California Estate Planning, Wills & Trusts
The Law Offices of Laurie Shigekuni
 

Office Locations::


2555 Ocean Avenue
Suite 202
San Francisco, CA 94132

225 S. Lake Ave.

Suite 300

Pasadena, CA 91101


Contact Information

Ph:   (415) 584-4550
        (800) 417-5250

Fax:  (415) 584-4553

contact@calestate
planning.com

Medi-Cal Trusts


Our practice makes available trust language that may ease eligibility for long-term care benefits under Medi-Cal (California's version of the federal Medicaid program). People sometimes think of Medi-Cal as a poverty program, but some homeowners who have modest savings may still need Medi-Cal because Medicare covers only very limited periods of long-term skilled nursing home care. If you choose, we can design your documents to coordinate with Medi-Cal eligibility rules. Some of this work – the part addressing estate recovery – can now be done more simply under the provisions of SB 833, which took effect in 2017.


Medi-Cal for Long-Term (Skilled Nursing) Care

Nursing home care in this country is expensive. In California, the annually updated official Average Private Pay Rate for nursing home care in 2017 was $8515 per month. Without long-term care insurance, it is difficult for many people to pay such costs. Medi-Cal is the only publicly funded program that covers long-term skilled nursing care for some chronic conditions.


Medicare Skilled Nursing Coverage is Limited
Many people mistakenly believe Medicare will cover skilled nursing care. In fact the coverage Medicare offers is very limited. For example, patients generally have to spend three days in an acute care hospital before they qualify to receive Medicare payments for skilled nursing care, and then the care must be related to the same acute illness or episode as the hospital stay. If this requirement is met, Medicare will pay up to 100% for the first 20 days, and a copayment for the 21st through 100th days of skilled nursing care, but generally will not pay after that. Medicare payments do not cover nursing care at all for diseases such as Alzheimer’s or Parkinson’s disease, because those require custodial care – as opposed to acute care, which is medical care for a sudden accident or event such as a hip fracture.


Who May Receive Medi-Cal for Long Term Care?
People automatically qualify for Medi-Cal who receive federal means-tested Supplemental Security Income (SSI) benefits (as distinct from SSA retirement or SSDI employment-based disability benefits). The same is true for recipients of CalWORKs benefits, which is California's version of the family welfare benefit, known at the federal level as Temporary Assistance for Needy Families (TANF). Medi-Cal “expansion” benefits also became available to a larger group of lower-income people under the Affordable Care Act, also known as the ACA and Obamacare. (Medi-Cal expansion benefits are based only on income, not assets, but they are limited to people between ages 19 and 64 with incomes less than 138% of the federal poverty level, which as of 2017 is $1868 per month for a two-person household.)

As we’re all aware, there are efforts at the national level to repeal the ACA and to restrict Medicaid more sharply – but it remains to be seen whether such efforts will succeed, and how California legislators might choose to cushion federal health care cuts in state benefits programs.

Single adults who receive Medi-Cal for long-term care must generally have very low liquid assets, usually $2,000, to be eligible for benefits. There is considerably more flexibility for married people. The "sick spouse" who needs Medi-Cal help to pay for treatment must be impoverished and may have only about $2,000 in liquid assets, but the well spouse may have up to $120,900 (as of 2017) in liquid assets. As we’ll explain next, a house or other ownership interest in a home is usually an exempt asset for Medi-Cal purposes during the lifetime of the patient and the patient's spouse or registered domestic partner. Therefore a married homeowner, living at home, who has a spouse staying in a skilled nursing home, can often maintain a middle-class standard of living with the help of Medi-Cal benefits.

Exempt Assets for Medi-Cal Eligibility
Many types of assets are not counted in calculations of Medi-Cal eligibility. The most important exempt asset is a “principal residence” , defined by California law as, “[T]he home, including a multiple-dwelling unit, in which the individual resides or formerly resided,” so long as the ownership and residency situations meet certain criteria.
(California Welfare and Institutions Code Sections 14006(b) and 14006.15.) This is a very broad exemption. The home may still be exempt even if the applicant is absent from it, if
the applicant intends to return home. An attorney should be consulted on questions about the exemption or Medi-Cal eligibility.

There is a slow regulatory process in the works that, when complete, will impose a federally required limit on the amount of home value that is treated as exempt for Medi-Cal purposes. The federal Deficit Reduction Act of 2005 (DRA) required states to set caps on the amount of equity long term care benefit applicants or recipients may have in their primary residences. State legislation (W&I Code Sec. 14006.15(b)) has now set California’s cap at the maximum permitted level of $750,000. However, the cap will not take effect until state regulations interpreting it have been finalized. As of this writing, in late 2017, the regulations had not become final. This could change at any time, however. For updates please refer to the CANHR site. If or when the DRA limit is imposed, there will be a further question how to calculate whether the homeowner’s equity interest in the property reaches the $750,000 cap. Sec. 14006.15(a)(1) defines the value of an "equity interest" as the assessed value of a property minus encumbrances, which could help some people who acquired property a long time ago.


For further information about Medi-Cal eligibility and long term care options, the San Francisco-based nonprofit California Advocates for Nursing Home Refo
rm (phone: 415-474-5171) is an excellent resource.


Estate Planning That Eases Application for Medi-Cal
Any person who requires Medi-Cal assistance to obtain skilled nursing services must first become impoverished. However, for a married couple, the well spouse may still be able to retain substantial assets. The sick spouse may transfer assets to the well spouse as long as the sick spouse can make an informed decision and sign his or her name. However, there is a problem if the sick spouse no longer has capacity to make financial decisions. Court intervention may be necessary to transfer documents from the sick spouse to the well spouse.

Part of our work is in drafting documents that prepare for these scenariosfor example, by allowing assets to be transferred between spouses if one spouse becomes incapacitated. These kinds of estate planning provisions may reduce the likelihood of a need for court intervention in the event of one spouse's incapacity.

Medi-Cal and SB 833 for Homeowners

During a patient's life, a house is an exempt asset and therefore not a barrier to Medi-Cal eligibility. However, after a Medi-Cal recipient is deceased, and the surviving spouse or registered domestic partner is also deceased, the home is subject to Medi-Cal "recovery," meaning the state can pursue a claim against the deceased Medi-Cal patient's estate. Most Medi-Cal collections have always been for costs incurred from age 55 onward; one of the effects of the new SB 833 is to narrow down the kinds of care that are subject to recovery.

Until the recent passage of SB 833, exemptions from Medi-Cal recovery were narrow and were based on personal circumstances. Principally, the state will not pursue recovery if the patient is survived by a minor (under 21) or by a blind or disabled child of any age. A child of the deceased person who lived in the home as a caregiver may also be able to stave off recovery. A "hardship waiver" may be filed within 60 days from the notice of the claim for recovery.

California law, unlike the law of some other states, does not prevent a homeowner who receives Medi-Cal benefits from giving away an exempt asset, including a home. Therefore, one option – not always appropriate – has been to transfer most of the patient's equity in the exempt house to the people who the patient would want to inherit the house, while the patient retains a "life estate" right to continue using the property as long as he or she is alive. This is a complex process and can be a disempowering one, so it is a relief that SB 833 reduces the reasons to gift away home equity during the homeowner’s lifetime.

SB 833 adds one more reason why a revocable trust may be to a homeowner's advantage. In addition to help with avoiding probate, a trust can also help avoid Medi-Cal recovery claims against the house after the homeowner's death.

 
The Law Offices of Laurie Shigekuni
 

Office Locations::


2555 Ocean Avenue
Suite 202
San Francisco, CA 94132

225 S. Lake Ave.

Suite 300

Pasadena, CA 91101
 
Contact Information
Ph:   (415) 584-4550

        (800) 417-5250

Fax:  (415) 584-4553
contact@calestate
planning.com

 

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