Why Protect your Money From Medicaid? Many seniors may find themselves facing overwhelming financial burdens in their later years due to medical expenses. Sixty-six percent of all bankruptcies are caused by medical bills and 7 out of 10 people over the age of 65 will experience the long-term medical expenses which are often the cause of the medical bankruptcies.
If used properly by California citizens, whether they be lower income or even middle or upper middle income, there’s Medi-Cal to take away the pain. Medi-Cal is known as Medicaid in other states. For those who do not seek proper counsel, most Medi-Cal applicants believe that in order to qualify, that they would have to spend-down almost all their savings — money they may have spent their entire working lives to accumulate. Fortunately, if you’re careful and plan ahead, there are ways to legally “hide” your savings from Medi-Cal.
California is unique in our country as the only state which is not operating pursuant to the ‘Deficit Reduction Act’ (DRA). The DRA will in the future implement significant restrictions not formerly experienced in our state. California’s exclusion from the restrictions of the DRA is only temporary. Though California has already passed the DRA, but it has not yet been implemented here.
When the DRA is finally applied in California, it will change our current qualification rules regarding the period of time in which the state may look-back to determine whether you’ve transferred or paid out any resources which could have been used to pay for your care. This is referred to as the “look-back” period, which is currently 30 months in California, but will be doubled to 60 months under the DRA.
In addition a few of the changes to occur under the DRA are, 1) how annuities are treated, 2) how income from a healthy spouse may be applied in the determination of eligibility, 3) the amount of home equity which you may have and still qualify for benefits, 4) will require that partial months of ineligibility be considered with respect to what the state considers a disqualifying transfer, 5) change the rules regarding how partial or installment transfers were made during the “look-back” period and 6) the granting of agreements allowing a Medi-Cal recipient to have a right to live in their home for their lifetime.
The following are a sampling of the types of strategies which may be used to allow you to use the benefits of Medi-Cal and still prevent your assets being lost to exorbitant medical expenses:
Medi-Cal Asset-Protection Trusts. This irrevocable trust is designed to provide asset protection, so the assets no longer belong to you and are beyond the reach of Medi-Cal. You can transfer your home and finances into such a trust and California will not be able to pursue those assets as reimbursement for the medical benefits which you have received.
Pooled income trusts. These also are irrevocable accounts used to hold excess income, but they are for disabled individuals. The surplus income is pooled together and managed by a nonprofit that acts as a trustee and disburses the funds. Unused funds remain with the trust for charitable purposes.
Spousal transfers. Certain transfers between spouses are permitted and, unlike many other strategies, are not subject to the look-back period. One basic Medicaid-planning strategy is to transfer assets to the well spouse who still lives in their home, referred to as the community spouse.
This is just an introduction to the very complex field of elder law planning performed by using the benefits of Medi-Cal. In order to navigate California’s maze of federal, state and county related Medicaid laws you will need the services of specialized professionals to make sure that you receive a positive outcome. The legal sheltering of certain assets for you and your family and avoiding the potential bankruptcy which comes from paying long-term care medical expenses will be a decision that you will most certainly be glad that you made, but you delay at your peril. Do not wait until the situation becomes critical.
Call our office today to schedule an appointment to discuss how you can create a plan to pay the long-term medical expenses that most people will at some point have to encounter.
Read our past article, ”How Much Does the Average Funeral Cost?”
For more information about The Hayes Law Firm, visit our Google My Business page.
This website is not intended to be a source of solicitation or legal advice. General information is made available for educational purposes only. The information on this blog is not an invitation for an attorney-client relationship, and website should not be used to substitute for obtaining legal advice from a licensed professional attorney in your state. Please call us at (626) 403-2292 if you wish to schedule an appointment for a legal consultation.