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Medi-Cal Long Term Care ("LTC") Estate Planning

The average cost of care at a skilled nursing facility (SNF) in the State of California hovers just north of $8,00 per month. In many cities throughout the State, SNFS can cost over $10,000 per month. Medicare only provides 20 days of 100% long-term care (LTC) coverage unless one has a supplemental plan that extends Medicare LTC benefits with a daily co-pay up to 100 days . At day #101, most families begin paying the enormous private pay amount monthly known as, Spend down, until their savings are at a level equal to qualifying for Medi-Cal LTC benefits.

Our firm specializes in Medi-Cal estate planning, and if you or your loved one is burning their nest egg monthly on LTC costs because you were told you had to spend down, STOP!  California is the only state left in the US that still allows Stacked Gifting. Stacked Gifting means one can Gift Stack their savings anytime to their loved ones without being disqualified for Medi-Cal LTC benefits. (Please find our Gift Stack blog on this website for more information).

Revocable Living Trusts, Wills, Pour-Over Wills

How do you know if you should purchase a Revocable Living Trust or a Will, and what is the difference between a standard Will and a Pour-Over Will?

Determining whether or not you should buy a Will or a Revocable Living Trust turns on whether or not your estate is worth more than $150,000  and, of course, probate. Be careful here, because this number is one's gross value, not net. If, for example, you have a home worth $300,000 with a $200,00 mortgage, the estate value (plus personal property but, for teaching purposes, it is not calculated here)  is $300,000, not $100,000 (=$300,000 -$200,000). If this estate either purchased a Will or failed to write one prior to dying, the estates is subject to probate —  a lot of  attorney’s fees —  and a settling period that can last as long as a year or longer (unless it's a small estate with less than $150,000, then that period can be shortened dramatically).

Thus, if your estate is worth less than $150,000, consider buying a Will. If it’s worth more than $150,000, think about buying a Living Trust. When you purchase a Revocable Living Trust, the Pour-Over Will is an additional  trust document that captures anything not funded  (titled in the name of the trust) in the name of trust. Personal property like cars, boats, savings accounts, guns and inexpensive real property like desert land, flow into the Pour-Over Will up to a maximum of  $150,000 limit without subjecting these assets to probate.

Transmutation Agreement between Spouses for Medi-Cal LTC Planning


Transmutation means, “to transfer,” and a Transmutation Agreement Between Spouses means the confined spouse (usually in a nursing home, or getting close to being confined in one) wants to transfer all the assets of the community estate to the healthy spouse for Medi-Cal LTC reasons; Transmutation Agreements have their place in Medi-Cal Estate Planning, but not always.

Here, the couple understands that transmutation of the couple’s community property to the sole and separate property of the healthy spouse will allow for the greatest preservation of the couple’s assets by a) avoiding estate recovery if the confined spouse requires Medi-Cal LTC benefits during his lifetime, and b) enabling the confounded spouse to qualify for Medi-Cal LTC benefits should the healthy spouse predecease the confined spouse.

California set into law on January 1, 2017 a new Medi-Cal recovery rule that stipulates an estate with a Revocable Living Trust avoids Medi-Cal estate recovery. So, if one is concerned about Medi-Cal recovery, one can overcome the first reason for buying a Transmutation Agreement by simply purchasing a Revocable Living Trust. However, the second reason is more problematic because if the healthy spouse has reason to believe she could predecease the unhealthy spouse, she should consider purchasing a Transmutation Agreement along with the collateral agreements that are ordinarily produced with it.

Charitable Remaining Trust

If you want to minimize capital gains tax and maximize charitable giving, then you should consider a charitable remainder trust (CRT). CRTS allows one to make a donation to one's favorite charity, and receive the income from the donated assets for one's personal use during one's lifetime. How? After death, the balance of the trust is donated to the charity. The donors establish the trust and transfer assets, such as real estate or highly appreciated stocks,  to the trust. The trustees of the trust, who are often also the donors of the property, then sell the assets for the trust and reinvest the proceeds. The donors receive a specified amount of the income from the trust either for the balance of their lives, or for a fixed period of time. After their  deaths, the assets are given to the charitable organization named in the trust. 

Special Needs Trusts     

Instead of leaving assets directly to the disabled adult child, parents can establish a Third Party Special Needs Trust in their Living Trusts or Wills.  This trust would not be under the control of the child, and the child would not be able to revoke it and use the assets for his own purposes.  The trust would have an independent trustee and would continue for the lifetime of the child. (This is known as a "Third Party Special Needs Trust" because the beneficiary has no control over the trust.  (There are other types of special needs trusts that are funded with assets belonging to the beneficiary, known as Litigation Special Needs Trusts, that are not discussed here.) The primary purpose of a third party special needs trust is to preserve government benefits for disabled beneficiaries like Medi-Cal and Social Security Income.  Usually the benefits involved are from government programs that have eligibility requirements. 

Life Insurance Trusts


The trustor sets up the trust and names a trustee, who will buy the insurance for the trust, using funds contributed to the trust by the trustor. After the trustor's death, the proceeds of the insurance are paid to the life insurance trust and then distributed to the beneficiaries of the trust, who often are the trustor's children. If the trust has been administered properly, the proceeds of the insurance will be distributed free of federal estate taxes to the beneficiaries.

Pet Trusts

We these trusts, one can provide that a trust will be established for the care of one's pet, and a specified amount of money will be used by the trustee for the care, feeding, and health care of the pet for the remainder of its life. The trust for the pet can be provided either through a will or through a living trust.  The pet trust can specify how the trust fund will be spent, and to whom the  balance of the trust fund will be given after the pet's death.

Disclaimer Trusts

If minimizing or eliminating federal estate taxes for a married couple is at issue, then a Disclaimer trust might be worth considering. The way it works is that after the death of the first spouse, the surviving spouse has the option of disclaiming all or part of the estate of the first spouse to die. The assets that are disclaimed are transferred to the disclaimer trust and are not included in the estate of the surviving spouse when he or she dies.  The disclaimer trust will probably have the same distribution plan as the living trust, but the couple can also specify a different distribution plan for the disclaimer trust.

Trust Administration and Management