Top 3 Things to Know to Protect You From A Medi-Cal Estate Claim

Medi-Cal offers low-cost or free health insurance and nursing home coverage to eligible California residents with limited income. Before January 1, 2017, the federal law made it optional for states to recover for medical services like doctor visits and hospital stays. California is among 10 states that seeks repayment beyond the federal minimum and here your estate will be expected to pay back the value of all coverage you receive after you turn 55. Assets transferred to a surviving spouse could be sought for recovery from that spouse’s estate after his or her death. With new legislation, a Medi-Cal homeowner need only avoid probate to protect his or her estate from recovery, such as by having the home owned by a living trust.

Are You Asking Yourself “Can Medi-Cal Take My Home After I Die?”

  • Learning the New Law

Through the Estate Recovery Program, the Medi-Cal program sought repayment from the estates of deceased family members.  The program targeted only benefits received by the deceased on or after their 55th birthday as well as  their assets at the time of death. For those who passed away on or after January 1, 2017, Medi-Cal Estate Recovery may not apply if your estate is planned correctly. California passed SB 833 that included changes to the Medi-Cal estate recovery practices and more changes to the state health care laws. California no longer seeks recovery from the estate of a surviving spouse of a deceased Medi-Cal recipient.  The estate and assets which pass through a trust, or which avoid probate, are protected under SB 833. By placing assets into a living trust, and through proper estate planning, estate recovery can be avoided. Thinking you might need help? The Law Offices of Joel A Harris, located in Antioch, California are experts in Estate Planning and Probate Law.

  • Changing the Way You Gift Money

Under the new recovery rules, if a gift deed transfers the home outright to an individual and you retain a life estate, this would be considered irrevocable and immune from recovery. The state cannot recover from IRAs, work-related pension funds or life insurance policies. You should usually not name your living trust as the beneficiary on retirement accounts. Always directly name the person(s) you would like to be  the beneficiary. Repayment will be limited to only estate assets subject to probate that were owned by the deceased recipient at the time of death and repayments will be limited to services received by deceased.

Gifting assets can cost you if you don’t understand the rules. Changes to the Medi-Cal eligibility rules now uses a 30 month “look-back” rule when evaluating applicants. Transfers made for less than fair market value will cause a penalty period of disqualification determined by dividing the uncompensated transfer by the average monthly cost of LTC private pay in your area. By gifting, an individual can transfer property at the time of death with the gift tax effects considered.

  • Helping Your Children

Even though the state can no longer recover for basic health services like doctor visits and prescription drugs, it can recover for services related to nursing home care. Recovery is limited to services required to be recovered under federal laws. Probate is a legal process through which the corresponding county court sees that the deceased’s assets are distributed according to the decedent’s will. The probate process can be thought of as simply the last option for transferring titles to the beneficiary. Avoiding probate can save unnecessary expenses, time, and stress.

Are You Worried Your Assets May Not Be Protected From A Medi-Cal Estate Claim?

Planning for your future includes understanding that all that you have worked and saved for could be taken away after your passing if not properly protected.  Preparing for that time by protecting your assets is the best gift you can give your spouse and children. At The Law Offices of Joel A Harris, we offer the best guidance for preparing your estate plan catered to your individual needs. Throughout the process, we explain everything and patiently answer every question you may have. Since 1993, The Law Offices of Joel A Harris, located in Antioch, California, has worked tirelessly to assure individuals create the most beneficial estate plan for their spouse and heirs. Have questions, feel free to reach out to us at (925)757-4605.

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What does the Trump Presidency Mean for HealthCare, Medicare and Estate Planning?

Whether you voted for him or not, we can all agree that the Trump presidency will most likely bring unprecedented change to our country.

Many have concerns about entitlements, healthcare, taxes and civil rights. My clients – Baby Boomers and young families who want to retire comfortably, have affordable healthcare as they age and who want to leave a legacy behind for their children and grandchildren – have concerns about what the Trump presidency means to the Affordable Healthcare Act (Obamacare), Medicare and Estate taxes.

I address those three issues in this blog.

Trump on Affordable Healthcare

One of the most heated debates during the election was whether Obamacare would be repealed by our new president. Trump vowed to repeal the Affordable Healthcare Act on day one of his presidency. However, just last week, Trump nominated Representative Tom Price to head the U.S. Department of Health and Human Services (HHS) who said, according to an article in Reuters, (“Trump’s health pick defends stocks, says Americans won’t lose insurance”),“Americans will not suddenly lose health insurance.” Price went on to say, “nobody is interested in pulling the rug out from anyone”. Instead, Republicans in Congress will work to repeal the law and replace it with an alternative system. (Source: Reuters)

In an interview with the Washington Post, Trump stated, “We’re going to have insurance for everybody. “[They] can expect to have great health care. It will be in a much-simplified form. Much less expensive and much better.”

The Bottom Line on Affordable HealthCare: While “Obamacare” may be repealed, it seems that neither Trump nor House Republicans want to leave Americans without universal healthcare. I suspect there will be changes to your existing plan, and, according to Trump and his advisers, these changes will make healthcare more available and affordable for all.

Trump on Medicare

Per an article in Forbes, repealing Obamacare will have a major impact on Medicare and Medicaid: the “unheralded Medicare reforms in Obamacare, such as lower operating costs, higher quality care and a sounder financial footing for the program” will be torn apart by the proposed Trump and Republican plans to dismantle Obamacare. Forbes also states that, “it would repeal the expansion of Medicaid, a program that provided more than 12 million low-income Americans with coverage, and replace it with nothing.”

Medicare healthcare seniors

According to Forbes, Health and Human Services (HSS) nominee Price’s “Empowering Patients First Act” would replace the Affordable Care act, “with a 401(k)-like plan where you’d be exposed to the ravages of the private insurance market and be given tax credits based on your age.” (source: Forbes)

Many believe that Price’s proposed reforms could have a major negative impact on Medicare. Not necessarily in the short-term, but in the long term, his reforms could be used to dismantle our current Medicare system and instead, hand out lump sums or “vouchers” to retirees to be used to buy private insurance policies. Would this be helpful or hurtful to our aging Baby Boomers? That is yet to be seen.

I have to wonder if the vouchers would be enough to cover a year’s worth of medical expenses? According to many healthcare and medical experts, “probably not, if (the senior) has a range of expensive or chronic medical issues, as many older people do.” (source Wired)

The Bottom Line on Trump on Medicare. In the short term, it appears there will be no major changes to Medicare. But we need to keep our eye on the details of HSS nominee Price’s “Empowering Patients First Act” and how that could be applied to the future of Medicare. Many believe a voucher system could have severe negative impact on seniors and healthcare.

Trump on Estate Taxes (AKA: “The Death Tax”)

Much hoopla has been made over the Estate Tax, renamed by Republicans in the 1990s as the “Death Tax”. Politicians have used it as a political tool to win over constituents for decades. Democrats want to keep the tax, as a safeguard against the “accumulation of dynastic wealth” (Source: Time) or to prevent the rich from getting richer off the backs of average American and Republicans have tried (in vain) to repeal the so-called “death tax” claiming it penalizes success.

Reviewing an old estate plan

According to the IRS (IRS.gov) the Estate Tax is, “the right to transfer property after your death and it consists of an accounting of everything in your estate” and through a long process of determining what gets included and excluded from your estate (deductions), a value is put on your estate to determine your Gross Estate, and a tax assessed. (To read the full tax law visit the IRS website here). Some say this is an unfair “death tax” that penalizes upwardly mobile Americans wo want to leave a legacy to their children.

Let’s look at the facts about the so-called “Death Tax” (Source: Time Magazine):

  • The current Estate Tax affects less than one half of 1% of American estates
  • $10.9 million is the value of a married couple’s estate EXEMPT from the Estate Tax. That means anything over $10.9 million is subject to 40% tax ($5.45 million for singles).
  • .4% (yes, 4/10 of one percent) of decedents’ estates are subject to the estate tax.
  • $269 billion is raised for the treasury from this tax.
  • Fewer than 5000 estates would benefit each year from its full repeal

Donald Trump and Speaker Ryan have vowed to repeal the Estate Tax n 2017. What does that mean for you and me? If the value of your estate is less than $10.9 million it means absolutely nothing to your personal estate plan. If your estate is worth more, it means your decedents will get all your estate – tax free. It also means our treasury will lose $269 Billion dollars. That revenue must be made up somewhere; either through cuts in services or higher taxes on the rest of us.

The Bottom Line on Trump and Estate Tax:

One possible scenario that could be a part of estate tax repeal is the repeal of the step-up in cost basis that currently occurs on death. Today, if you inherit appreciated assets such as stock or real property, you get a new cost basis as of the date of death. This allows heirs to sell these assets with little or no capitals gains tax. In community property states, the surviving spouse can enjoy a 100% stepped up basis if their assets are titled correctly (such as in a living trust that designates the assets as community property. Joint tenancy does not work for this). A loss of the stepped-up basis will force heirs to trace back the original cost basis of assets they inherit, and pay the capital gains tax on sale. The temporary estate tax repeal under the Bush administration included both a repeal of the stepped-up basis, and the new provision that capital gains tax will also be triggered by death.

The bottom line is that if the estate tax is replaced by a due on death capital gains tax, the majority of estates may become taxable! Careful attention to any new estate tax laws, and careful planning after the laws have gone into effect, will be critical!

The future is as uncertain as ever. How the new administration will affect our lives is yet to be seen. Use the information above to learn and keep track of laws that may affect you.

Should You Sell Your House to Pay For a Nursing Home?

Has the time come to consider moving to a board & care facility or even a skilled nursing home? Has your parent or loved one gotten to the point where they can’t take care of themselves and a nursing home is the only option? Whether considering the move for yourself or a loved one, there is a lot to consider when figuring out how to pay for it. should you sell home to pay for nursing home

Most people first try to pay for their nursing home care out of pocket or by applying for Medi-Cal (California’s Medicaid program). But what if the elder has a home? How does that factor into the equation? There is a lot of confusing and misleading information on the internet about this huge decision, so I wanted to give you a simple guide to help you make the right choice.

Here are the four most important things to consider when deciding whether you should sell your home to pay for the nursing home:

1. Your house may be protected from Medi-Cal, your cash won’t be. Owning a home doesn’t automatically disqualify you for Medi-Cal benefits for nursing home costs. However, the State Department of Health Services will file a claim against your estate after you die to recoup the Medi-Cal nursing home benefits paid. With careful planning there are ways to avoid this lien. Some states have implemented the Deficit Reduction Act of 2005, disqualifying the home as an asset for Medicaid eligibility if your equity exceeds the allowed limit. However, while your home may be protected, any cash you gain from the sale of your home won’t be – you will have to “spend down” to the allowable limits ($2,000 for a single person in California) before the state will help pay for your nursing home care. Note: Medi-Cal only pays for nursing homes, not board & care facilities.

sell home to pay for nursing home

2. There could be avoidable taxes. The financial benefit of selling your home while you’re alive could actually be diminished because of capital gains. When you sell a home while you’re alive, the capital gains tax is on the difference between your original purchase price and current market value (less an applicable homeowner’s exemptions). That means if you’ve owned the home for 30 years, you could owe a huge chunk in capital gains taxes. However, leaving the house to your heirs, they are only on the hook for the difference between the market value when they sell and when they inherited it. This could be a huge tax break for your heirs.

3. Borrowing could be your best bet. Home equity loans and reverse mortgages can be practical solutions to pay for long term care expenses. It’s best to speak with your financial advisor or tax professional about these options.

4. Consider in-home care. Receiving care in your own home could be less expensive than living in a nursing facility and will be a much better experience for most elders. Medi-Cal may cover some in-home care expenses for seniors eligible for “In Home Support Services”.

If you have a good long term care insurance policy, you will not have to worry about these issues! Most policies now include in-home care coverage.

Deciding to move yourself or a parent to a nursing home is a huge decision and figuring out how to pay for it can be overwhelming. To fully understand all your options and what your financial and tax implications are before making the wrong move, contact an Estate Planning Attorney. We would be happy to schedule a consultation and answer all of your questions.