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.
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.
The law placed multiple limits on Medi-Cal Estate Recovery’s capacity to claim assets after a recipient’s death, including:
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.
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:
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.
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.
While there are multiple advantages to Medi-Cal Asset Protection Trusts, there are important factors to consider when creating one. These include:
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.