning in your estate plan including Medi-Cal if it’s beneficial to you.

Learn all your estate planning options today by calling Botti & Morison Estate Planning Attorneys, Ltd. at (877) 585-1885. Botti & Morison Estate Planning Attorneys, Ltd. accepts clients throughout California and has offices in Ventura County, San Luis Obispo County, Los Angeles County, Santa Barbara County, and Kern County.

Back to top