There are so many different types of trusts that you can create, understanding the differences between them can be a challenge. Take, for example, Medi-Cal Trusts and so-called Family Wealth Trusts. A Medi-Cal Trust is a special type of trust basically used to shelter your assets in order to preserve your eligibility for Medi-Cal benefits. By using a Medi-Cal Trust, you can receive income from the trust up to a certain amount, without jeopardizing your Medi-Cal eligibility. On the other hand, a Family Wealth Trust allows you to regulate an heir’s access to assets, while providing long-term supervision and management of investments in the trust property.
Family Wealth Trusts
One real benefit of a family wealth trust is that the assets you place in the trust are permanently removed from your estate. So, when you pass away, the assets in the Family Wealth Trust will not be considered part of your estate for estate tax purposes. Asset protection is meant to shelter the wealth you have accumulate from unnecessary risks. A Family Wealth Trust can be one of the most effective and flexible ways to provide that type of protection. Regardless of the value of your estate, asset protection should always be a priority in your estate plan. That way, you can guarantee your family wealth will be passed on to your heirs as you see fit.
As you probably know, Medi-Cal is a need-based government assistance program that pays for medical services for the medically needy. To be eligible for Medi-Cal, you must have limited financial resources to be eligible for Medi-Cal. The purpose of Medi-Cal planning is to eliminate the need to exhaust your savings and assets before Medi-Cal will pay for the cost of long-term care. A Medi-Cal Trust is like other irrevocable trusts, however, except that you can actually be named as the income beneficiary. Your children or spouse are then considered residual beneficiaries. In other words, you can receive income from the trust, up to the maximum amount allowed by Medi-Cal, while maintaining your eligibility for benefits.
What is the difference?
A Family Wealth Trust offers lifetime benefits, and protects your wealth for current and future generations. A Medi-Cal Trust is meant to protect assets by taking them out of your estate in order to establish or maintain eligibility for government benefits. Because of the Medi-Cal law passed in 2005, you are no longer able to transfer your assets to family members, in order to reduce your estate. This new law created a period of ineligibility for anyone who gives away their assets within five years of applying for Medi-Cal. This is where a Medi-Cal Trust becomes useful.
If you have questions regarding Family Wealth Trusts, Medi-Cal Trusts, or any other incapacity planning needs, please contact the Schomer Law Group either online or by calling us at (301) 337-7696.