Dear Mr. Miller:
My Mom needs skilled nursing but I know the cost will wipe her out. She doesn’t want that and will hang on to living at home until she drops unless she can save the nest egg for her kids (me and my two sisters). She doesn’t have that much–her house in Los Angeles and $140,000 in securities. But she knows that that is way too much to qualify for Medi-Cal. What can she do?
Daughter Working to the Bone for Mom
The Big Lie: Your Mom is not alone in her thoughts about saving all of her hard earned wealth for her children–this is a common thought. Most people think that they have to choose: save the money or obtain the care they need, not both. That is a fallacy as one can achieve both goals with proper planning and guidance. And, of course, while your Mom lives with that fallacy, you pay the price in sacrificing your career and life to care for her.
Gifting to Qualify: Traditionally, we would say that to qualify for Medi-Cal one would need to have no more than $2000 of wealth to their name (and exempt property usually including the house). One way to get rid of the excess wealth (in your Mom’s case $138,000) would be to gift it off in a Medi-Cal approved fashion. The Medi-Cal approved fashion is not particularly difficult but does have some potholes that an experienced attorney can help you avoid. The gifts can be to the children directly or to a QMap Trust on behalf of the children. Both methods have their pros and cons.
Net Worth Limit Eliminated: Ok, so that’s the traditional approach. However, California just changed their law to phase in an elimination of the asset limit test. As of July, one can have up to $130,000 and qualify. And, no sooner than 2024, can have an unlimited amount of net worth.
Three Hurdles to Medi-Cal: But that is not necessarily the end of the problem. We have always said there are three hurdles to get over for Medi-Cal. First: Qualification. There is no question your Mom should be able to qualify in July. Your Mom would only need to spend down or gift away $10,000 to qualify. That can be done very easily. Second: Share of Cost. We’ll discuss that below. Third: Medi-Cal recovery. Think of this concept as Medi-Cal is a loan, it is not a gift, and when your Mom dies, it is repayable. At least that used to be the rule. We used to say one had to really work to avoid recovery. For the last 5 years or so we have said you really have to screw up to not avoid recovery as it has become pretty easy. So hurdle #1 and #3 have been, or will be shortly, eliminated as major stumbling blocks. That leaves #2.
Share of Cost: In Medi-Cal lingo this is essentially the same as the co-pay on your traditional medical Insurance. How much of the skilled nursing facility (SNF) cost will your Mom be responsible for and how much will Medi-Cal pay. Basically, subject to a small exception, your Mom pays all of her income to the SNF cost and Medi-Cal pays the rest. But there are exceptions to that rule, many of which have not been completely tested yet. But one approach is fairly certain. If the nest egg is gifted out before your Mom enters the SNF and is done in a proper manner, the income that it generates is no longer hers. But, of course, there is probably social security and pension income, also. There are various approaches that one could employ.
The Best Solution: So even though your Mom should have no problem qualifying, I would suggest you give us a call at 760-436-8832 to discuss the situation so your Mom can obtain the best solution possible.