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How Can Seniors Protect their Assets?

Asset protection for seniors is vital when you’re considering a long-term care estate plan. The reason for this is it’s incredibly common for elderly individuals and couples to become financially destitute at the end of their lives due to long-term care costs. While you may think long-term care won’t apply to you, many experts would disagree. According to the California Partnership for Long-Term Care, two out of three Californians will require some type of long-term care for a minimum of 2.3 years.

Nursing homes, skilled nursing facilities, and residential facilities for the elderly are extremely expensive in California. Often seniors will liquidate their assets or fail to properly protect their assets and have them seized by the State of California to pay back Medi-Cal benefits. Although this is a common occurrence for many, this doesn’t have to happen to you and your family.

You can qualify for Medi-Cal and still protect your assets by utilizing an Irrevocable Medi-Cal Asset Preservation Trust.  Assets can be placed in the trust and therefore escape any recovery efforts by the State of California. IRAs and other retirement assets can be protected so that they will transfer to your beneficiaries free of recovery as well upon death.

How Does an Asset Protection Trust Work?

With an Irrevocable Medi-Cal Asset Preservation Trust set up, assets are transferred into the trust before a Medi-Cal application is submitted. All assets placed in the Irrevocable Trust are then secure from any type of lien or estate recovery claim by Medi-Cal Estate Recovery or any other claims by creditors. This is very different from a Revocable Living Trust, which does not remove assets from your name and fails to provide asset protection.

With just a Revocable Trust or “Living Trust” established, all assets in the trust will be considered yours and will count towards both Medi-Cal eligibility and Estate Recovery as well as court ordered judgements. That means Medi-Cal Estate Recovery and other creditors can place a lien on your home or other valuable assets.

While it’s a powerful tool for probate avoidance, a Living Trust simply doesn’t offer the same asset protections as an Irrevocable Medi-Cal Asset Preservation Trust. Plus, if you place assets in your Irrevocable Trust before your application, they’ll be considered non-exempt for the purpose of Long-Term Care Medi-Cal eligibility.

Who Needs an Asset Protection Trust in California?

Older individuals, couples, or persons in need of long-term care who wish to protect their assets should pursue the creation of an Irrevocable Medi-Cal Asset Protection Trust. The best way to guarantee your assets are protected is to take a proactive approach and establish your Irrevocable Medi-Cal Asset Preservation Trust before submitting your application for Long-Term Care Medi-Cal.

If you’re thinking of setting up an Irrevocable Medi-Cal Asset Preservation Trust for your assets, you should also consider who in your life is financially responsible. Once you set up your trust, you’ll have to be prepared to relinquish direct control over your assets to that person without hesitation. So, it’s important you choose the right loved one, family member, or a professional to act as your trustee so they can guard your assets and distribute them according to your wishes.

It’s important to note you’ll still have direct control over your own income including Social Security and pensions with an Irrevocable Trust set up. You’ll also be in direct control over any assets that remain outside the Irrevocable Trust.

Possibility of Long-Term Care Insurance

The predatory nature of Medi-Cal Estate Recovery can deter some from applying for long-term care benefits. Some will instead turn to Long-Term Care Insurance to provide coverage for nursing homes, assisted living facilities and in-home care. That way the individual or couple can still receive coverage for long-term care and directly own all their assets without fear of liens.

Long-Term Care Insurance can be incredibly expensive, and the cost is dependent on a number of variables that include the following:

• Your age and current health
• The length of the policy
• The rating of the insurance company
• Any exclusions or riders
• Cost of living adjustment provisions

Unfortunately, the cost of long-term care has skyrocketed over the last ten years. It seems many Long-Term Care insurance policies do not offer full coverage anymore. This can result in policyholders applying to Medi-Cal in an effort to fill in any coverage gaps. The phenomenon is due in large part to increasing long-term care expenses as they are becoming greater than the cost-of-living adjustment provisions contained in the policy.

Despite the issues associated Long-Term Care Insurance, it’s still a valuable tool you can utilize to fund your long-term care. If your insurance can cover the costs, then you don’t have to worry about Medi-Cal Estate Recovery and can simply place your assets in a Living Trust or have instructions for how they’ll be distributed upon death in your will.

Additional Resources

Your Guide to Long-Term Care
Visit the official website for the California Association of Health Facilities (CAHF) to learn more about your long-term care options. Access the site to research the various types of long-term care available, how to pay for long-term care, State agencies role in your long-term care, rights of the residents, and facts/statistics surrounding long-term care in California.

California Trust Laws
Visit the official website for California’s Statutes to learn more about the rules and procedures surrounding trusts. Access the site to learn more about Irrevocable Trusts, how they differ from Revocable Trusts, the trust administration process, and the payment of claims and/or debts from Revocable Trust.

Long-Term Care Asset Protection | Elder Law Services in Ventura County, Los Angeles County and Central California

The astounding costs surrounding long-term care in California could devastate a lifetime of financial success and hard work in just a few short years. That is why we highly encourage you to reach out the California Medi-Cal planning attorneys at Botti & Morison. We can address your financial concerns regarding your assets by establishing an Irrevocable Medi-Cal Asset Preservation Trust that’s designed to protect your wealth from creditors or State recovery efforts.