A significant majority of senior citizens will eventually need help with their activities of daily living. Medicare will not pay for long-term care, but Medi-Cal will help with these costs. As a result, Medi-Cal planning is important for many older Californians.
Just so you understand the extent of the costs that we are talking about, according to the state, the average monthly cost for nursing home care is $7,549. This is the average; in the Bay Area it is considerably higher. It is not uncommon for people to spend multiple years receiving long-term care.
Medi-Cal is a program that is jointly run by the state of California along with the federal government. It is a program that is designed to help people who have very limited financial resources. As a result, you must meet income and asset requirements, and they are quite modest.
You could spend everything that you have saved for retirement paying for long-term care out-of-pocket. Once your resources were for the most part exhausted, you could qualify for Medi-Cal to pay for the remainder of the care that you need.
Clearly, this is not a very appealing prospect, because you would be losing everything that you intended to leave behind to your loved ones.
To qualify for Medi-Cal, people often engage in a process called a spend down. You could essentially give your children their inheritances in advance. You would then have limited resources left in your own name, and you would be able to qualify for Medi-Cal to pay for long-term care.
However, this is a bit easier said than done, because in California there is a 30 month look-back. You must complete the spend down at least 30 months before you apply for coverage, or your application will be initially denied.
When you spend down, you could give direct gifts to your loved ones, but you could alternately create a Medi-Cal trust.
There are revocable trusts, and there are irrevocable trusts. A Medi-Cal trust would be an irrevocable trust. Because you are surrendering direct personal control of the assets in the trust, they would not be counted when Medi-Cal was determining your eligibility.
People often create income-only Medi-Cal trusts. With this type of trust you can continue to receive income that is earned by the assets in the trust, but the principal would not be counted when Medi-Cal was tallying up your assets.
Assets that have been conveyed into a revocable trust like a revocable living trust would be countable, because you do not surrender incidents of ownership.
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