Introduction: Those who wish to
qualify for Medi-Cal (Medicaid outside of California) need to meet
certain net worth requirements. California’s version allows the
disabled spouse to have no more than $2000 while the healthy spouse
can have up to approximately $113,000. But if all of that $115,000
is community property isn’t it really $57,500 each?
Consider Dave who is in a skilled nursing facility (SNF. Competent
and aware of what is going on, he is deeply concerned about his
wife, Lauren, and her continuing ability to be able to provide for
herself. Dave’s care is running at $15,000 per month. And there is
no end in sight. Medi-Care is gong to terminate in two weeks and
then Dave and Lauren are on their own. Their total assets are
$115,000 in the bank.
This is not an uncommon situation. Acute and sub acute care at a SNF
often runs between $10,000 and $20,000. Worse, most people do not
have long term care insurance. Some, wrongly believe that their
ordinary health/medical insurance will cover SNF. The truth is, the
only avenue available to Dave and Lauren is going to be Medi-Cal.
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Qualify the Easy Way: So how do they qualify if Dave can only have
$2000 but yet both names are on the bank account. Seems easy enough
to simply have Lauren transfer $113,000 of the bank account into her
name alone. And, yes, they would be qualified at that point.
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Recovery: There is, however, still a problem and it’s a big one. Medi-Cal is a loan, not a gift. In other words, when Dave and Lauren
are gone, the Medi-Cal authorities want their money back. They will
take it out of Lauren’s estate (assuming she is the 2nd to die).
That certainly is not what Dave and Lauren would have wanted. After
all, they wanted their daughter to get it.
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The Problem: But, here’s the kicker. Medi-Cal will only take it out
of Lauren’s estate to the extent that she inherited from Dave when
he died. The $115,000 was all community property. When she
transferred the $113,000 to an account in her name alone, that did
not change the ownership, it was still community property.
Therefore, when Dave dies, she inherits half of that ($57,500) from
him. And when she dies, Medi-Cal is entitled at least up to that
$57,500 from Lauren’s estate.
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Transmutation Agreement: The solution is something called a
transmutation agreement. If Lauren and Dave sign such an agreement,
then that transmutes (converts) all of that $113,000 from community
property to Lauren’s separate property. Now, all of a sudden, when
Dave dies, Lauren hasn’t inherited anything from him and when Lauren
dies, Medi-Cal is not entitled to anything from Lauren’s estate.
Instead, the daughter gets it. All because of having the right
documentation done in the correct way.
[Back to Top of Article] What Lawyers Accomplish: And that’s where lawyers come in. A
qualified competent attorney is going to be able to advise you
properly about all the little “gotchas” that you never thought about
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