Seniors need to have a plan in place for long-term care, should they need care assistance in the future.
A recent article in The Victoria (TX) Advocate titled “How does Medicaid factor into financial planning?” recommends that seniors need a strategy to pay for the costs of long-term care. In some instances, however, some individuals may have to rely on Medicaid (Medi-Cal in California) if they don't have enough income to purchase long-term care insurance, the assets to pay for care themselves, or they are uninsurable.
Medi-Cal planning was often thought of as a viable tool for long-term planning. However, estate planning attorneys are now rethinking this strategy. Medi-Cal planning—which was, in essence, planning to make asset transfers, used to be the primary tool used by seniors considering long-term care costs. However, law changes and the advent of new financial products and plans may work (depending on your own personal situation) better, they say. Medi-Cal "planning" is actually a misnomer as most seniors don’t plan to go on Medi-Cal, but rather experience an urgent care need, and there aren’t any other options. A better alternative, if possible, is to obtain a long-term care insurance policy.
To qualify for Medi-Cal, in California, a single senior must be at what the government deems poverty level: less than $2,000 in countable assets (countable assets doesn’t include one's personal residence and this threshold varies by state) and a married senior and his "at home" spouse may keep $119,220 in countable assets. Even if a senior is considered well off when he or she retires, medical and long-term care costs can decrease their assets to the poverty level, which means Medi-Cal would be an option at that point.
Some seniors will purposely transfer to their children or irrevocable trusts to qualify for Medi-Cal. Some transfers will not affect their current eligibility for Medi-Cal and others will cause a period of ineligibility. There are other methods of spending down assets which can be more beneficial to the senior—like using cash assets to make substantial home improvements and repairs, adding safety features in the home should the senior become wheelchair bound.
Another risk in depending on Medi-Cal for long-term care is that federal law requires states to look for recovery of Medi-Cal benefits. The state will put in a claim against any assets that pass through probate (or a revocable/living trust) upon the death of the recipient. This will include assets not counted during eligibility, such as the senior’s home.
Because estate and lifetime planning can be overwhelming and wrought with pitfalls, the article advises seniors to enlist the help of an estate planning attorney and, more particularly, an elder law attorney to evaluate all options available.
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Reference: The Victoria (TX) Advocate (February 13, 2015) “How does Medicaid factor into financial planning?”