There is nothing scarier to an elderly person than the prospect of losing their entire estate to a nursing home stay. They often wonder, what will happen to me after all the money is gone. In San Diego, the average nursing home stay can cost $7,000 to $10,000 a month. The last thing most elders want to think about is selling the family home that they just spent the better portion of a lifetime paying off in order to pay for long term care. It doesn’t have to be this way. There are ways to plan your estate so that you don’t have to sell the family home and liquidate all of your other assets to pay for care. Right now in California, we have a very unique opportunity to plan to provide asset protection that once the DRA is in place will largely be gone. The DRA is the Deficit Reduction Act. This is a Federal law that many other states across the nation have already implemented that relates to Medicaid planning (Medi-Cal is what we call it here in California).
For example, we can currently make multiple gifts within the same month to a person or trust and if those gifts create a penalty period for qualifying for Medi-Cal, the penalty period is considered concurrent not cumulative. This is huge. If you had 4 gifts that by themselves would create a 1 month penalty each, you would have a 4 month period for which you would not be eligible to qualify for Medi-Cal (the penalty period). However, currently in California those gifts run concurrently (sort of like a person who is convicted of several crimes but serves their time concurrently).
So using the example above, the penalty period will only be 1 month. Another important issue to look at is investigating possible long term care facilities well in advance of a need for the care. If you can research and visit several skilled nursing care facilities ahead of time, you will not be in reactive mode if and when the time comes that you or a loved one needs that care.
It is important to note that not all nursing facilities are Medi-Cal approved. Even if the facility says they do not have any Medi-Cal rooms available when you interview them, you still want to know if they are a facility that accepts Medi-Cal payments. This is important to know because you or your loved one may be able to enter the facility as a private paying client and later convert over to Medi-Cal with virtually no change in care. In our office, we use many strategies to help clients protect themselves and their assets.
One that is very progressive and provides tremendous asset protection is the use of an Irrevocable MAPT Trust. This trust is set up by the elder and involves gifting of certain assets to that trust either in whole or in parts over time. In California, a personal residence is an exempt asset and can be transferred to a MAPT Trust in whole without penalty. This protects the family from an estate recovery after the death of the trust creator. We can also draft the trust with provisions that would allow the trust creator to return back to the home if and when they are able to and allow them to take their 121 exclusion from the capital gains sale on the home if it is sold during their lifetime inside the irrevocable MAPT Trust.
To schedule an appointment with me to discuss how we can start protecting Mom and Dad’s assets through this type of planning, call (760) 448-2220 or email me at [email protected].