Jim and Marie Anderson live in San Jose, California. They are now in their mid-70s and they recently celebrated their 50th anniversary.
The Andersons have been blessed with three wonderful children. One is a nurse, one is a school teacher, and their youngest child, Joe, is not able to work.
Joe is now in his late 40’s and lives in a group home. He receives Social Security (SSI) of about $500 a month and his parents have always supplemented his income.
Mr. and Mrs. Anderson have lead a modest lifestyle. Mr. Anderson receives Social Security of about $900 per month and Mrs. Anderson gets about $650 per month. In addition, he has a pension of $350 per month. They have been able to live on this and continue to save about $250 per month. Like most of their generation, the Andersons are excellent savers.
In fact, they have accumulated a nice little nest egg. Their assets are as follows:
| Residence | $ 560,000 |
| 1997 Buick | 2,500 |
| Certificates of Deposit | 100,000 |
| Mr. Anderson’s IRA | 35,000 |
| Savings Bonds | 40,000 |
| Money Market | 75,000 |
| Total Countable Assets | $250,000 |
Unfortunately, Mr. Anderson recently had a stroke and won’t be able to come home. He moved to the nursing home right up the street. Mrs. Anderson is satisfied with the care he is getting… but her worst fears are coming to pass. That’s because her Parkinson’s Disease has progressed to the point where she can no longer care for herself and can’t stay at home either. Now that she will be joining her husband in the nursing home, who will care for their son, Joe?
And most of all, Mrs. Anderson is concerned about the money.
Mrs. Anderson frets over the fact that the nursing home will cost about $16,000 a month for both of them… and that doesn’t count the cost of the medication.
Our office had good news for the Andersons. We explained to them that under the Federal and State laws, Joe is considered to be permanently and totally disabled. Since that is the case, the Andersons can give all their assets to Joe… or to a trust for Joe’s benefit… without incurring any transfer penalties.
Fortunately, the news is even better than that. Under the “transfer to a blind or disabled child” section, Mr. and Mrs. Anderson can transfer all of their assets to their son with a disability and incur no penalty whatsoever. Thus, she and her husband can make a gift of the entire $250,000 and qualify for Medi-Cal right away!
Further, California considers the gifting of the home to be exempt from the gifting “look back” rules such that they can gift their home away without resulting in any Medi-Cal disqualification. And having done so while they are alive means it will avoid the Medi-Cal recovery lien upon their deaths. Multiple techniques for achieving this are available, each having different advantages, and since these different techniques can have a huge impact, it is best to consult with qualified legal counsel before choosing the technique to use.
ABOUT THE Litherland, Kennedy & Associates, APC, Attorneys at Law
Roy W. Litherland is an attorney whose practice emphasizes elder law and estate planning. Roy has practiced law in the greater Bay Area for the last 38 years and is certified as a legal specialist in Estate Planning, Trust and Probate Law by the California State Bar Board of Legal Specialization. In addition to his extensive legal background, Roy was also previously licensed as a Certified Public Accountant. Although Roy has an extensive background in accounting, he retired his license to practice as a CPA to devote his time and energy entirely to the practice of law, specializing in estate planning, trusts, Medi-Cal planning, and probate. Roy is a noted speaker on living trusts, Medi-Cal Planning, and estate planning. He is a member and designated Fellow of the American Academy of Estate Planning Attorneys, an organization that fosters excellence in estate planning.
The Litherland, Kennedy & Associates, APC, Attorneys at Law is a member of the National Academy of Elder Law Attorneys and the California Advocates for Nursing Home Reform.
