Q.  I hear there is a new law which protects widows from losing their homes in foreclosure when a spouse dies. Do you know anything about that?

A.   Yes. I believe you refer to the “Survivor Bill Of Rights” (SB 1150), effective January 1, 2017.  SB 1150 now imposes certain responsibilities upon a mortgage lender when the borrower dies and leaves a surviving homeowner who is not on the loan. This situation could easily occur, for example, where a borrower remarries after taking out the loan. The survivor in these cases is most often a senior, and usually a woman who must now struggle to make the mortgage payment without the income of her deceased spouse.

Under prior law, mortgage lenders often took the position that a non-borrowing spouse or child had no right to even receive information about the decedent’s loan, and no right to apply for a loan modification to enable them to keep the home. As a result, many homes were lost through foreclosure.

Under SB 1150, the law now extends to the surviving, non-borrowing home-owner the same rights that the borrower had under pre-existing law, known as the “Homeowner’s Bill Of Rights”, which protects the borrower’s own right to secure loan information and to apply for a loan modification where necessary.

Previously, some lenders took the Catch-22 position with non-borrower survivors that they would not even consider a loan modification until the loan was first brought current, which itself was often impossible without the corresponding opportunity to arrange a loan modification. Some lenders even proceeded with foreclosure proceedings while the non-borrowing family member was attempting a rescue of the home loan.

SB 1150 now requires mortgage lenders to provide relevant loan information about the status of the loan to the deceased borrower’s “successors in interest”, to afford the successors a reasonable opportunity to apply to assume the loan and/or for a loan modification, and to delay foreclosure proceedings while this process is underway.

A “successor in interest” is defined as a surviving spouse, domestic partner, joint tenant, parent, grandparent, adult child, adult grandchild, or adult sibling who occupied the property as his/her principal residence within the six months prior to the borrower’s death, and who can demonstrate that he or she has an ownership interest in the home. The successor may acquire his/her ownership  interest by reason of the death of the borrower, e.g. pursuant to a Will or Trust, or by reason of being an heir-at-law if the borrower died without a Will.

Significantly, the new law does not impose upon the lender an affirmative obligation to actually grant the requested loan modification. It only requires that the lender provide relevant information about the loan and afford the decedent’s successor(s) a reasonable opportunity to qualify for foreclosure prevention alternatives offered by the lender, subject to its credit guidelines. It also prevents the lender from proceeding with a foreclosure while the application is pending.

SB 1150 only applies to first deeds of trust secured by owner-occupied residential real property containing up to four (4) dwelling units, and does not apply to Reverse Mortgages. Even though so limited, the new law can be a lifesaver for surviving family members who would otherwise be unable to even secure loan information necessary to enable them to apply for a loan modification to save their home.

For more information on this new law, go to https://SurvivorBillofRights.org/. For advocacy assistance visit Housing and Economic Rights Advocates at www.heraca.org or call the organization at 510-271-8443.

References:  Text of New Law: SB 1150; also see Survivor Bill of Rights.Org;  and see Frequently Asked Questions.  For attorneys assisting clients with foreclosure problems, visit California Homeowners Bill of Rights; For more information on the predecessor Homeowner Bill of Rights, click HBOR.

Q.  My wife and I were wondering how much we could leave to our children free of any gift or estate tax?

A.  The answer may surprise you. A married couple can actually transfer to up to $10,980,000 to their children, free of any gift or estate tax (in 2017). You can either do so by either making lifetime gifts, or by leaving it to them as an inheritance. You can actually mix-and-match: you can gift a portion of this exemption amount to them during your lifetimes by way of gifts, and the balance upon death by way of your will or trust.

This comes as a surprise to many couples, who mistakenly believe that they are limited to gifts of $14,000 per year per child. Not so. The $14,000 per year Annual Exclusion Amount (“AEA”) is merely the amount that each of you may gift annually to as many individuals as you wish, without the need to file a gift tax return.  If you were so inclined, you and your wife could each make a $14,000 gift to every single person in your neighborhood without the need to file a single gift tax return!

More realistically, married couples typically prefer to leave their assets to each other, first, and then to their children. Under tax laws signed by President Obama in 2010 and 2013, each person has an exemption from the federal estate tax of more than $5 million. This exemption adjusts each year based upon inflation. For an individual dying in 2017, that exemption is now $5,490,000.  If a married person dies without using his entire exemption, the unused portion may be timely claimed by his surviving spouse, who thereby preserves it for later use to combine with her own exemption. The deceased spouse’s unused portion is called the Deceased Spouse’s Unused Exclusion Amount (“DSUEA” for short).

This transferability of the DSUEA to the surviving spouse is called “portability”. In essence, the unused portion of the first spouse’s exemption may be “ported”, or transferred, to the surviving spouse, assuming a timely election is made by the survivor.

Example:  Bob and Sue have an estate worth $9 million. Bob dies in 2017 and leaves everything to Sue. Everything passes to Sue without tax under the Unlimited Marital Deduction available to transfers between spouses. So Bob’s entire DSUEA is therefore unused. Sue’s CPA helps her make a timely election to claim Bob’s DSUEA by filing a Form 706 Estate Tax Return.  For simplicity, assume Sue also dies in 2017 and that her estate is then still worth $9 million.  Her estate would then be entitled to all of Bob’s unused DSUEA, plus her own exemption, so she could then leave $5,490,000 + $5,490,000 = $10,980,000 to their children, estate tax free. This plan completely tax shelters the estate passing to their children. Caution: if Sue does not made a timely election to port Bob’s DSUEA, then the excess value of her estate above $5,490,000 would be subject to estate tax, at the very hefty rate of 40%, resulting in an estate tax of over $1.4 million.

By combining your exemptions via a timely election after the first death, you and your wife can minimize, or even eliminate, estate tax for your children. Note: The ability to port over the DSUEA is more complicated if the survivor later remarries, but even then there are planning options available to minimize tax.

Q.  I hear that the federal estate tax may be repealed during this administration. If that happens, will trusts still be a useful estate planning device?

A.  In a word, yes. But remember, the federal estate tax now only kicks in if your estate is valued at more than $5.49 Million at death (2017). At this high threshold, 99% of Americans will never need to worry about the estate tax and so, as for them, the estate tax has already been “repealed”. Yet trusts continue to be used as a common estate planning device and their utility has not diminished. Here are some of the nontax benefits of creating a trust:

  • Avoiding Probate: One of the great benefits of using a revocable trust, in preference to a will, is that a trust is designed to avoid probate. In California, probate is a court proceeding whereby a judge oversees the settling of your estate. The process tends to be time-consuming, expensive and public. By contrast, the postmortem settling of a trust is usually more expeditious, less expensive and private.
  • Management upon Disability: If you were to become disabled, and unable to manage your assets, your designated successor trustee could step forward and manage them for you, and thereby avoid the need for a court created conservatorship, which is a more involved, expensive and public proceeding. By contrast, a simple will would only kick in upon death, and therefore would not provide you any benefits for asset management during life. Note: a comprehensive Durable Power Of Attorney (“DPOA”) would be another alternative to management of your financial assets in the event of disability; but the DPOA expires on death, making a trust the better option for uninterrupted asset management.
  • Protection from Creditors: Certain types of trusts can protect your beneficiaries from creditors. By way of example, if you had a child who was a spendthrift, you could appoint a trustee to manage that child’s share of your estate in a “Discretionary Support Trust”, which could remain in existence well after your demise. The trustee might be authorized to retain that child’s share in trust and pay out only as much as necessary for his needs. Under that arrangement, your child’s unpaid creditors would not be able to seize any part of his share which remained in trust.
  • Provide for a Child with Special Needs: If you have a child, or grandchild, with a disability who relies upon public benefits, such as Medi-Cal or SSI, you could leave his share in a “Special Needs Trust” (“SNT”). A SNT is a special trust designed to hold assets for the benefit of a person on public benefits in a manner that does not undermine his ongoing eligibility for those benefits. The trustee would then use the SNT funds to supplement your child’s public benefits and thereby enhance his quality-of-life.
  • Avoid Medi-Cal Recovery: Because of recent changes in the law, the estates of persons dying after January 1, 2017, who have received Medi-Cal benefits during life, will no longer be subject to recovery (or “payback”), if their estates do not go through probate. Since a trust is typically designed to avoid probate, holding assets inside a trust can thus avoid Medi-Cal recovery and potentially save their estates many thousands of dollars.

A trust can be as useful today as in years past, and you should still give serious consideration to using this device as part of your estate plan.

Q: My friends and I were recently discussing powers of attorney. It seems that we have different understandings as to what they look like and how they can be used. Can you provide me with a short lesson which I can share with them?

A. Sure. Powers of attorney are very important legal documents. In their basic structure you (the principal)  delegate to someone whom you trust (your agent or “attorney-in-fact”) the power to engage in financial transactions in your name,  using your assets, with the same legal effect as if you had signed the transaction documents yourself.  But all powers of attorney (“POA”) are not the same. Here is a short list of some variations:

Is It Durable?  Unless the document expressly so provides, a POA expires when the principal loses mental capacity.  However, this feature may be overcome if the document provides that it is “durable,” meaning that it survives the principal’s incapacity. In almost every case, you will want a power of attorney to recite that it is durable, as that is usually when it is needed most.

Is It a “Springing” Power?  A POA can either be immediately effective or it can be effective only upon the occurrence of a future event, such as incapacity. If triggered by a future event, we refer to this as a “springing power,” because it only springs into life upon the occurrence of that future event. Example: Many POA’s are designed to spring into life only when a physician certifies that the principal has lost mental capacity.

Is It Limited Or General? A POA can either be limited in scope (e.g. authorizing an agent to sign a deed and other documents to close a specific sale escrow) or be limited in time with a fixed expiration date, or it can be very general and comprehensive in nature. 

Does It Permit Modification of Trust? If you have complete confidence in your agent, you may wish to authorize your agent to make future modifications to your “Living Trust” in order to address changes in family circumstances, changes in tax law and/or to engage in public benefits planning on your behalf.  But in order for these powers to be effective, there must also be reciprocal provisions in your trust, a legal requirement too often overlooked. However, your agent may not make a Will for you. 

Does it Permit Gifting and/or Long Term Care Benefits Planning? By California law, an agent cannot use the principal’s assets to make gifts, unless that power is expressly granted in the POA.  Further, even if this power is expressly granted, the agent cannot make gifts to himself unless the right to “Self Deal” is also expressly stated.  Sometimes the power to make gifts can be very important, such as for tax planning or planning for eligibility under the Medi-Cal or Veterans Pension programs to help with long term care expenses.

Unfortunately, we find that very few POA’s contain these important powers, or impose limits upon exercise, which reduce the planning opportunities available to the agent.

In every case, the POA can only be created when the principal has mental capacity to understand what he or she is signing and all expire upon the death of the principal.  Lastly, a POA for financial matters cannot authorize health care decisions: for that another document is necessary,  called an Advance Healthcare Directive.

Q. My primary asset is my home, which I purchased about 40 years ago and now own free and clear. I would like to leave it to my children, but in a way that avoids the fuss of a probate or trust administration when I die. Is there some way to do this?

A.  Yes, indeed. You might consider leaving it to your children via a Life Estate Deed. A Life Estate Deed (“LED”) is a special kind of deed which you would sign and record now, but which would transfer your home to your children effective upon your death, while reserving to you the exclusive right to live in your home during your lifetime. Upon your death, your children’s interest would mature into a full ownership interest

One of the nice features of this LED, is that the clearing of title upon your demise is very simple.  At that time, your children need only file with the county recorder an affidavit reciting the fact of your death, along with a certified copy of your Death Certificate and other routine transfer documents.  There is no probate and no trust administration to deal with.

However, as with many legal matters, there are “Pros” and “Cons” to using this special deed. Here are some of them:

Advantages:

1) Upon your demise, clearing title and confirming ownership in your children is a simple procedure, handled without probate or trust administration.

2) The home would receive the same favorable tax treatment accorded a transfer, upon death, via a Living Trust or Will: Your children would receive the home with a tax basis equal to its increased value at your death, thus minimizing any capital gain tax if they later sell the home.

3) Should you ever apply for a Medi-Cal Long Term Care subsidy to help with nursing home expense, the home would be protected from a post-mortem recovery claim for reimbursement.

4) In terms of title insurance, this LED is better than the new Transfer on Death (TOD) Deed, as many title companies are unwilling to insure the transfer of title where the newer, TOD Deed has been used.

Disadvantages:

1) Once the deed is signed and conveyed, you cannot change your mind by revoking the conveyance.

2) Once the deed is executed, you would not be able to obtain a conventional or reverse mortgage secured by the home.

3) Once done, you could not sell the home without agreement of your children, and if sold, the proceeds must be “split”.  This restriction could impair your ability to sell the home to help fund your own retirement or long term care expenses.

4) Disputes may arise regarding responsibility for repairs or improvements.

5) If any of your children predecease you, their interest would go as they direct in their own trust or will or, if none, to their heirs-at-law. Thus, you would no longer control the ultimate disposition of their interest.

While many of these disadvantages can be eliminated by creating a formal “Living Trust”, the trade-off is the greater expense of creating a trust, and the time and expense of a formal, post-mortem trust administration upon your demise.

Before making the decision to use a LED — rather than a “Living Trust” or Will–  it would be wise to seek professional advice from a knowledgeable attorney to make sure that this special deed is right for you.

Q.  My wife and I have about $10,000 in credit card debt that we struggle to pay each month. Our incomes are very modest and all from Social Security and my work Pension. Is there any way that we can legally avoid paying this debt without dire consequences?

A.  Very likely, yes. Generally speaking, income from Social Security, work pensions, VA Benefits and disability income is protected, by federal law, from collection by non-governmental creditors. If these are your sources of income, you could very well just stop paying and you would still receive your full incomes each month. Indeed, it is not a crime to stop paying a bill, especially if continuing to pay would deprive you of the basic necessities of life. Many seniors are both surprised, and relieved, to learn of this.

Although your creditors may be aware that these source of income are exempt from collection, some may nevertheless attempt, by repeated phone calls, to coerce you into paying these uncollectible bills.  You can easily put a stop to this. Under the federal “Fair Debt Collection Practices Act”, you may send a letter to your creditors demanding that they cease all further efforts to communicate with you by mail or phone. The creditors must then immediately cease all further communication. Such letters should be sent Certified, Return Receipt Requested, so you have proof of mailing. The creditor then has the option of writing off the debt as uncollectible, or filing a lawsuit to obtain a judgment. Unless the debt is large, many creditors just write off the debt and close their file.

What if one of your creditors opts to file a lawsuit and obtain a judgment? Answer: They still will not be able to go after your income if it is from one of the sources mentioned above. True, if you own a home, they could obtain a judgment and record a lien against your home. But, even then, that is usually not as bad as it sounds: attempting to collect a judgment by foreclosing on an individual’s home is a cumbersome and expensive process, and most creditors would prefer to just record the judgment and then let it just sit there, accruing interest, to be paid out of escrow only when you someday sell or transfer your home or borrow against it.

There are some exceptions to the above: if you owe money for unpaid taxes or other obligations to federal agencies, such as unpaid student loans, they may garnish up to 15% of your social security income. But, even here, there are options  to avoid collection, upon a proper showing that you need all of your income for your basic necessities.  Another exception is unpaid child or spousal support.

Before deciding upon the best plan in your case, it would be wise to seek legal advice.  To aid you, there is a very low cost resource available to low income seniors and the disabled. It is a non-profit law firm called ‘Help Eliminate Legal Problems for Seniors’ (“HELPS”).  For a very nominal monthly fee, based on a sliding income scale (which can be as low as $5/month, or even for free), they will counsel you, call creditors on your behalf, and help you write “Cease and Desist Letters”. You may contact them for assistance on line at www.HelpsIsHere.org or by calling 1-855-435-7787.

Q. My sister just passed away and had previously appointed me as trustee of her trust. She was estranged from one of her sons and left him nothing on purpose. However, I anticipate that he will demand a copy of the trust and information about her estate. Am I my legally obliged to share any of that information with him?

A. Here are the short answers: Yes, on a copy of the trust; No, on information about the estate. Here’s the explanation:

Copy of the Trust:  California law provides that, upon the demise of a trust-maker (aka, a “Settlor”), formal notice must go out to all of the Settlor’s beneficiaries AND heirs at law. Beneficiaries are persons or organizations named in the trust to receive a bequest; they may, or may not, also be family members.  Heirs are close family members whose status is measured by bloodlines and who may, or may not, also be named as beneficiaries. This formal notice advises both named beneficiaries and unnamed heirs that they are entitled to a copy of the trust and that, if they wish to challenge its legal validity, they must do so within a prescribed period of time.

The law’s rationale appears to be the following:  heirs, who may have been left out entirely, as in your sister’s case, or who may feel that they were “short-changed” on their anticipated inheritance, should have the right to challenge the trust by, for example, proving to a judge that your sister was of unsound mind when she signed the document.   To challenge the trust, the law understandably affords them an opportunity to obtain a copy of the trust instrument upon formal request.

Information About the Trust Estate: By comparison, however, only a beneficiary is entitled to information about the trust estate, including an accounting of the trust assets, income and expenditures.  In this sense, beneficiaries would include both primary beneficiaries and contingent beneficiaries, the latter being persons who would take in the event that the primary beneficiaries predeceased them or disclaimed their bequests.

Other Options:  Sometimes clients with estranged family members balk at having to formally notify them of the commencement of formal trust administration following a settlor’s death. These families are concerned that the estranged heirs may make trouble, especially when offered the right to a copy of the decedent’s trust.

Unfortunately, if the decedent’s assets are held in a trust, there is really no way around the formal notice requirement required by California law.  However, if we are consulted in advance, say, at the time the Settlor is designing his or her estate plan, there are sometimes alternative arrangements that can avoid the necessity of formal notice. One option:  Instead of placing assets in a Living Trust, many kinds of assets can be held in Beneficiary Form, so that the particular asset goes automatically to the designated beneficiaries upon the owner’s death and without probate or formal trust administration. Examples: Pay on Death (“POD”) Bank Accounts, Transfer on Death (“TOD”) Brokerage Accounts, Insurance and Annuity Policies and even Transfer on Death Home Deeds.

In connection with trust administration, especially where — as here — you expect difficulty from a disgruntled heir, it is wise to engage the services of an attorney familiar with trust administration to guide you.

Q.  Our 35 year old daughter is going through a divorce. She is on disability and gets SSI and Medi-Cal. We worry that she may lose her benefits once she is awarded support and receives her share of community property. You recently wrote about a Special Needs Trust to protect benefits for a senior in a nursing home. Might that trust also be used in her situation to protect her benefits?

A. Yes, indeed, and my compliments for asking the question. Very few attorneys and judges are familiar with the use of the Special Needs Trusts (“SNT”) in the divorce context. As a result, the sad fact is that many persons on SSI and/or Medi-Cal lose their benefits when they divorce.  A bit of background:

To qualify for Supplemental Security Income (“SSI”), an individual with a disability must meet two conditions:  She must (a) have less than $2,000 in non-exempt resources (e.g. savings), and (b) her monthly income must be less than the SSI benefit rate, currently $895.72 (in 2017).  An award of SSI also entitles the beneficiary to Medi-Cal.

In the divorce context, a spouse would typically be awarded both spousal support and a division of marital assets, such as bank accounts, IRA’s, etc.  If that spouse were receiving SSI and/or Medi-Cal, the award of support and/or marital assets  could render that spouse ineligible for public benefits if they put her over the respective income or resource ceilings. The question, then, is whether there is a way to preserve BOTH a spouse’s public benefits AND her right to support and share of marital assets?

Answer:  YES. Enter the Special Needs Trust.  If handled with proper care, the SNT could hold both court-ordered support and resources, thus preserving for the spouse with a disability both her public benefits and the divorce award, and thereby helping to make her life post-divorce a bit easier.

Once inside the SNT, the Trustee would handle the funds in a manner compliant with the SSI and Medi-Cal rules. This typically would mean that the Trustee would not disburse funds directly to your daughter, herself, but instead would pay third party providers, selected by her, directly for goods and services that she needed, such as a car, computer, clothing, etc. A good trustee would comply with your daughter’s requests for payment to her selected providers, so long as those payments did not undermine her ongoing eligibility for the public benefit programs. The trustee would also typically make periodic reports to the government programs to affirm compliance with the program rules.

If mentally competent, your daughter could create her own SNT and even select her own Trustee, who might be a parent or trusted friend. Alternatively, she could join a Pooled SNT established by a non-profit organization, which would provide professional trustee services for a reasonable fee.

To make this option work, it is essential that your daughter engage an Elder Law or Special Needs attorney familiar with the use of the SNT in divorce. The SNT attorney would then work with her divorce attorney and might help educate the judge and opposing counsel to the benefits of this technique. It is also best that the SNT attorney be engaged early in the case.

ReferencesSI 01120.201(J)(1)(d) [“.unless the assignment is irrevocable.”]; SI 01120.200(G)1)(d) [“..as a result of a court order…”]; SNT Fairness Act

Q.  My wife suffers from Parkinson’s and has been in a nursing home for some time. About a year ago, we put everything in my name so she could qualify for a Medi-Cal subsidy to help pay for her care. We currently have only simple wills which leave everything to the survivor of us, and then to our two children. Is this the best plan?

A.  Probably not, and here’s why: if for some reason you predeceased her, then all of your assets would go to her. These assets would then put her over the $2,000 Medi-Cal resource ceiling for an unmarried individual, and she would be terminated from the program. She would then have to use these very assets to pay for her care, potentially depleting a lifetime of savings and leaving little or nothing as an inheritance for your children.

A better plan would be to change your own will and trust so that if you predeceased her, your assets would go into a Spousal Special Needs Trust (“S-SNT”) for her benefit. The S-SNT is a special trust which would hold these assets in the name of a “friendly” trustee, who would use them to pay for extra things for your wife not provided by Medi-Cal, such as a TV in her room, occasional outings, and perhaps companion visits. Because the assets would be owned by the trustee, they would not count as hers and would thus not undermine her continued eligibility for Medi-Cal. One of your children could serve as trustee.

Upon her later demise, the balance remaining would go to your children or other designated beneficiaries.

This spousal S-SNT requires that your plan be structured in a very special way. Because of a quirk in the law, it must be created by Will, and not by trust. In this sense the S-SNT created for a spouse is very different from the Special Needs Trust sometimes created for a child or grandchild on public benefits.

Your plan could still use a trust and companion will. They would be structured so they worked together but contained a kind of “toggle switch”:  If your wife predeceased you, then upon your own later demise they would pass everything to your children by trust.  But, if your wife survived you, the “switch” would trigger and trust assets would, instead, transfer to the Will to create the S-SNT for her.

Because the S-SNT for a spouse must be created by will, it requires some involvement by the probate court after your demise. Fortunately, this requirement does not necessarily mean that your estate would need to go through a full probate. It only requires that, after your demise, a petition be filed in the probate court seeking an order formally establishing the S-SNT and authorizing its funding from your probate estate. Once the order is granted, your estate assets would be so transferred, and the probate could then be closed.

This plan does require that it be in place before your demise and its design and implementation does require special skill.  I recommend that you seek out a knowledgeable Elder Law or Special Needs attorney to assist you in creating it.

Note:  A variation of this plan would be suitable for a couple, presently in good health, who wish to plan for the possible future long term care needs of the survivor of them.

Reference:  42 USC 1396p (d)(2)(A) [“Treatment of Trusts”]. Note the phrase “established … other than by will”.

Q.  A while back you wrote an article advising that the obligation to repay Medi-Cal for benefits received during life changed as of January 1, 2017. Does that mean that we no longer need to include Medi-Cal planning powers in our estate planning documents.

A. Not at all. While the rules requiring “payback” to Medi-Cal have changed dramatically for persons dying after January 1, 2017, (making only estates that go through probate subject to recovery), there is still a need to plan ahead for Medi-Cal eligibility and those rules have not changed.

Background:  Elders in need of nursing home care face costs of $9,000 per month or more, and risk running through a lifetime of savings to finance that care. Fortunately, the Medi-Cal program offers a safety net, helping those who qualify avoid financial ruin.  However, Medi-Cal has strict resource caps to qualify:  $122,900 in non-exempt assets for a married person, and only $2,000 for an unmarried person.

Persons over the resource caps must either shoulder the entire financial burden themselves until they “spend down” to the caps, or engage in proactive Medi-Cal planning to bring themselves under these caps. However, to engage in this planning the applicant must either have full mental capacity at time of need, or have legal documents in place — with special provisions — so others can do so for him. Consider these examples:

(1) Mary: Married Person: $300,000 in Cash Assets: In this case, Mary and her spouse are over the Medi-Cal resource cap by $177,100, and Mary would not qualify for a Medi-Cal subsidy. However, there may be lawful strategies that could be used to bring the couple’s assets down below the resource caps. Examples: give away the excess to children, albeit in a very special, Medi-Cal compliant manner; use the excess funds to purchase a very special kind of annuity; or, convert excess cash assets into exempt assets, such as by paying down a home mortgage. However, if Mary is incapacitated, she may be unable to join in these actions, unless special powers were included in her Power of Attorney and/or Trust authorizing others to do so for her.

(2) John: Single Person: Home Sale Contemplated:  Let’s suppose John cannot live safely at home. His family anticipates the need to sell his home, worth $750,000, to finance care in an Assisted Living Facility (“ALF”) on a private pay basis, as Medi-Cal usually does not subsidize care in an ALF, but only in a nursing home (“NH”).

If John’s care needs later increase to the point where he needs nursing home care, the sale proceeds still in his name would then likely place him over the Medi-Cal resource cap and render him ineligible for a Medi-Cal NH subsidy.   A better plan:  if a special “Medi-Cal Asset Protection Trust” (“MAPT”) were first created to hold title to the home, and title to the home were placed into this trust before sale, then the sale proceeds would not go to John, but rather to his Trustee. The Trustee could then use them for John’s care in the ALF. When he later needed a Medi-Cal NH subsidy, the remaining proceeds would not be treated as owned by John.  He might then qualify for a Medi-Cal NH subsidy if his other resources were below the cap, and thereby preserve his remaining estate for family. However, if John lacked capacity at this time of need, this planning option may not be available to him, unless he had advance planning documents in place — with special planning powers — so as to permit others to create the MAPT for him.

In sum, it is still wise to include special Medi-Cal planning powers in your estate planning documents, for possible future need.