Our office receives numerous calls from concerned loved ones and family members wondering if or when they should start Medicaid planning (Medicaid is called “Medi-Cal” in California). The answer: It is never too early or too late to discuss the planning options available. Below are just two examples of the many types of calls we get every day where we advise clients that Medi-Cal planning is an option right now.
Mrs. Jones is an 81-year-old widow experiencing short-term memory loss. She is still able to live alone in her own home. Her income is $750 a month, she has a home worth $535,000 and other assets of approximately $60,000. She heard from a friend that she should give away all her assets now to her kids just in case she would ever need to go to a nursing home. Her friend told her that as long as she gives everything away more than three years before moving to a nursing home, she’ll be able to qualify for Medi-Cal without having to spend down any of her assets.
Unfortunately, there are many problems with the advice Mrs. Jones’ friend gave her. First, Mrs. Jones may need nursing home care in less than three years. Due to this large transfer being made within the 30 month look back period,* she will now be ineligible for Medi-Cal for some extended period of time and will have no funds to pay for her own care. Once the money and house are transferred to her children, those assets actually belong to the children – no strings attached. Even if the children are trustworthy, and would be willing to give the money back if Mrs. Jones needed nursing home care, once the assets are in their names, the assets are subject to their creditors. One of the children could be sued or go through a divorce. Since the assets are in the children’s names, a lawsuit, tax problems, or a divorce could easily wipe out mom’s life savings, as well as leaving her without her home.
Also, keep in mind that Mrs. Jones may never need nursing home care. Rather, she may need to make a move to an assisted living facility. Typically, Medi-Cal does not cover the cost of care in an assisted living facility. Therefore, it’s important that Mrs. Jones hang on to her assets while she’s still relatively healthy so she can have the freedom and independence to pay for the level of care she needs when she needs it.
In this scenario, we would advise Mrs. Jones to get the proper estate planning documents in place so her children could act on her behalf in the event of incapacity, and to avoid probate in the event of her death.
Mr. and Mrs. White had assets of $240,000 in addition to their home worth about $820,000 when Mr. White, who suffers from Parkinson’s, moved into a California nursing home eight months ago. Mr. White’s monthly income is $1,300 and Mrs. White’s is $450. Mrs. White was told she needed to spend down their assets to about $117,240, not including the house, in order to qualify Mr. White for Medi-Cal. With nursing home costs averaging over $7,500 a month, and other incidental expenses, they are now down to about $180,000.
Mrs. White recently went to a support group meeting for Parkinson’s and someone told her that there might be a way to save more than $117,240 of their assets. She thought it was too late to protect the assets because her husband had already been in the nursing home for eight months and she had already started the spend down. Fortunately, she contacted our office and we told her not to spend down any more funds. We filed a Medi-Cal application immediately and requested prior quarter coverage. We were able to get Mr. White qualified for Medi-Cal as of the month we filed the application. Further, through requesting prior quarter coverage, we were able to get Mrs. White an $22,500 refund for the previous three months of nursing home care she had already paid. And we got a court order permitting Mrs. White to keep the entire $180,000 and all of Mr. White’s income.
In the end, Mrs. White was able to keep approximately $193,000 in assets, plus the house, while still getting her husband qualified for Medi-Cal.
Again, it is never too early or too late to discuss the planning options available. Whether you are
81 years old, healthy, and living in your own home or have been in a nursing home for several months—depending on your situation, there are steps you can be taking now to preserve as much of your assets as the law will allow. The key is to find out what the options are by discussing your situation with a qualified Elder Law Attorney.
*To be five years when the Deficit Reduction Act of 2005 is fully implemented in California.
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.