The government run health insurance program for people with significant financial need is called Medicaid in most of the 50 states. In California, this program is called Medi-Cal.
This is a program that is jointly administered by the federal government along with each respective state government. Every state has a certain amount of latitude with regard to the precise way that the program is administered.
Based on Need
Medi-Cal eligibility is based on financial need. There are rather complex parameters in place that are used to make eligibility determinations. These were further complicated by the implementation of the federal health care law.
Medi-Cal planning involves keeping your assets within program parameters. This is traditionally done through measured divestitures. In other words, you give away or spend assets in an effort to bring your financial capabilities within the program limits.
When you hear about this strategy you may wonder if assets that you have conveyed into a trust would be counted by the Medi-Cal program. The answer is that it would depend on the type of trust.
Revocable vs. Irrevocable
There are revocable and irrevocable trusts. The revocable living trust is a very commonly utilized estate planning device.
One of the appeals of the revocable living trust is the fact that it is in fact revocable. You do not permanently surrender control of the funds. You could rescind the trust at any time and retain personal ownership of the assets that you conveyed into it.
After you die, assets that have been held by the trust would be transferred by the trustee to the beneficiaries outside of the process of probate. These trusts are used to facilitate probate avoidance.
Because you retain incidents of ownership, assets that you convey into a revocable living trust would be counted by the Medi-Cal program.
If you wanted to remove assets from your financial profile for Medi-Cal planning purposes, you would want to place them into an irrevocable trust. With this type of trust you cannot take back the assets. You surrender incidents of ownership.
Because of this, the assets that have been properly placed into an irrevocable trust may not be counted by the Medi-Cal program.
Drawbacks of Medi-Cal Trusts
Trusts that are used for Medi-Cal planning purposes are sometimes referred to as a Medi-Cal trusts. A disadvantage would lie in the fact that you are surrendering ownership of assets that you convey into the trust.
You don’t have the same access during your life. You may actually need these resources at some point in time. In addition to this, you may never need Medi-Cal because you may never become incapacitated.
Medi-Cal Planning Consultation
This post provides a brief answer to a complicated question. If you would like to obtain in-depth information about Medi-Cal trusts, contact our firm to set up a free consultation.