Does a Living Trust Protect Assets from Nursing Homes?

On Behalf of | Apr 5, 2022 | Blog |

Millions of Californians rely on Medi-Cal (California Medicaid) to pay for nursing home care. This is because, unlike Medicare, the Medi-Cal program pays for these and other long-term care services. However, Medi-Cal is income-sensitive, and someone with too many valuable assets may not be eligible for coverage. By reaching out to our California elder law center, those planning to apply for Medi-Cal, who often have concerns about safeguarding their property while still qualifying for coverage, learn to avoid financial problems and achieve benefits. As you consider your estate, Medi-Cal eligibility, and other long-term care issues, you may be wondering: Does a living trust protect assets from nursing homes?

What is a California Living Trust?

Your California estate plan should include four key components: 1) Your Will, 2) Your Advance Health Care Directive, 3) Your Durable Power of Attorney, and 4) a Living Trust. A California living trust is a legal device wherein someone can place their assets to be used for the benefit of named beneficiaries. This is how most trusts operate. However, with a living trust, the person transferring their property (the grantor) can act as the trustee and be a beneficiary as well. The trust is revocable, meaning that the grantor can change its terms and content at any time. Once the grantor passes away, their trust will become irrevocable and continue to operate according to its terms.

Medi-Cal Exempt and Countable Assets

The Medi-Cal program considers some of an applicant’s property to be exempt. This includes assets such as your primary home and personal vehicle, and a small amount of personal funds. However, the program will consider your other non-exempt assets and resources ” countable ” when assessing eligibility. If you have a living trust and believe you may need Medi-Cal, knowing how the program will view this device is essential.

Your Living Trust and Medi-Cal

Medi-Cal Eligibility

Generally, when assets are placed in an irrevocable trust, they are no longer considered the grantor’s property. However, living trusts are revocable, meaning the grantor has access to and control over the trust’s assets. The Medi-Cal program considers revocable trust assets to be available to an applicant if they have the power, legal right, and authority to revoke the trust. Proper planning is important for protecting assets from nursing home costs. If you have property in a living trust, Medi-Cal may consider it countable. Therefore, if you plan to rely on Medi-Cal to pay for your nursing home and other long-term care expenses, having a living trust could interfere with your eligibility.

Medi-Cal Estate Recovery

Another issue to consider is Medi-Cal estate recovery. Under California and federal law, the Medi-Cal program can seek reimbursement for long-term care expenses from a program recipient’s estate after they pass away. This is called the Medi-Cal estate recovery program. Under the recovery program, Medi-Cal can pursue reimbursement from the recipient’s probate estate. Typically, living trust assets will pass outside of the grantor’s probate estate. However, that will not prevent the trust assets from being countable for Medi-Cal eligibility purposes.

The good news is there is a way to create a trust that will: 1) not count against your Medi-Cal eligibility and 2) protect your assets from Medi-Cal estate recovery.

Medi-Cal Asset Protection Trust

A Medi-Cal asset protection trust is specially created to shield your property and funds from Medi-Cal estate recovery. The document is typically prepared by an elder law attorney also referred to as an elder care attorney. This type of trust can also protect assets from certain creditors and legal situations. Medi-Cal protection trust assets no longer belong to the grantor once they are placed in the trust. Therefore, when the grantor dies, their trust assets will not become part of their probate estate. Instead, the asset protection trust property will pass to the grantor’s beneficiaries according to the trust’s terms.

When properly created, Medi-Cal asset protection trust assets will not be counted against a Medi-Cal applicant. Unlike a living trust, a Medi-Cal asset protection trust is irrevocable when it is created. Generally, once a grantor places their assets into an irrevocable trust, they no longer have legal rights to them. Since the grantor does not own the asset protection trust property, it will not be counted against them by Medi-Cal.

Work with an Experienced California Medi-Cal and Trust Attorney

Having a trust is an essential part of any California estate plan. However, when you are planning for long-term care, it’s essential that you use a trust that supports your goals. To learn how to protect your assets from nursing homes consulting an elder law attorney is necessary. By working with an experienced California Medi-Cal and trust attorney, you can help ensure that you have the right trust for your circumstances.

Contact a California Medi-Cal Planning Attorney

Interested to know “can a nursing home take your home” or “what can a nursing home take for payment?”

At the Law Offices of Alice A. Salvo, we are experienced California Medi-Cal planning attorneys and California elder law specialists, who can help you evaluate your situation and prepare to minimize and eliminate your nursing home and other long-term care costs. Please get in touch with us online or by phone to set up a free consultation today. https://www.salvolaw.com/

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