Q. In previous articles you have written about the option of seeking a Medi-Cal subsidy to help pay for the cost of nursing home care if that need arises. I have a Living Trust. Are there provisions that I should include, or some that I should avoid, in order to facilitate Medi-Cal qualification down the road?
A. Great question. While I cannot provide an exhaustive list in the space of this article, I can comment on one that is critically important: a Living Trust-based estate plan should permit amendment or revocation by a trusted agent if the trustor, himself, later becomes incapacitated.
Background: When many people set up trusts, they provide that only they, themselves, are empowered to make amendments or withdrawals from the trust. For persons in robust good health, that restriction makes perfect sense: they understandably do not want others tampering with their trust.
However, when those same individuals age, become infirm and face the need for nursing care, this restriction can become a financial obstacle. Reason: In order to invoke strategies to accelerate eligibility for a Medi-Cal nursing home subsidy, it is often necessary to first remove assets from the trust. The same is true when the goal is to protect the home or other assets from a Medi-Cal “payback”, or recovery claim, after death.
The problem arises where the infirm trustor does not then have sufficient mental capacity to sign documents to amend or remove assets from his trust. In that case, his family may be unable to invoke planning strategies to deal with excess resources and qualify him for Medi-Cal. Without help from Medi-Cal, the cost of care could potentially drain the trust estate, to the financial detriment of the trustor and his family.
Check to see if your trust provides that the right of amendment or withdrawal is “personal” to you, as the trustor. If so, you may have a problem. Such a provision might read something like the following:
“The power to revoke or amend this trust is personal to the settlor and shall not be exercisable on the settlor’s behalf by a conservator, an agent under a power of attorney, or any other person or entity.”
If your trust contains a provision like the above, it could be the “poison pill” which later exposes your trust assets to rapid spend down in the event you need nursing care and/or to a substantial Medi-Cal recovery claim after death.
Perhaps a better plan would be to change your trust now to authorize your trusted agent under a Durable Power Of Attorney (“DPOA”) to amend or revoke your trust in certain circumstances, such as if the need for nursing care arises. If you are concerned that such power might be abused, you might build restrictions into its exercise, such as by requiring the written certification of a physician that you need nursing home care, the approval of an attorney who practices in the field of Medi-Cal planning and/or the approval of a judge.
If you do opt to so modify your trust, be sure to include coordinating provisions in your DPOA, a legal requirement that is often overlooked.
Lastly, for those who no longer have capacity to change their trust, know that application can sometimes still be made to the superior court for permission to amend or revoke the trust when need requires, a process which is expensive and the outcome uncertain.