Medi-Cal is California’s Medicaid health care program. It is different from Medicare because Medicare is an entitlement program for those that have paid into the system by working in the US. Medi-Cal which is California State’s implementation of the Federal Medicaid laws, on the other hand, is need based. You must qualify to be covered for benefits.
Medi-Cal pays for a variety of medical services for children and adults with limited income and resources. The Medi-Cal system is paid for by federal and state taxes. If you are determined to be eligible, you can get Medi-Cal as long as you continue to meet the eligibility requirements. This is why potential inheritances, gifts to the person Medi-Cal or extra income from work can be problematic for someone on Medi-Cal.
Long-term care costs are rising at an alarming rate in California. It has become a major problem for most seniors. Many end up losing their life savings paying for long term care (statistics show that 60-70% of seniors will need long term care due to the fact that the average life expectancy has risen so dramatically in recent years). The average cost per month for nursing home care is now $7,092 in California.
In some cases, for an Elder or a person with Special Needs, they are unable to get some or all of their medical needs met through traditional means and thus Medi-Cal is the only option for having coverage (or at least a part of the medical coverage).
To provide an example, imagine Uncle John has a revocable trust. In his trust, Uncle John has left his $2,000,000 estate to his 4 nephews. In most circumstances this is not a problem, but since Uncle John has one nephew with a mental disorder who is on Medi-Cal, leaving an outright distribution to him will throw him off of Medi-Cal until he spends down the inheritance. The better solution would be for Uncle John to incorporate a Special Needs Trust in his revocable trust for the share he wants to leave for his nephew who has the mental disorder. A professional trustee would also be wise to run this trust once Uncle John has passed away.
Another example is Aunt Betty who is now 78. Aunt Betty often has lapses in her memory but all in all she is still able to take care of herself in her home. Aunt Betty has two adult children and several grandchildren but both of her children live out of state. Aunt Betty has a home in Southern California that is now worth close to $900,000 (she and her late husband purchased the home 40 years ago for $100,000). Betty also has a car but it’s not in very good shape and she receives social security income ($1,000/month) and a small pension ($800/month) from her late husband. She also has $100,000 CD at a local bank. Looking forward, there is a possibility that Betty may need in-home or nursing care at a facility based on possible dementia or Alzheimer’s disease.
There are strategies and techniques that can be employed in a “pre-planning” mode to preserve the assets so that Aunt Betty won’t end up in a crisis and have to quickly spend down her estate. Aunt Betty also needs to make sure that she has an Advance Health Care Directive, HIPAA Authorization, Expanded Power of Attorney for Finances, as well a revocable and/or irrevocable trust to transfer assets to her children (or other beneficiaries if she so chooses).
It’s probably a good idea for Aunt Betty to consider a geriatric care manager to help her since her children live out of state. Incapacity is not typically something that happens over night. It’s usually a gradual process and it’s best to have someone there you can rely on to support you should you need more and more assistance down the road.
In this last example, the home that Aunt Betty lives in is her largest asset. She really wants the home to be transferred to her children who grew up in the home. There are some interesting things we can do to preserve that asset through an irrevocable trust. Other assets may be transferred to this special type of irrevocable trust as well. The interesting part of the trust is that we can have a trusted person in charge of that trust and that person can have the ability to make life time distributions from the trust to the trust beneficiaries (usually the Grantor’s children).
The sooner we do this however, the better. California has adopted the DRA (Deficit Reduction Act of 2006), however has not yet implemented it. What this means is that we have a “look-back” period of 30 months for gift transactions. Once the DRA has been implemented in California, that rule will be 60 months. There are many other strategies and techniques to aid in spending down the estate for Medi-Cal qualification yet allowing for some asset preservation for the family. Vetrans benefits may also may be a part of the planning process for long term care. Careful planning is required when looking at the big picture however because the rules for Medi-Cal and for VA benefits are very different. One could obtain VA benefits and inadvertently make themselves ineligible for Medi-Cal. It is best to speak with an attorney versed in Medi-Cal and Veterans Benefits.
If you or a loved one is facing a situation where it’s a possibility that down the road Medi-Cal or VA Benefits may be needed, stop now and call my office at (760) 448-2220 and my caring and compassionate staff will set us up for a time to talk on the phone or in person to see how we can help you not only get the best care you deserve but how you can preserve the wealth you have worked so hard to create over your lifetime.