Americans are living longer, according to the Centers for Disease Control and Prevention. As Americans age, they also require long-term healthcare. In the United States, Medicaid is a federal and state program providing middle to low income families with coverage for medical costs and nursing home care. In California, the state-specific Medicaid program is known as Medi-Cal. While, in theory, Medi-Cal seems like a great idea, Medi-Cal poses some significant financial challenges. In fact, many people who need Medi-Cal may discover that they do not qualify.
Additionally, the State of California will attempt to reclaim the costs associated with your medical care through their Medi-Cal Estate Recovery Program. One way to address these issues is through a Medi-Cal Asset Protection Trust (MAPT). Many Californians may be uncertain as to whether a MAPT is right for them. If you have questions or concerns around MAPT, consider contacting the experienced estate planning and elder law attorneys of Santa Barbara Estate Planning & Elder Law at (805) 946-1550 for guidance.
Understanding California Medi-Cal Asset Protection Trusts
A Medi-Cal Asset Protection Trust holds and manages people's assets, including their primary residence, so that the State of California does not have the legal ability to take them. This type of legal document protects people's assets from being lost to Medi-Cal, lawsuits, bankruptcy, and other complex legal situations. Additionally, a Medi-Cal Asset Protection Trust also protects people's assets for their beneficiaries.
Medi-Cal Asset Protection Trust Limits
The law placed multiple limits on Medi-Cal Estate Recovery's capacity to claim assets after a recipient's death, including:
- If a recipient's spouse survives them and is not themselves a recipient of Medi-Cal, then the estate cannot be collected after the spouse passes away.
- Any home that is valued at under half the average value of homes in that county cannot be claimed.
- If there is no probate estate -meaning all assets are held in a revocable or irrevocable trust there is no Medi-Cal Estate Recovery.
- If the recipient has a surviving child who is under the age of 21 or disabled, then the estate may not be claimed.
- In California, Estate Recovery may only seek recovery for long-term care -- not other unrelated medications or treatment costs.
It is important to note that while assets in a revocable trust are protected from Medi-Cal Estate Recovery, a revocable trust will not help you become eligible for Medi-Cal if you have too many countable assets for the progarm. An irrevocable trust such as a MAPT can help you become eligible for Medi-Cal benefits in the month you are placed in a skilled nursing facility, or even months or years after placement in a skilled nursing facility.
How A Medi-Cal Asset Protection Trust Can Protect You
For individuals who opt for a Medi-Cal Asset Protection Trust as part of their estate planning, there are several ways that the trust can protect these people and their families. This includes:
- It prevents the state from coming after someone's estate if their home was transferred to a MAPT.
- It protects the house from any of the children's creditors.
- Individuals have the option and legal right to stay in their residence as long as both spouses are alive.
- It avoids probate, meaning the house will go immediately to the designated beneficiaries without court interference.
- It allows individuals to make MAPT assets non-countable so that children do not lose access to government benefits upon inheritance.
- Parents can specify specific terms and incentives for children's use of the trust - such as for education, a career, or buying a home.
- Individuals can specify a Trust Protector to guard the MAPT, protect beneficiaries, and ensure that the deceased's wishes are correctly carried out.
If you have questions about how and why a Medi-Cal Asset Protection Trust can help you and your family, it may be helpful to speak with the nationally recognized attorneys at Santa Barbara Estate Planning & Elder Law.
How a Medi-Cal Asset Protection Trust Can Make You Eligible for Medi-Cal
California law has a fixed maintenance need standard for those who are living at home, i.e., the amount of monthly income the state has determined you need for necessary monthly expenses, not including medical bills. The need standard for a single elder (over 65) or disabled person is $600 per month; for an elder/disabled couple it is $934 per month, unless you qualify for the Aged & Disabled Federal Poverty Level Program. Generally, if your monthly income is higher than the need standard, or above the aged
and disabled level, you will have a “share of cost” for your medical bills each month. Once you pay or agree to pay your monthly “share of cost” towards your medical bills or skilled nursing home care, you will receive Medi-Cal benefits to pay for covered services you receive in that month.
The share of cost works much like an insurance deductible and is determined by the Medi-Cal office. The amount of the share of cost is equal to the difference between your gross monthly income, minus deductions, such as insurance premiums (Medicare and/or private insurance), and the need standard.
Medi-Cal classifies property as “exempt” and “non-exempt.” Exempt property is not counted in determining eligibility; non-exempt property is counted. For 2021, the at-home spouse can keep up to $130,380 in non-exempt property and the institutionalized spouse can keep up to $2,000 in a separate account. Where a married couple or individual has more than the resource or asset limit, they can turn to a Medi-Cal Asset Protection Trust to make themselves eligible for Medi-Cal. In this scenario, the trust must be irrevocable to be exempt from Medi-Cal's asset limit. This means that once the assets are transferred to the trust, they no longer belong to the person creating the trust, and that person cannot regain ownership.
Additional Medi-Cal Asset Protection Trust Factors
While there are multiple advantages to Medi-Cal Asset Protection Trusts, there are important factors to consider when creating one. These include:
- The State of California has a 30-month look-back period during which they check how assets were sold or given away to meet eligibility in the past 30 months from the date of application. If transfers or gifts made during that 30 month period were over the allowable transfer limit there could be a several month or years period until one may be eligible for benefits.
- If transfers or gifts are made properly, a person may become eligible in the same month he or she is placed in a skilled nursing facility, or if placement has been months or years then the month the application is made.
- It can be expensive to create a Medi-Cal Asset Protection Trust. For this reason, they are typically not used for assets valued under $100,000. However, visiting with an experienced attorney can help you better understand if this would impact your specific situation.
Why You Should Consider Visiting With an Estate Planning Attorney
It is critical to consider working with an estate planning attorney when establishing a Medi-Cal Asset Protection Trust. An experienced attorney can help you navigate the legalities associated with MAPT and work to ensure that the Trust is set up correctly so that you are eligible for Medi-Cal and your hard-earned assets are protected from the high cost of long-term care to provide for a spouse living at home or to your children or other beneficiaries upon your passing . If you are considering establishing a MAPT, the attorneys at Santa Barbara Estate Planning & Elder Law may be able to help. Contact them for a consultation at (805) 946-1550.