Frequently Asked Questions about Medi-Cal Planning for Skilled Nursing Facilities in California

These questions and answers provide general information only and should not be relied on as a legal opinion. Each situation is different and slight differences may have a large impact on the result.

ELIGIBILITY FOR MEDI-CAL FOR SKILLED NURSING FACILITY CARE

1. How much in assets does Medi-Cal allow you to keep?

The ill person can only keep $2,000 in assets and, if he/she is married, the spouse can only keep $90,600 in assets in 2003 (that amount goes up a bit each year). Assets that are not exempt (like the house) or cannot legally be transferred must be spent before the ill person becomes eligible for Medi-Cal.

2. I have a joint bank account with my mother, who may be headed to living in a skilled nursing facility; does this provide any protection?

No. Joint cash accounts are considered 100% available to the person applying for Medi-Cal. Other jointly owned property is usually considered available to the applicant in proportion to his/her percentage of ownership.

3. My husband and I have a living trust; doesn’t that shield the assets from being counted for Medi-Cal eligibility?

Absolutely not. Medi-Cal treats assets in living trusts as being available. Often the first step in Medi-Cal planning is to terminate any existing living trust. (Another trust is often set up for the well spouse after eligibility is established).

4. It looks like my husband will have to live in a skilled nursing facility in the next year or two; should we begin transferring his assets?

This depends. You may want to start transferring some now, since that will start ineligibility periods running. Ideally, the ineligibility period will be over by the time he enters the facility. On the other hand, some facilities will not accept patients who have transferred all assets, so it is frequently better to hold off on some transfers until the ill person has entered a facility. See your attorney to plan all of this. It is a complicated area and if the transfers are done out of proper sequence or incorrectly it may result in a lengthy period of ineligibility.

5. We transferred some assets from my ill wife already, and now I’m concerned we may have done it in such a way that she may be ineligible for Medi-Cal payments for a skilled nursing facility for a long time.

Often assets already transferred can be transferred back – and the Department of Health Services will reduce or eliminate the ineligibility that these transfers created.

6. On the Medi-Cal application: I didn’t check the box stating that my husband, who is in a skilled nursing facility, intends to return home; can I change this?

Yes, fortunately, you can change this – and the Department of Health Services has to accept the change.

7. What can a single ill person do for Medi-Cal eligibility?

Quite a number of things. One is to pay down debt, except for medical expenses. Another is to pay for any needed repairs on your home if you own it. You may also purchase any desired home furnishings and household goods, including TV’s, computers, and VCR’s. You may sell any existing car and purchase one new one. You may purchase tangible burial assets like caskets, plots, crypts, etc. You may also place up to $1,500 in designated burial funds in a separate account or fund an irrevocable burial trust. Also, you may fragment and bunch gifts of assets to others to take advantage of the fact that ineligibility periods run concurrently on multiple gifts (at least until the proposed new regulations go into effect). It may be possible -- depending on the circumstances – to create an operating business with the assets of the ill person. One condition is that a business tax return (IRS Schedule C or F) will have to be filed regarding the business. You might possibly purchase an "immediate annuity" (one with periodic payments that is irrevocable) that makes small payments at first and a balloon payment at the end -- but this assumes the Department of Health Services has not issued its new regulations. The timing of these things can be crucial so please get legal advice if you need to transfer assets.

8. What can a married ill person do for Medi-Cal eligibility?

Everything that a single person can do and more. Transfers to the well spouse are generally exempt. It is crucial that the well spouse not give away any property received from the ill spouse until after the ill spouse has entered the skilled nursing facility. Once new regulations come into effect, such retransfers will cause periods of ineligibility for the ill spouse. (The well spouse can transfer any other separate property at any time.) If the spouse wants to sell or borrow against any of the property transferred by the ill spouse (such as the house), that should only be done after the ill spouse has qualified for Medi-Cal.

9. My husband and I are not U.S. citizens; does it matter?

Generally not. California provides Medi-Cal payments for skilled nursing facility care to immigrants regardless of their immigration status. The income or resources of an immigrant’s sponsor are not counted in determining eligibility. All the other rules are the same, including those regarding Medi-Cal attempts to recovery money after the ill person dies.

10. Are there any disadvantages to applying for Medi-Cal for skilled nursing facility care?

Medi-Cal will pay for only a shared room, not a private room. Not all skilled nursing facilities will accept Medi-Cal patients. Medi-Cal planning frequently involves giving up control of assets. Medi-Cal does not cover assisted-living retirement facilities, residential care facilities, or board and care facilities.

SHARE OF COST QUESTIONS

11. My husband is entering a skilled nursing facility. He has a good income from Social Security and a pension, but I don’t. Is there any way I use part of his income?

Yes, if your income is below the minimum monthly maintenance needs allowance of $2,267 (the level set for 2003), your spouse’s monthly income can be transferred to you in an amount to bring you up to that minimum.

12. My wife is going to have to live in a skilled nursing facility. I have income from certificates of deposit. Though my income is less than the minimum monthly maintenance needs allowance of $2,267, the assets I need to generate that income greatly exceed the $90,600 in assets that a spouse is allowed to keep because interest rates are so low. Can I do anything to keep these assets?

Yes. It is possible to obtain an order increasing the Community Spouse Resource Allowance (the CSRA maximum is currently $90,600), allowing you to keep additional assets sufficient to produce the minimum amount of income. This must be authorized by a court order or at a hearing before an administration law judge. Although enlargement of the CSRA is mandatory for this purpose, be aware that procedures to obtain an expanded CSRA are time-consuming, cumbersome, and frequently frustrating.

13. I have income from some assets I own. Altogether my income exceeds the minimum monthly maintenance needs allowance of $2,267. Is there anything I can do to bring my income under that amount so that I can use some of my ill spouse’s income? I would rather not give the assets to my children just yet.

Yes, you may want to convert your assets into investments that do not produce income but instead appreciate in value, such as zero-coupon bonds. The income is taxable but it is not countable as income for Share of Costs purposes because it is considered unavailable. It will still be considered unavailable if the money is again invested in zero-coupon bonds when the bond matures.

RECOVERY OF MEDI-CAL PAYMENTS BY THE DEPARTMENT OF HEALTH SERVICES

14. If we establish eligibility for my husband for Medi-Cal payments for a nursing home, does that prevent Medi-Cal from keeping our remaining assets from going to our children after we die?

No. Medi-Cal will seek recovery (for payments it has made) from all property in the ill person’s estate. The estate includes assets conveyed through joint tenancy, tenancy in common, living trust, will, community property, etc. The Department of Health Services cannot recover against a surviving spouse or a minor, blind or disabled child. Once they have passed on, though, the Department can try to recover those assets. This is why it is often important for the ill person (or his/her agent under a proper power of attorney) to transfer all of his/her interest in the residence in writing – rather than leave it as community property or joint tenancy.

15. My wife is in a skilled nursing facility and we plan to transfer all her interest in our house to me. Is there anything else we should do?

Yes. It is important for tax and Medi-Cal reasons to have a separate agreement between you stating that she has the right to live in the house as long as she lives. The agreement may also be between you and her agent under a proper power of attorney.

OTHER ISSUES

16. My husband is in a skilled nursing facility and qualified for Medi-Cal. It’s unlikely I will die before him. Can I do anything to take care of him if I die first?

You cannot set up a living trust that makes him a beneficiary. He will lose his eligibility for Medi-Cal if you do that. What you can do is set up a living trust for yourself that states that if you die first, then your trust gives your assets to your estate. You would also set up a will that creates a trust for your husband during his lifetime, with any remainder going to others upon his death. Such testamentary trusts are not subject to the Medi-Cal rules.

17. We don’t think we are anywhere near the Medi-Cal planning stage. Is there anything we should be doing now?

Yes. Review any trust that you have. Make sure it states that your agent under a power of attorney has the powers to amend and revoke the trust and make gifts of the trust property. (It should also state that these things may be done by a conservator acting according to the doctrine of substituted judgment.) In addition, you should have a power of attorney that gives the agent the power to create, modify, or revoke a trust on your behalf, and to make or revoke gifts of your real estate (and other property) in trust or otherwise. The reason to do this is so that your agent can engage in Medi-Cal planning in case you become unable to handle things yourself.

18. Don’t these provisions give the agent a lot of power and possibly create tax problems?

Yes but you can add protective measures. Often a provision is added stating that the agent may only make gifts to those persons who are your heirs or beneficiaries. To avoid tax problems if your agent dies before you do, you might choose an agent who is not a potential beneficiary (such as a friend of the family). Another option is to have the power of attorney name a special agent who has the power to make gifts to the general agent.

19. Do these rules apply to other states too?

No. Each state has its own rules about Medicaid. Medi-Cal is California’s version. The rules vary dramatically, so you’ll need to contact an attorney in your own state.

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Methven & Associates
2232 Sixth Street Berkeley, CA 94710
Phone: (510) 649-4019 Fax: (510) 649-4024
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Copyright 2004 Bruce E. Methven, All Rights Reserved.

The foregoing article constitutes general information only and should not be relied upon as legal advice.