When you hear the term “asset protection,” lawsuits will probably come to your mind. Without question, there are litigious types out there, and you can take steps to shield your assets from litigants seeking redress.
However, there is another form of asset protection that flies under the radar, and it is important for just about everyone. In this blog post, we will provide some eye-opening information about the need for this type of asset protection for senior citizens.
Nursing Home Costs
Long-term care costs are a very big deal when you understand the facts. We practice in the state of California, and the cost for a room in a nursing home in our state averages over $100,000 per year.
People often spend multiple years receiving nursing home care, so the expenses can be considerable. They could potentially consume everything that you intended to leave behind to your loved ones.
If you are thinking that Medicare will pay for your long-term care expenses, you should think again. Most people will qualify for Medicare coverage at the age of 65, but Medicare does not pay for nursing home or assisted living community expenses.
Help with your activities of daily living is considered to be custodial care rather than medical or convalescent care. Medicare will pay for convalescent care after surgery for up to 100 days, but it will not help with custodial care expenses.
The Medi-Cal Program
Most people here in California have heard of the Medi-Cal program. This is a government run health insurance program that provides coverage for people who have virtually no financial resources.
If you retire with some assets, and you qualify for Medicare, Medi-Cal would probably not seem relevant to you.
In spite of the above, Medi-Cal actually becomes quite relevant to a significant percentage of seniors, because this program will pay for long-term care.
Because Medi-Cal is a program that is only available to people who can demonstrate financial need, there are income and asset limits. For an individual, the limit on countable assets is just $2000.
“Countable” is an operable word here. Some of the assets that you own do not count when Medi-Cal is determining your eligibility status. You can maintain ownership of your home, and this is a big deal for homeowners.
Your wedding ring, your engagement ring, and your heirloom jewelry are not countable, and you can maintain ownership of one vehicle that is used as a primary source of transportation. The Medi-Cal program does not count your household goods and personal effects either.
An insurance policy with no cash value (term life insurance) would not count, but there is a $1500 limit on whole life insurance. You are also allowed to set aside $1500 to cover burial or cremation expenses.
Nursing Home Asset Protection
When you hear all of the above, you would logically come to a conclusion: If you ever need long-term care, you could give assets to your loved ones so that you could qualify for Medi-Cal coverage.
This is not as simple as it may appear to be on the surface, because there is a 30 month Medi-Cal look-back period. Medi-Cal evaluators would examine your financial transactions going back 30 months. If they found that you gave away assets within this 30 month time frame, your application would be denied.
A penalty would be imposed. The length of the penalty would be tied to the amount that you gave away as it compared to the cost of long-term care in California. For example, if you gave away enough to pay for two years of long-term care, your eligibility for Medi-Cal coverage would be delayed by two years.
Because of the 30 month look-back, you must plan ahead carefully in an intelligent and informed manner if you want to qualify for Medi-Cal at the ideal time without losing anything in the process.
When it comes to divesting yourself of assets to qualify for Medi-Cal, you could give direct gifts at least 30 months before you apply for coverage. It would also be possible to convey assets into an irrevocable Medi-Cal trust.
With this type of trust, you would surrender control of the principal, but you could still continue to receive income from the earnings of the trust before you apply for Medi-Cal coverage.
To Schedule a Free Consultation
If you are interested in the possibility of working with our firm after learning these facts, please select our “Workshops” tab to RSVP for a free estate planning workshop. At that workshop you will be offered a free one-hour consultation with an attorney: https://collinslawgroup.comseminars/