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Horizon Elder Law & Estate Planning Blog

Thursday, March 19, 2020

Using Irrevocable Trusts In California Medi-Cal Planning

Many individuals will eventually need long-term care at some point in their lifetimes. Because the cost of long-term care is expensive, a vast majority of those individuals will need assistance paying for that care. Medi-Cal is the name of California’s Medicaid health care program.

However, individuals must qualify for Medicaid to receive assistance with long-term care costs. Our California wills and trusts attorneys assist individuals in Medi-Cal planning to develop strategies that protect assets for family members while allowing a person to become eligible for Medi-Cal if necessary.

Irrevocable Trusts and California Medi-Cal Planning

Medi-Cal has income and asset restrictions. If you need long-term care, you may be required to spend down assets until your assets are below the threshold to qualify for Medi-Cal benefits. If you own a home, you could still qualify for Medi-Cal, but the state could place a lien on your home that must be paid after your death. In some cases, the state can recover the money it paid for nursing home care or long-term care from your estate after your death.

Using one or more irrevocable trusts as part of your estate plan can protect your assets from Medi-Cal liens and estate recovery actions. Some benefits of using irrevocable trusts as part of Medi-Cal planning include:

  • Preserving your home for you and your heirs. You and your spouse can remain in your home as long as you desire. The trust protects your home from liens during and after your lifetime.
  • When created correctly, an irrevocable trust that includes your home can provide income for you and your spouse if the home is rented or sold after you move into a nursing home.
  • Irrevocable trusts also reduce the taxable value of your estate because the assets held by the trust pass to the trust beneficiaries instead of going through your probate estate.
  • Assets held by an irrevocable trust are not subject to Medi-Cal liens or estate recovery for long-term care costs.
  • Irrevocable trusts may preserve eligibility for other government benefits.
  • Irrevocable trusts may also incorporate other estate planning goals and needs, such as discretionary trusts and special needs trusts.

Things You Need to Be Aware of Before Creating Medi-Cal Trust

Even though a Medi-Cal irrevocable trust may sound appealing, there are some warnings everyone should be aware of before transferring property to an irrevocable trust.

First, irrevocable trusts cannot be changed. Once you transfer your home and other property to the trust, you cannot undo the transfer. Also, there is a look back period for transfers. Creating an irrevocable trust during the look back period could result in a delay in Medi-Cal eligibility.

You should investigate all options for Medi-Cal eligibility before choosing to use an irrevocable trust in your long-term care plan. Depending on your situation and circumstances, you might have additional options for long-term care planning.

Contact Our California Estate-Planning Attorneys for More Information

Long-term care planning may involve several strategies. Our California estate-planning attorneys carefully analyze your financial situation and discuss your goals and desires before developing a long-term care plan. Schedule a consult with our California elder law attorneys to discuss your situation. The sooner you begin long-term care planning the more options and flexibility you have regarding your plan.


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