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"How to get Medi-Cal coverage for your nursing home care... without selling your home or leaving your family without a dime... Surprising ways to pay for your assisted living and long term care costs."

Elder Law Today Newsletter | Vol. 8 | June, 2006


Medi-Cal and the Personal Residence Protection Trust

In our May 2006 Newsletter, we discussed the fact that whereas the home may be exempt for Medi-Cal eligibility purposes, it may not be exempt from estate recovery by the State of California after the Medi-Cal recipient dies.

If the home is in the recipient’s name at the time of his death, it will be available to the State through an estate claim. The State can recover against joint tenancies, tenancies in common, revocable living trusts and other arrangements. The State can also recover assets of the surviving spouse of a Medi-Cal recipient who receives assets through probate or by community property.

As a result, one mechanism that may be utilized in certain instances to protect the home from a state lien is the IRREVOCABLE PERSONAL RESIDENCE PROTECTION TRUST. The home is transferred to this trust during the life of the Medi-Cal recipient. The transfer of the family residence to this type of trust may afford the recipient more asset protection and flexibility than an outright gift to a family member.

In creating the trust, the recipient retains certain controls for income, transfer tax, and property tax purposes, without causing the home to be available to the state for a recovery claim.

In some situations, the recipient will want to retain some beneficial interest in the trust, such as the right to receive trust income if the house is ever sold by the Trustee. However, if the recipient does not wish to have the income (which would then be available to pay a share of cost for a nursing home) the trust could be structured so that the recipient would not retain the right to income.

This type of trust is especially useful if the parent, who is the Medi-Cal recipient, has several children, one of whom is having life difficulties with judgments and liens recorded against his name with the County Recorder. If a straight transfer of the home was made from the parent to the child with judgments, for instance, those judgments would attach to the parent’s real property. This is not a good result.

One requirement, for property tax purposes, is that the children be the ultimate beneficiaries of the trust. A client will typically want to retain control over the disposition of the property at death, so that the property will pass to his children. This power is usually coupled with an Occupancy Agreement with the Trustee of the trust.

The transfer of the home to this type of trust should also be considered for pre Medi-Cal planning.

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