Protecting your assets from Nursing Home Costs
Mark Breunig, Estate Planning and Elder Law attorney
The topic of covering nursing home costs is always a difficult one. No one wants to go to a skilled nursing facility, but sometimes our health puts us there.
I always discuss the issue of planning for the possibility of an extended nursing home stay with all my estate planning clients. Here are the top 10 misconceptions people seem to have about Medi-Cal coverage for extended nursing home stays.
1. I can’t give away anything and qualify for Medi-Cal.
This is a complicated area of the law and readers should consult with an experienced Elder Law Attorney before they transfer their assets. Although transfers between spouses are exempt, transfers to persons other than spouses usually subject the donor to penalties that result in periods of ineligibility for Medi-Cal. There are some exemptions to this rule.
2. If I give my assets away, I won’t be eligible for Medi-Cal for three years.
Medi-Cal will look back at gifts made within three years of the date of the application. When a person applies for Medi-Cal, the application asks if the person has made any transfers to other persons within the three years preceding the application. If a transfer has taken place during the lookback period, then a penalty may be imposed. A Elder Law Attorney may be able to design a legal
strategy to protect assets even within the three-year period.
3. I must spend all my money before I can receive Medi-Cal.
This is not exactly true. Individuals and married couples are permitted to own certain types of assets and still qualify for Medi-Cal. Examples of exempt resources include one vehicle, household furnishings, pre-paid funerals, and the family residence if the applicant or spouse is still revocable there. Besides these exempt assets, a single individual may keep $2,000 but a spouse may keep up to $126,420.
4. I can spend down my assets only on medical or nursing home bills.
This is not true. Clients should seek advice from an experienced Elder Law attorney to spend the excess resources in ways that most benefit the clients and their families, and, in particular, can provide a spouse remaining at home with a good quality of life.
5. Once I am in a facility, it is too late to start Medi-Cal Planning.
In cases where planning was not done before the person entered a nursing home, assets may still be protected. With proper planning, under current law, it is often possible to save from 40% to 100% of the institutionalized individual’s assets.
6. My retirement assets are safe when my spouse gets Medi-Cal.
When a married person applies for Medi-Cal, the assets of both spouses are considered. Without proper planning, a spouse’s retirement assets are in jeopardy. However, strategies can be implemented to ensure the spouse has the funds for a comfortable lifestyle.
7. If my assets are owned by a revocable trust, they are protected from nursing homes.
Certain assets owned by a revocable trust are generally vulnerable to nursing home costs and are counted when determining financial eligibility. However, other types of trusts may be used to protect assets.
8. I can give away a certain amount of money per year under the Medi-Cal rules.
This is not a Medi-Cal rule, but a federal tax rule. The federal gift tax rule permits persons to give up to $15,000 per year per donee without filing a federal gift tax return. If gifts are made that exceed this limit, a gift tax return must be filed, but normally gift taxes are not owed because of the lifetime gift tax credit. Gifts made as part of Medi-Cal planning may well exceed the $15,000 per year per donee limit, and a gift tax return may have to be filed.
9. All my income must be used for my spouse’s nursing home bill.
The treatment of a couple’s income by Medi-Cal is complicated. Unlike rules of resources, the Medi-Cal rules of income follow the “name on the check” rule: that is, each spouse’s income is considered separate property. This means that the healthy spouse can retain all their own income. In some cases, the community spouse is also entitled to share in some or all the institutionalized spouse’s income.
10. I can file by myself or the facility will help me.
Medi-Cal laws and regulations are complicated and subject to change. Timing is important. Because private payment rates are higher than Medi-Cal rates, the nursing home has no incentive to assist clients in protecting assets and often will give incorrect information. The filing of a Medi-Cal application is comparable to filing an income tax return that you know will be audited. Be sure to consult an experienced Elder Law attorney in order to avoid mistakes in Medi-Cal asset protection planning.
Mark Breunig is an Estate Planning and Elder Law attorney with offices in Lincoln and Loomis, CA. He has been practicing law in northern California since 1995. He can be reached at (916) 672-2042, or firstname.lastname@example.org