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Medi-Cal Planning Checklist

Your comprehensive estate plan should include a variety of components that help you achieve inter-related goals within your plan. For most people, Medi-Cal planning should be one of those components. The reason for this is that there is a very good chance that you, or a spouse, will need long-term care (LTC) at some point before the end of your lifetime. At an average monthly cost of around $9,000, most people cannot afford the cost of that care if forced to pay out of pocket. California’s Medi-Cal program may be able to help; however, eligibility for Medi-Cal benefits will depend, in part, on the value of your “countable resources” at the time you apply. If your resources exceed the (very low) Medi-Cal resource limit, a waiting period will be imposed during which time you will be expected to depend on those resources to cover your LTC costs. Proper Medi-Cal planning can prevent the loss of valuable assets and set you up for Medi-Cal eligibility should you need it down the road. To help you with your Medi-Cal planning, the Medi-Cal planning attorneys at Collins Law Group have created the following “Medi-Cal Planning Checklist.”

1. Learn Medi-Cal eligibility basics

One primary goal of Medi-Cal planning is to ensure your eligibility should the day come that you need to turn to Medi-Cal for help with LTC expenses. Therefore, you need to familiarize yourself with some basic eligibility requirements.

  • Must be California resident
  • Must be U.S. citizen or in the country legally
  • Income limit – depends on the program, household size, and changes annually
  • “Countable resource” limit also depends on program and household size. Some assets are exempt, meaning they are not counted when calculating the value of your resources.

2. Start planning early – the Medi-Cal five year “look-back” rule.

  • Transferring assets when you recognize a need to qualify for Medi-Cal benefits won’t work.
  • Medi-Cal uses a 5 year “look-back” rule that reviews an applicant’s finances for the 5 year period prior to enrollment.
  • Any asset transfers made for less than fair market value during the 5 year “look-back” period may be discounted and the value of the asset added back into your resources for purposes of eligibility determination.

3. Understanding exempt and non-exempt assets

Exempt assets do not count toward your “countable resource” limit and, therefore, are not in jeopardy.

  • General resource limit — $2,000 individual and $3,000 for a married couple
  • Other exempt assets include:
    • Principal residence – no limit
    • Small amount of equity ($6,000 but subject to change) in real property other than principal residence
    • Real estate used in a trade or business – no limit
    • One motor vehicle
    • Personal affects, including clothing, heirlooms, weddings and engagement rings, and other jewelry with a net value of under $100.
    • Household items.
    • IRAs, KEOGHs, and other work-related pension plans sometimes.
    • Irrevocable burial trusts or irrevocable prepaid burial contracts.
    • One revocable burial fund or revocable prepaid burial contract — up to $1,500 plus accrued interest per person.
    • Burial space items.
    • Musical instruments.
    • Recreation items including TVs, VCRs, computers, guns, collection, etc.
    • Livestock, poultry, or crops.
    • Countable property equal to the amount of benefits paid under a state-certified, long-term care insurance policy.
    • Life insurance policies — combined face value of $1,500 or less accrued interest and dividends per person.

4. Understanding the need to protect non-exempt assets

Your non-exempt assets will be in jeopardy if you need to qualify for Medi-Cal and those assets are valued at more than the allowable resources limit.

  • If assets exceed the limit, a waiting period will be imposed by Medi-Cal.
  • Length of the waiting period is determined by dividing the value of your “excess” assets by the average monthly cost of LTC in your area. For example, if you own non-exempt assets valued at $150,000 and are applying as an individual, you have $148,000 in “excess” assets. Divided by $9,000 (average monthly cost of LTC) gives you a waiting period of 16 months.
  • Medi-Cal will expect you to rely on those assets during the waiting period.
  • Your retirement nest egg could be depleted in a matter of months if you don’t start protecting those non-exempt assets now.

5. Medi-Cal planning strategies

Every plan is unique; however, there are some common Medi-Cal planning strategies you may decide to use after consulting with your Medi-Cal planning attorney.

  • Lifetime gifting – as long as you start before you enter the 5 year “look-back” period, gifting assets to adult children or other beneficiaries can be an excellent way to remove non-exempt assets from your estate.
  • Medi-Cal trust – transferring non-exempt assets into an irrevocable Medi-Cal living trust removes those assets from your legal estate; however, you can still benefit from them by receiving interest on the trust assets.
  • Converting assets – sometimes, converting non-exempt assets into exempt assets works. For example, if you have cash (non-exempt) sitting in a savings account, you might pay down the mortgage on your principal residence because that equity is exempt.

Contact Us

If you have additional questions or concerns relating to Medi-Cal planning, contact the experienced California Medi-Cal planning attorneys at Collins Law Group by calling (310) 677-9787 to register for one of our FREE estate planning workshops.