MEDI-CAL RULES AND IDEAS
GENERAL RULES
SEE A QUALIFIED ATTORNEY IN YOUR STATE FOR DETAILS REGARDING YOUR
PARTICULAR SITUATION
ASSETS THAT THE WELL SPOUSE CAN KEEP AND STILL HAVE AN ILL SPOUSE QUALIFY TO RECEIVE MEDI-CAL BENEFITS TO PAY FOR LONG TERM CARE
As of January 1, 2004, if a married person must go into a skilled nursing facility and needs Medi-Cal assistance to pay for his/her care, the well spouse (the spouse who will be remaining in the community) may keep any assets, the total value of which does not exceed $92,760.00, in addition to "exempt assets." The $92,760.00 amount is known as the "Community Spouse Resource Allowance." Under certain circumstances this amount can be increased so the community spouse can keep more assets.
The spouse who is going into the facility can keep assets with a total value of $2,000.00.
A single person who is going into a skilled nursing facility
and needs Medi-Cal assistance to pay for care may keep assets
with a total value of $ 2,000.00 in addition to exempt assets.
MEDI-CAL PLANNING - EXEMPT ASSETS
(The well spouse or a single individual can keep these assets in addition to the amounts mentioned above.)
1. PRINCIPAL RESIDENCE
There is no dollar value limitation on the residence. However, without appropriate planning, a Lien may be placed on the property so the State of California can recover payments made from Medi-Cal.
NO lien will be placed on the home if:
The well Spouse, a child under 21 who is blind or totally
disabled, or a sibling who has equity in home and resided there
for at least one year before admission lives in the home.
Very significant planning can be done to protect the residence from a Medi-Cal reimbursement claim.
2. UP TO $6,000 IN EQUITY IN REAL ESTATE THAT GENERATES INCOME
3. HOUSEHOLD GOODS of unlimited value
4. PERSONAL EFFECTS/JEWELRY - All personal effects, including all items of clothing, heirlooms, wedding and engagement rings and all other jewelry with a net fair market value of $100.00 or less. (For married couples there MAY BE no dollar limit when one spouse is institutionalized (42 USCSec. 1396r-5(c)((5)(B) (Draft) 22 Cal Code Regs Sec 50490.1)
5. ONE CAR - unlimited value. Used for transportation by or on behalf of the person who is applying for Medi-Cal.
6. WHOLE LIFE INSURANCE - Policies with total face value of $1,500.00 or less on life of any individual in the Medi-Cal Family Budget Unit.
7. TERM LIFE INSURANCE
8. BURIAL INSURANCE
9. BURIAL TRUSTS OR PREPAID BURIAL CONTRACTS -
Irrevocable Burial contract for services and space - regardless of amount PLUS additional $1500 in funds set aside for such expenses
10. BURIAL PLOTS, VAULTS AND CRYPTS - For use by any member of the family, regardless of value
11. PENSION FUNDS AND ANNUITIES UNDER LIMITED CIRCUMSTANCES
12. MUSICAL INSTRUMENTS - Unlimited value
13. SPECIAL PAYMENTS PROTECTED BY LAW (reparation payments to Japanese interned during WW II, payments to victims of crime and reparation payments from German government to victims of Nazi persecution)
Converting non-exempt assets (assets that you would have to spend down to get within the $92,760 Community Spouse Resource Allowance) into exempt assets may be a valuable planning tool. A qualified attorney can provide you with safe strategies for protecting assets.
HAVE YOU MADE A GIFT WITHIN THE LAST 3 YEARS?
Gifts disqualify a person from receiving Medi-Cal assistance for approximately the length of time the gift would have paid for care.
Example:
$9,000.00 Gift
$3,000.00 per month cost of care
3 Month disqualification period
The well spouse can keep all income that comes in the well spouse's name. If that is less than $2,319.00 per month (as of 1/1/04), the well spouse may be able to keep some of the income that comes in the ill spouse's name. The $2,319.00 is known as the Minimum Monthly Maintenance Needs Allowance (MMMNA).
Example 1 - Well Spouse's income is $1,000.00 per month (less than the $2,319.00 MMMNA):
MMMNA
$2,319.00
Well spouse's income( $1,000.00)
Deficit
$1,319.00
The Well spouse can keep his/her own $1,000.00 plus $1,319.00 of income that comes in ill spouse's name.
Example 2 - Well Spouse's income is $2,500.00 (more than $2,319.00 MMMNA):
MMMNA $2,319.00
Well spouse's income ($2,500.00)
Deficit -0-
Well spouse can keep his/her own $2,500.00. Ill spouse's income must go to pay for his/her care.
TRANSFERS (Limiting legislation is pending - CHECK WITH A QUALIFIED ELDER LAW ATTORNEY BEFORE TRANSFERRING ASSETS)
It may be possible to transfer Exempt assets (home, car, etc.) without incurring a penalty period. (Discuss this with your attorney because any transfer may have serious negative income tax consequences.)
If the transferor retains a right of occupancy in an unrecorded agreement between transferor and transferee, this may avoid the negative income tax consequences.
If the transferor reserves the power to designate persons to receive income from transferred property the negative income tax consequences may be avoided.
Transfers between spouses are generally safe. However, any such transfer should include a transmutation of the character of the asset. Tax consequences must be considered before any transfer is made.
Transfers between spouses do not create a disqualification period. However, such transfers leave the assets subject to the $92,760.00 limitation. It does make management by the well spouse more convenient.
Transfers to Certain Other Persons are Exempt Also. Check with a qualified attorney to determine your options.
PERIOD OF INELIGIBILITY FOR A PERSON WHO MAKES GIFTS AFTER GOING INTO A SKILLED NURSING FACILITY
1. Total uncompensated values of all asset dispositions within look back period (36 MONTHS) are aggregated.
2. Total of (1) is divided by monthly cost (approximately $4,415.00).
3. Period of ineligibility begins on first day of first month during or after which assets have been transferred for less than fair market value.
PERIOD OF INELIGIBILITY FOR TRANSFER FROM A TRUST
There is a 60-month look-back rule for certain events
involving transfers from trusts.
The Department of Health Services is now vigorously
pursuing reimbursement for Medi-Cal benefits from the estates of
recipients following the death of the recipient. Recipients
of Medi-Cal assistance must consider it a loan rather than
welfare. Planning is essential to protect a recipient's estate
from total depletion.
Under the appropriate circumstances, the use of an annuity to protect assets is a valuable planning step. The use of annuities for Medi-Cal planning is strictly limited.
Although an annuity may be exempt for purposes of
qualification for Medi-Cal, it is now questionable whether the
annuity will be claimed by the State of California for
reimbursement purposes when the Medi-Cal recipient dies. Discuss
this exposure with your attorney before using this tool.
COMMUNITY SPOUSE INCOME
To maximize allocation of income to community spouse from institutionalized spouse:
Invest in growth to minimize the share of cost going to the institutionalized spouse and transfer the institutionalized spouse's income to well spouse. Use Zero coupon treasury bonds. They are safe, provide growth and produce no current income. All interest is paid out on the last day. They produce Phantom income for tax purposes, but not for Medi-Cal purposes. In this way the well spouse can claim a greater allocation of income from the institutionalized spouse.
IRAs AND WORK-RELATED PENSIONS
The treatment for IRAs and work related pensions is determined by which spouse's name is on the accounts.
Long term care insurance may be an option that you should pursue to protect your assets. California has a program called "California Partnership for Long Term Care." Purchasing insurance through this program provides one dollar of extra asset protection for every dollar that the insurance pays out for your long term care.