By Judd Matsunaga, Esq.
Every 66 seconds, someone in the United States develops Alzheimer’s. The disease is debilitating and deadly. Day-to-day tasks become difficult or impossible. Caregivers sacrifice untold time and energy to keep patients safe and comfortable (Source: CNBC.com, March 5, 2018).
Frightening? You bet. No one likes to think about the possibility of becoming mentally incapacitated to the degree of not being able to handle day-to-day financial matters or make health care decisions. However, if you don’t think about it and make plans, you are doing yourself and your loved ones a great disservice.
Making legal plans in advance is important for several reasons. One of the most important is that early planning allows the person with dementia to be involved and express his or her wishes for future care and decisions. This eliminates guesswork for families and allows for the person with dementia to designate decision makers on his or her behalf.
Early planning also allows time to work through the complex legal and financial issues that are involved in long-term care. First and foremost, you must make plans for health care and long-term care. Long-term care can easily cost $10,000-$12,000 per month! How are you going to be able to afford that?
Seniors need to plan for long-term care. California seniors need to know that Medi-Cal is designed to cover long-term custodial care. Medi-Cal is California’s largest payer of long-term care. Medi-Cal is California’s version of the Medicaid program that is funded jointly by the state and federal governments.
Medi-Cal will pay for long-term nursing home care for as long as you need it. However, Medi-Cal is not an entitlement — you have to qualify to receive benefits. Most “middle-class” families are told they do not qualify for Medi-Cal because they make too much money or have too much in assets. Not true! You can qualify for Medi-Cal benefits and keep your home, your income, your savings, retirement accounts and your car!
What seniors are not told is that they have a legal right to spend down excess assets in order to qualify. Medi-Cal classifies property as “exempt” and “nonexempt.” The real secret is how to convert “nonexempt” assets into “exempt” assets. That means you could be a millionaire and still qualify for Medi-Cal, provided your excess assets are “exempt.”
Still, other seniors are told that the State will take the family home upon death to recover Medi-Cal benefits paid during life. They don’t want that. So, they sell their home. What a mistake! They just turned their biggest exempt asset into a nonexempt asset, making it that much harder to qualify for benefits.
To be clear, the home is “exempt” as long as it’s the applicant’s principal residence or the applicant has a “subjective” intent to return home. “Subjective” means a person hopes to return home, even though he/she “objectively” may never have the ability to return home (it’s just a box that’s checked on the application).
“But Judd, what about the State taking the home after I die in recovery?” That’s partially true — when a Medi-Cal recipient dies, the state can seek repayment for the cost of certain services received that were paid for by Medi-Cal. The whole truth is that there are legal ways to protect your home so that your children will inherit it free of any Medi-Cal recovery.
If you were told you have too many assets to qualify, you may convert nonexempt assets into exempt assets. You may also “spend-down” excess assets to qualify for Medi-Cal. For example, you can pay off your mortgage, remodel or repair your home, buy new furniture, pay off other bills and debts, buy new clothing or medical equipment. You may also buy a new car even if you don’t drive.
But — be careful. Any assets above the property reserve limit of $2,000 (or $122,900 if married); or any asset that is not exempt will be counted by Medi-Cal in determining eligibility. These include cash, savings, stocks, the cash surrender value of whole life insurance if the face value exceeds $1,500 and any other nonexempt resource.
Simply put, even if you have been told you have too much money to qualify for Medi-Cal, you can legally gift away excess money if done properly. The rules are very tricky. It would be advisable not to gift or transfer any assets away without first consulting with an attorney with experience in Medi-Cal qualifications.
Judd Matsunaga is the founding attorney of Elder Law Services of California, a law firm that specializes in Medi-Cal Planning, Estate Planning, and Probate. He can be contacted at (310) 348-2995 or firstname.lastname@example.org. The opinions expressed in this article are the author’s own and do not necessarily reflect the view of the Pacific Citizen or JACL. The information presented does not constitute legal or tax advice and should not be treated as such.