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.