Elder Law, Medi-Cal Planning, Estate Planning - Law Offices of James T. Kennedy San Francisco, Bay Area
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2447 Santa Clara Avenue, Suite 202, Alameda, California, 94501, (510) 522-3235
2447 Santa Clara Avenue, Suite 202
Alameda, California, 94501
(510) 522-3235

Resources

URGENT NOTE: Because of the adoption of the Deficit Reduction Act on February 8, 2006, much of the information below relating to Medi-Cal and in the article on California’s Medi-Cal Program attached to this page is now outdated. DO NOT rely on anything on this page or the attached article to take action. Call Jim Kennedy at (510) 522-3235 or an Elder Law attorney in your immediate area.

FAQ's (Frequently Asked Questions)
(click on question for answer)

  1. I have heard that I cannot apply for Medi-Cal for three years if I transfer assets. Is that correct?

  2. What are some considerations prior to transferring assets?

  3. Is it true that if I receive Medi-Cal and reside in a nursing home, Medi-Cal will try to take my home?

  4. How can I pay for long-term nursing home care?

  5. What factors should be considered in selecting a nursing home?

  6. What is advance planning?

  7. What can happen without advance planning?

  8. What is a "durable" power of attorney?

  9. Can and should probate be avoided?

Answers

  1. There is a great deal of confusion surrounding this question. First, it is important to understand the concept of the "lookback period", which is currently 30 months in California. Medi-Cal has the right to review bank statements for all of your financial assets for the two and one-half year period preceding the submission of your Medi-Cal application. Asset transfers do result in a penalty period during which time you will not be eligible for nursing home coverage by Medi-Cal. However, that does not mean that you will not qualify for Medi-Cal for two and one-half years if you have made an asset transfer. There is a complex formula by which Medi-Cal determines the length of the penalty period which could be less than one month's time or as long as two and one-half years or more in certain instances. By way of example, if you transfer assets resulting in a 6 month penalty period, you would qualify for Medi-Cal in the 7th month, although you would still be required to submit two and one-half years worth of bank statements.
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  3. Prior to transferring assets, it is important that you and your attorney determine any impact that the transfer might have on income, gift and estate taxes. It is possible that the tax loss caused by asset transfers will be greater than the potential savings in nursing home and homecare costs obtained through Medi-Cal planning.

    Additionally, you must determine whether highly appreciated assets, such as stocks and real estate, should be transferred and whether the potential capital gains taxes outweigh any benefits of the transfer. For estate tax and planning purposes, each person is able to give away, whether by gift or at death, $1,000,000.00 in addition to any annual $11,000.00 gifts made during life. Recent tax law changes will significantly increase this unified credit exemption amount until the estate tax is repealed in 2010(if a future administration elects to continue the provisions of the recent tax law). In the case of a married couple, for Medi-Cal eligibility purposes, one spouse may transfer all of his or her assets to the other spouse without incurring a penalty period. But doing so results in the loss of one unified credit. The loss to the beneficiaries in the form of taxes may be more than the cost of nursing home care. These calculations must be made and the accompanying scenarios must be properly evaluated prior to initiating any transfers. If planning is begun far in advance of possible health care needs, estate taxes in certain situations can be saved by making significant gifts of the annual exclusion amount during life, currently $11,000.00 per recipient per year.

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  5. Not necessarily. For example, if your spouse lives in the home, then Medi-Cal has no right to place a lien on the property. There are many planning options available with respect to protecting one's home. However, if these planning options are not pursued, then it may be possible that Medi-Cal will have the right to place a lien on the home.
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  7. There are many different sources of funding which may be available to cover the cost of one's long-term nursing home care. For example, a person may avail him/herself of any one of the following; private pay funds, Medicare, long-term care insurance, Veterans benefits or Medi-Cal.
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    • The level of care necessary(i.e., "custodial" or "skilled nursing care")
    • Financial responsibility(Medicare, Medi-Cal, Veterans benefits, long-term care insurance, or private pay)
    • Location (proximity to family and friends is important)
    • Size(larger nursing homes offer a wider array of services and have more professionals on staff, whereas smaller nursing homes are less "institutionalized" and it is easier to develop personal relationships between residents and staff)
    • Condition of building
    • Physical appearance of residents
    • Physical appearance of staff and the manner in which they treat residents
    • Food
    • Activities
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  10. Advance planning includes executing documents that appoint an agent to handle your personal, financial, legal and healthcare matters should you no longer be able to make such decisions yourself due to mental or physical incapacity. Generally, these documents consist of:
    1. A Durable Power of Attorney; and
    2. A Health Care Directive
    In addition to the above documents, effective advance planning also includes income, gift and estate tax planning, as well as determining funding options for long-term care. Estate planning for the ultimate disposition of assets to and among loved ones and charitable organizations also plays a pivotal role in advance planning.
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  12. Without proper planning, individuals who are not familiar with your wishes regarding health care and not familiar with your financial objectives will have to make decisions for you. Often, this cannot be accomplished without the appointment of a conservator to handle your property and personal affairs. The conservator may be a family member, but the conservator may also be a complete stranger. The conservator, whether family member or not, might not be familiar with your wishes regarding health care and life support and might not be aware of your financial objectives.

    By executing a health care proxy and durable power of attorney, you will be able to make your personal wishes known and designate an agent to "act in your shoes."

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  14. A durable power of attorney is one which survives the subsequent incapacity of the person signing the power of attorney. This is important to ensure that the agent you appoint to act on your behalf has the authority to do so should you become incapacitated. Without a durability provision, your agent will not have the authority to handle your affairs when he/she needs that authority most - upon your becoming incapacitated.
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  16. Probate can and should be avoided, but that does not mean that estate administration and tax filings can also be avoided. Jointly-owned property goes directly to the surviving owner outside of probate. Similarly, life insurance proceeds and some retirement benefits pass directly to the named beneficiary, thus bypassing probate(unless no beneficiary was named or the estate was named as beneficiary). Property held in trust (such as revocable living trusts) generally passes directly to beneficiaries named in the trusts, thus also avoiding probate. If you desire more information about revocable living trusts, please request our free Living Trust Fact Sheet.

    Life insurance proceeds, joint-held property and trust property, however, may all still be subject to estate tax. Where a tax return is required, much of the work of administering an estate must be done whether or not the estate is "probated." Additionally, an effective estate plan is not always achieved if probate avoidance is the primary focus.

    A knowledgeable elder law and estate planning attorney will evaluate your particular situation and formulate a plan best suited for you.

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Learn about the historical background, Medi-Cal's present system and how it will affect you in the future.

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Websites

National Do Not Call Registry

AARP

Alzheimer's Association

California Advocates for Nursing Home Reform

California Department of Aging

California Department of Health Services
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