What You Need to Know BEFORE Applying for Medi-Cal
Navigating government programs is never easy and it can be difficult to know where to start. Below, we’ll discuss the preliminary planning for Medi-Cal, which is the only means of paying for long term care without having to pay for it yourself. Our office has been helping our clients prepare to qualify for Medi-Cal and navigate the process for over 30 years. As such, Medi-Cal planning is a major part of what we do in our Elder Law practice area. To begin, we’ll address a major question we get in our office, “What should I (or my parents) do to prepare for long term care?”
Update Powers of Attorney
One of the most important matters we have to be concerned with is making sure that your power of attorney, if you have one, is actually updated. What we mean is simply this – if you have a well parent or well spouse, they are then going to be in charge of matters, but the ill spouse is not going to be able to. Thus, it makes no sense to have the ill spouse on all those documents taking care of the well spouse. We should update those documents and make sure that family members are next in line – children specifically to take care of the parent rather than the other parent.
Have a Current Photo ID
Another big issue that I come across is IDs, which may sound a little silly, but a large problem we have is when a parent who hasn't driven for five or six years does not have an updated current ID, whether it's a California driver's license or a California ID. So, it's very important as a family to get the parent to get that current I.D. You're not only going to need it for signing documents when it comes to a notary, but you're going to need it when it comes to placement inside a facility.
Address the Title on Bank Accounts
The third big issue that we come across you can always preliminarily address has to do with the checking account. Only having mom and dad on the checking account is fine, but what we want is that trusted son or daughter also on that checking account. So that, as you know, issues may be solved when it comes to long term care and bills that can't be paid by the parents by having the children are already set up to be able to legally write checks and make sure those bills are taken care of.
Update the Family Trust
This brings us to making sure that your revocable living trust is updated. One thing we will need to do is disinherit the ill spouse. If you have a well spouse that passes away before the ill spouse who's on the Medi-Cal benefit, you will be enriching them with an inheritance. That will cause a big problem with Medi-Cal and cause us to be in panic mode to keep that Medi-Cal in place because they can actually lose it with an inheritance.
Update Beneficiary Designations
Another issue that we can preliminarily address prior to getting into the details of qualifying for the Medi-Cal has to do with beneficiaries. What you should do is look at all the life insurances, annuities, pension, retirement plans, IRAs that might be out there and make sure the beneficiaries are now rearranged to account for an ill spouse or ill parent.
In other words, you do not want to have that ill parent in a position to inherit property after they get on the Medi-Cal and are collecting the benefit. All beneficiaries need to be changed over to usually the children as who we end up picking, or maybe another trust depending on the planning that we get involved in.
Address Investments
Next, we’ll need to address any investments there may be. In other words, are the parents’ or spouses’ investments in stocks, bonds, or mutual funds? If it comes down to where we have to shelter that money, we're going to have to move it out at $10,000 per day. Well, that could be a little difficult if we’re dealing with actual stocks, bonds, and mutual funds.
These are often addressed by liquidating those assets into a cash type form so that we can move out the amount, $10,000 per day without any glitches or problems, which will take some time. We have to work with the brokers to make sure things get done in a proper manner and be quite wary of whatever the taxable event will be for short or long-term capital gains.
How This Pre-Planning Comes Together
Consolidating Assets
With those items in mind, these preliminary matters should come together and be addressed prior to getting qualified for Medi-Cal so that the process is easier and can run more smoothly. Consolidate your assets. That's the most important issue. If we have parents that have assets invested all over town or in different banks, it's going to be very difficult in order to get those assets together, specifically if one parent is already incapacitated.
Banks will not operate or do things on instructions by one spouse. Nor will they do it on the direction of children. Again, the financial powers of attorney have to be updated. At the same time, we want to make sure that if the ill spouse is still capable of signing documents and allowing transfers to take place, that we can get those things done. Consolidating assets into specifically maybe one brokerage account or money market account and having one checking account goes a long way in getting us started down the path of getting you qualified for the Medi-Cal benefit.
Problem Assets – Rental Properties
This leads me to one of the biggest problems: rental properties. We can shelter rental properties, but it boils down to using assessed values in order to move those properties. So, a preliminary event would be to gather all the tax statements that you have when it comes to rental properties. On those tax statements will be the assessed value. In order to move a rental property, we have to divide that assessed value by $10,000 and then we have to prepare a deed that equals $10,000 of value.
For example, if we have a $300,000 rental property at assessed value, you divide it by $10,000 and it says we have to do 30 deeds. Think about it. 30 deeds are a lot of work, and it takes a lot of time to put together. They have to be dated on different days. After that, though, can you imagine what it's going to cost to file deeds with the county recorder.
They have a recording fee, and if you don't live in the property, it will be about $100 per deed. Well, if we are doing 30 deeds, 30 deeds times $100 is going to be $3,000 just to record those deeds. Thus, that problem asset of the rental property is something that if the parents have, we need to have time to get all that situated and figured out if we are in a rush, whether it is going to cause a problem or a delay in actually getting qualified for the Medi-Cal benefit.
In our practice, the preliminary issues are things a lot of people ask us about. Unfortunately, they don’t always ask us ahead of time, so we hope this post was helpful for those who may be unsure what to do prior to asking a lawyer.
