What I really mean: SET UP YOUR LIVING TRUST TODAY!
The California legislature has passed a new bill that prohibits the California Department of Healthcare Services (DHS) from making a Medi-Cal recovery claim or Medi-Cal recovery lien against assets that are either vested in a trust or pass by way of a payable on death beneficiary. Or assets that are held in joint tenancy.
What is Medi-Cal?
Generally, Medi-Cal is California’s version of the Medicaid programs available in other states.
Only Medi-Cal can explain what Medi-Cal is and this is straight from their website:
“Medi-Cal offers free or low-cost health coverage for California residents who meet eligibility requirements. Most applicants who apply through Covered California and enroll in Medi-Cal will receive care through managed health plans.”
“Medi-Cal has always covered low-income children, pregnant women and families. On January 1, 2014, California expanded Medi-Cal eligibility to include low-income adults. When you complete a Covered California application, your eligibility for Medi-Cal will automatically be determined. You can apply for Medi-Cal benefits regardless of your sex, race, religion, color, national origin, sexual orientation, marital status, age, disability, or veteran status.”
Medi-Cal Eligibility and Running Out of Funds
Medi-Cal eligibility for the most part is based on income and designed for low income individuals. Individuals or families with less than $2,000 in assets, but some assets are considered exempt. An exempt asset would be a primary home, a family car and a burial plot to provide easy examples. So if a person had a home, a car and less than $2,000 in the bank with no viable means to pay for their own medical care as to long term care or related care then that person may be eligible for Medi-Cal.
But what does this mean in context of estate planning?
Well, many people work hard, save well and still worry about adequately providing for their own longevity and long term care if they “run” out of money during their lifetime.
It can happen to an individual or family where end of life nursing home and other care costs far more than they have saved and the existing health insurance coverage will not cover – someone who needs expensive nursing home care for years. Nursing home care, for example, could run $5k or more a month. A person could have tapped all of their cash and retirement resources to provide for care and suddenly be in need of resources to provide for more care until end of life. Medi-cal at that point is an option for those individuals.
So let’s say you are now on Medi-Cal. Now what? Medi-Cal has a recovery program for certain individuals that used Medi-Cal benefits at age 55 or older, who have passed away and who own assets. Before the new law, Medi-Cal would seek recovery from anyone who was over 55 and had assets at their death. This means that your executor, successor trustee or personal representative would be required to give notice of your death to Medi-Cal so that Medi-Cal can write back and request that the amount of the services that they provided (with some rules) be paid back from your estate or trust.
Well, this has changed!
The new law states that Medi-Cal can only seek recovery from your assets ONLY if your assets are in PROBATE. If your assets have payable on death beneficiaries, are vested in a living trust or otherwise are owned jointly by another person when you pass, then Medi-Cal no longer has a right to seek recovery against those NON-PROBATE assets. How do things get to probate then? Things get to probate when you don’t have a trust, don’t have proper planning for your financial assets and ensure that everything you own has a place to go.
This means that setting up a revocable living trust that can be changed or modified during your lifetime is a great wa y to set up asset protection from Medi-Cal. This does not affect whether you would be eligible for Medi-Cal in the first place, but if you wind up receiving Medi-Cal benefits after age 55 and have proper planning in place then Medi-Cal cannot seek recovery against your assets.
Jennifer Sawday is the author of this article. If you have any questions, please feel free to email her directly at email@example.com
Medi-Cal and program eligibility, see here: http://www.dhcs.ca.gov
Legal Language About New Law: http://leginfo.legislature.ca.gov/faces/billNavClient.xhtml?bill_id=201520160SB33
Medi-Cal Legal Update: http://www.dhcs.ca.gov/services/Pages/TPLRD_ER_cont.aspx