Medi-Cal Asset Protection Strategies

What is Medi-Cal? It is a combined federal and state program that pays for long term nursing home care. To qualify for Medi-Cal, a single applicant may not have more than $2,000.00 in non-exempt assets and non-available assets. There are similar qualification requirements for married couples.

 

Exempt Assets:Exempt assets are those that Medi-Cal does not count when determining a persons eligibility. These include such property as:

  •    One Automobile
  •    Household Goods
  •    Personal Property
  •    Family heirloom jewelry
  •    Specially structured Annuities
  •    Burial plots
  •    Irrevocable burial trusts
  •    $1,500 in a revocable burial fund

Unavailable Assets:Unavailable assets are counted in against Medi-Cal eligibility if the person has the right, power, and authority to liquidate the asset. One way of showing that an asset in not available is to show that it cannot be sold. Another way an asset may become unavailable is when the property is used for security of debt. Unsecured debt is not deducted from gross assets in order to determine eligibility. However debt which is secured debt is deducted.

 

Non-exempt Assets:Non-exempt assets are the things that you own that Medi-Cal will count when deciding whether or not a person qualifies. Generally these assets are available to a person and could be used to pay for personal care. This includes such property as:

  •    Checking accounts
  •    Certificates of Deposit
  •    Stocks and bonds
  •    Mutual Funds
  •    Real property other than your home
  •    Promissory notes

TWO TESTS TO QUALIFY FOR MEDICAL:

Two tests have been developed by Medi-Cal to determine eligibility. The first is the amount of available assets, and the second is the income that the person receives from all sources. Both tests must be passed in order to qualify.

FIRST TEST-ASSETS

   Residence, a single car, and pension funds and other work related annuities (including IRA's) are treated as "unavailable assets";

   *(1) if they are held in the name of the Medi-Cal beneficiary; and

   *(2) if the beneficiary has elected to receive periodic payments.

   All Cash in checking and/or saving accounts to which the applicant has unrestricted access is considered available and is counted as a resource.

   This includes joint accounts with family members. Funds in a joint account will not be considered available if the applicant can "clearly establish" that the funds are owned by the other party. This can be done by showing that the other party declared the income generated on his or her tax return.

SECOND TEST-INCOME (SHARED COST)

Although Medi-Cal has no income limit as to what a person may earn, a person cannot receive Medi-Cal benefits unless he or she spends almost all of his or her monthly income on medical expenses. The portion of one's income that must be spent on medical care before Medi-Cal will pay for any remaining medical cost is called "share of cost". Medi-Cal counts all gross earned income and unearned income. Deductions for income taxes are not allowed, except for certain expenses for houses, that are not part of the estate. Medi-Cal does allow the deduction for health insurance and Medicare premiums, including Medicare part B premiums. Unreimbursed medical expenses can also be deducted. In addition a deduction of $35.00 per month is allowed for personal needs.

 

What are some Asset Protection Strategies?

  1. Transfer of assets to Irrevocable Trust (If properly drafted this technique can save the family home from Medi-Cal Estate Claims)
  2. Transfer assets out of the estate. Warning if done incorrectly it could       cause civil and criminal penalties
  3. Spend down estate.
  4. Converting non-exempt resources to exempt or unavailable assets.

   Examples:

  •     Home Improvements;
  •     Purchase of Auto & or repairs;
  •     Purchase of Life Insurance;
  •     Purchase of Special Annuities.

 

CONCLUSION:

Appropriate planning for single clients is more difficult than for a married couple, especially when there is no home. It is usually better to go into a nursing home before one attempts to qualify for Medi-Cal, because many homes do not wish to accept Medi-Cal patients. In addition, there are various penalties for disqualification of improper transfers. Medi-Cal will look back at what assets were sold, gifted and or transferred for a 30 to sixty month period of time. If it is determined that there were improper transfers, penalties will be assessed. In certain situations, some transfers carry criminal penalties.

 

 IT IS IMPORTANT TO PLAN!  IT IS VITAL TO PLAN EARLY!!

 

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