Generally speaking, in the elder law/estate planning field, the term “Medi-Cal planning” is used to describe a very important strategy. To provide a brief explanation, a significant percentage of senior citizens will ultimately reside in nursing homes. Medicare will not pay for the custodial care that these facilities provide, but Medicaid is set up to absorb long-term care costs.
Since Medicaid is a health insurance program that is intended for people with very limited resources, you have to be able to prove that you have a significant level of financial need to qualify. Some things that you may own don’t count, including your home, but the limit on countable assets is just $2000.
It is possible to essentially give your loved ones their inheritances in advance to lower your personal asset level so you can qualify for Medi-Cal to pay for a stay in a nursing home. This is not as easy as it sounds, because timing is a factor. Your eligibility is delayed if you give away assets within 30 months of the submission of your application for Medi-Cal coverage.
This is a surface look so that you have a basic understanding of this form of Medi-Cal planning. There is another one that can enter the picture if you want to provide for a loved one that has special needs.
Medi-Cal for People With Disabilities
Medi-Cal is relied upon by a lot of elders and people that are simply at the lower end of the income spectrum, but there is another group that is heavily reliant on this program. Obviously, people with disabilities need expensive health care insurance, and most of them do not get it through employers, because they cannot work.
If you are going to be leaving an inheritance to a loved one with special needs that is relying on Medi-Cal as source of health insurance, you are in a tricky situation. A significant inheritance that becomes the direct personal property of a benefit recipient could cause a loss of eligibility.
It should be noted that there are a good number of people with disabilities that were injured seriously in accidents that were not their fault. It is not uncommon for someone in this position to receive a significant settlement or verdict. And of course, a person could be given a direct inheritance.
Under state and federal laws, it is possible for a court, a guardian, a grandparent, or a parent to set use this property to fund a first party special needs trust for the benefit of a loved one. The trustee that is named in the trust declaration would have the ability to use assets in the trust to satisfy the supplemental needs of the beneficiary.
There are a wide range of different expenditures that would be approved, so assets in a first party special needs trust can definitely be used to significantly increase the quality of life of the beneficiary.
That’s the good news, but there is also some bad news to go along with it. There is a Medicaid estate recovery requirement that is triggered after the death of a benefit recipient. If there is anything left in the estate, it can be absorbed by Medicaid as a source of full or partial reimbursement.
When a first party or self-settled special needs trust has been established with assets that were the direct property of the grantor/beneficiary, Medicaid could attach assets that remain in the trust during recovery efforts.
This being stated, if you want to help a loved one with your own resources, you can establish a third-party special needs trust. Everything is the same with regard to the ability of the trustee to use the assets to allow the beneficiary to enjoy a higher quality of life.
However, the beneficiary would have never directly owned the assets in the trust. As a result, if you create and fund a third-party special needs trust for the benefit of another person, you would name a successor beneficiary.
That individual or entity would assume ownership of the funds after the death of the disabled loved one, because the property would not be looked upon as part of the estate of the deceased benefit recipient.
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