Planning for your retirement years requires you to do more than simply save money. You need to think about how to protect the money you manage to accumulate for your retirement years as well. One way you can do that is by contemplating the need for long-term care, and the cost of that care, in your estate plan. Specifically, you need to consider the impact that Medi-Cal’s “spend-down” requirement could have on your retirement nest egg or you could lose the entire nest egg. To help you, a Los Angeles Medi-Cal attorney explains how you can avoid the ‘spend-down” requirement.
Will You Need Long-Term Care?
Unfortunately, there is no way to know with any certainty who will eventually need long-term care (LTC) and who won’t. You can, however, consider the odds and plan accordingly. When you reach retirement age (age 65), you will stand about a 50 percent chance of eventually needing LTC. Each year those odds increase. By age 85, you will stand a 75 percent chance of needing LTC before you die. If you are married, your spouse has the same odds, thereby increasing the likelihood that one of you will eventually need LTC. The cost of that care could deplete your retirement nest egg in record time if you are forced to pay out of pocket. In the State of California, the average monthly cost of LTC in 2016 was about $9,000. Given the fact that they average length of stay is 2.5 years, it is easy to see how a LTC bill can exceed the average person’s ability to pay quickly.
Paying for Long-Term Care
Like most people, you may be counting on Medicare to cover your health care expenses when you retire. Although Medicare will cover most of your health care expenses as a senior, it will not cover LTC costs. Unless you purchased a separate LTC policy, your average health insurance policy, if you have one, won’t cover LTC either. This is why over half of all seniors who need LTC turn to Medicaid – Medi-Cal in California.
Medi-Cal Eligibility and the Spend-Down Rule
Medi-Cal is intended to help low-income individuals and families with their health care expenses. For this reason, Medi-Cal has both an income and an asset limit for applicants. If the value of your non-exempt assets exceeds the program limits, Medi-Cal will impose a waiting period. The idea is that you will rely on those “excess” assets to cover your LTC expenses during the waiting period. This is where the term “spend-down” came from because you are expected to “spend-down” your excess assets until they fall below the program limit at which time you will be eligible for Medi-Cal’s assistance. Of course, no one wants to watch their retirement nest egg disappear in a matter of months because of the need for LTC; however, if you did not plan ahead, this is precisely what is likely to happen.
What Can You Do to Avoid Losing Assets to the Spend-Down Requirement?
Transferring assets out of your estate when you realize the need to qualify for Medi-Cal is not an option because of the five-year look-back rule. The rule allows Medi-Cal to review your finances for the five-year period leading up to your application looking for transfers for less than fair market value. Any that are found will likely be discounted and the value of the asset imputed back into your estate. The key to avoiding spend-down, therefore, is to include Medi-Cal planning in your estate plan long before the need for benefits arises. If you find you need to qualify for Medi-Cal at the last minute, an experienced Medi-Cal attorney may still be able to help you avoid the loss of some assets by helping you convert non-exempt assets into exempt assets.
For more information, please join us for one of our upcoming free seminars. If you have additional questions or concerns about conservatorship in the State of California, contact the Collins Law Firm by calling (310) 677-9787 0r Click Here reserve for a Free Estate Planning Workshop.
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