I was recently asked to address the following fact situation.  Mother is elderly and in failing health with limited assets other than the family home. Should she need to be admitted to a skilled nursing facility, it is likely Medi-Cal would end up footing the bill.  Daughter is disabled, receives public assistance and wants to know if there is any way she can inherit the home without impacting her public benefits.  My response was as follows:

If your mother goes into a skilled nursing facility (“SNF”) and Medi-Cal (“DHCS”) helps pay for that cost, upon your mother’s death, the DHCS has the right to file a claim against her estate and recover whatever has been paid out on her behalf.   If your mother owns a home at the time of her death, the typical technique is for the DHCS to enforce a Medi-Cal recovery lien compelling the home to be sold so they can make their recovery.  However, none of that should be of concern for you.

The Medi-Cal recovery rules provide that if any of your mother’s children are disabled at the time of her death, there is no recovery.  And that is true whether she leaves the home to you or not.  One option is to do nothing because if you are disabled within the definition of the Social Security Act, there will be no recovery.

But there is the option of your mother transferring the home to you in a Supplemental (Special) Needs Trust (“SNT”).   The SNT could hold title to the home for your benefit. One of the major advantages of doing so is that the home and other assets of the home would be protected from your creditors during your lifetime, and upon your death, would avoid any claim for recovery by the DHCS for benefits you received.  Also, the home held in the SNT could be sold, and the proceeds used for your care without negatively impacting your qualification for public assistance, whereas if you own the home directly (which is an exempt asset for purposes of qualification) and you sell the home, your receipt of the proceeds would result in you losing your public assistance.  Therefore, my recommendation is that you speak to your mother about creating a SNT for your benefit.

The Law Office of Roy W. Litherland is a member of the American Academy of Estate Planning Attorneys.

There is a “special needs” child or adult in your life. What should you do? Here are some thoughts to consider.

• Change – Nothing will remain as it is right now. The Special Needs Person (“SNP”) grows up and grows older. Their needs today are not likely to be their needs in the future. You need to design flexibility into your estate plan, usually best achieved by creating a trust granting broad authority to address the ever changing environment and appointing a trustee(s) whose discretion you trust to implement those provisions. Be careful about putting restrictions (handcuffs) on your trustee; that may prevent them from achieving your goals.

• Public Assistance – One of the principal goals of the Special Needs Trust (“SNT”) is to preserve the SNP’s right to receive public assistance. The assets in the SNT are ignored for purposes of qualifying for public assistance and at the same time are available to provide for the wants and needs of the SNP above and beyond what public assistance will provide. Like what might you ask? Anything other than food and shelter, and is not intended to replace medical assistance already being provided. But everything else is permitted to be provided, for instance:

o Vacations;
o Travel (for any reason);
o Entertainment (theatre or athletic events);
o Furniture (that big screen TV);
o A specially (or not) designed van;
o A wheel chair;
o Special therapy;
o Medical treatment not provided by public assistance (outside of California or the USA);
o Education;
o Or anything else except food, housing and to replace medical assistance already being provided.

• Guardian – If the SNP is a minor, it will be important to prepare an estate plan and designate a guardian who can legally care for them until they become an adult. Having attained adulthood, it may be necessary to have a court appointed conservator appointed for them to make their medical decisions, and provide for their personal needs. If the SNP lacks sufficient mental capacity to manage their own finances, the SNT creates the structure by which the trustee of that trust will handle those financial affairs, thus avoiding the appointment of a conservator of the estate of a SNP.

• Avoiding Probate – When the SNP passes away, what happens to any assets they own? If the assets are held in a SNT, the provisions of the trust will dictate who will inherit what’s left and will not be subject to the death probate process.

The Law Office of Roy W. Litherland is a member of the American Academy of Estate Planning Attorneys.