February 5

What You Should Know About Medicare, Medi-cal And Long Term Care Planning

elderly woman in long term care by a nurse, in whealchair


Long term care can be defined as that care which is expected to last for no less than thirty days. Long term care normally involves services of a custodial nature, the assistance necessary for a person to perform activities of daily living (ADL). Because of the custodial nature of the care required, long term care, absent long-term care insurance, is only marginally covered by Medicare and supplemental insurance policies with the majority of the cost of care borne by the individual. When the individual’s resources have been depleted to a prescribed limit, the federal government with state involvement will pay for some or all of the cost of long term care under the Medicaid or Medi-Cal program.


In most cases, you first look to Medicare or your Health Maintenance Organization (HMO) for the costs of long term or nursing home care. For purposes of this discussion alone, we will consider an HMO to be equivalent to Medicare and a supplemental insurance policy. Medicare was established in 1965 as a national medical insurance program designed to provide health care benefits to the elderly and handicapped. It is not a public benefits or social welfare program as the costs of Medicare are, for the most part, covered payroll deductions. While the program is federally funded, Medicare is actually administered by private organizations and large insurance companies, called Medicare fiscal intermediaries, carriers and peer review organizations. These organizations actually handle the day to day operations of the Medicare program including the processing of all claims, deciding which claims to pay, the amount of payment for the claim and the first stages of all appeals and complaints. As private contractors, the intermediaries have a financial incentive to interpret Medicare regulations very restrictively and to rely on extensive computerization and screening procedures to evaluate claims. As you can see by its very design, Medicare is not intended to provide unlimited medical coverage. To compound the problem further, the Medicare system usually delegates the initial authority to approve or deny benefits to the actual health care provider. Unfortunately, the bulk of the health care provider’s training as to coverage is supplied by Medicare carriers and intermediaries. Further, the health care providers are often under financial pressure to deny or restrict coverage. For these reasons, it is easy to see why Medicare is often viewed by the persons it serves as an inhuman bureaucracy that denies or reduces claims arbitrarily. Even with its significant problems, Medicare remains the major source of payment for most medical services provided to the elderly.

Medicare will pay for inpatient hospital care that is medically necessary for that particular treatment or diagnosis. The Medicare coverage is limited to 90 days of inpatient hospital care for each “spell of illness.” After 90 days of hospitalization, the patient may draw on his/her 60 lifetime reserve days if any remain. The concept of “spell of illness” is central to both coverage and deductible payment requirements. A spell of illness begins on the day a patient first receives inpatient care and ends when the patient has not been in a hospital or skilled nursing facility inpatient for 60 consecutive days. For example, if a person spends 90 days as an inpatient at the hospital, is then released home and returns with a different illness or injury after only 30 days, Medicare would consider the new injury or illness under the previous spell of illness and would refuse coverage.

The issue of remaining in the hospital too long is not a common problem for most elders. In fact, there has been a steady trend in the past few years toward releasing patients “quicker and sicker.” This is due to Medicare’s use of the Diagnostically-Related Group (DRG) system. Under the DRG system, a set price that a hospital will be paid is established for almost every medical procedure without regard to the actual length of the hospital stay. If the patient remains in the hospital longer than provided for under the DRG, the additional costs of care fall on the hospital. If the patient is discharged in less time than called for under the DRG, the hospital benefits. As should be obvious, the DRG system creates a strong financial incentive for hospitals to terminate Medicare coverage as soon as possible. Once the hospital announces that Medicare coverage is terminated, the patient is faced with the option of being discharged or remaining in the hospital at the patient’s expense. Unfortunately, where the elderly patient cannot afford to stay in the hospital on private pay but is too weak or ill to return home to live alone or be cared for by an aging spouse, the only feasible alternative is placement in a skilled nursing facility (SNF).

Nurse and elderly man spending time together — Image by © Jose Luis Pelaez, Inc./Blend Images/Corbis


Medicare will pay for a maximum of 100 days of coverage in a skilled nursing facility per spell of illness provided that the patient requires more than custodial care alone. It is important to understand that this figure is a maximum, not a guarantee; actually obtaining the maximum 100 days of coverage may be a rare occurrence. Medicare coverage in a skilled nursing facility is not automatic and is subject to numerous restrictions. In order to receive any Medicare coverage, the person in the SNF must have been hospitalized for at least three days prior to admission to the skilled nursing facility. The three day requirement does not include the day of discharge. Once the three day hospital stay requirement has been met, the person must be admitted to a Medicare-certified skilled nursing facility within 30 days of the discharge from the hospital. Under this provision, a person can be discharged to home after meeting the required three day hospital stay and then, if within 30 days of the discharge, be admitted to a skilled nursing facility. The placement in the SNF must be to treat a medical condition that was treated in the hospital and that treatment must be prescribed by the patient’s physician. Further, it must be determined that the placement in the SNF is the most efficient and economical means of providing the required treatment. Even after all of these requirements have been met, Medicare will only continue coverage for as long as the patient needs skilled nursing or rehabilitation services. The absence of a need for skilled nursing services and/or the failure to progress with rehabilitation are the most common reasons for discontinuance of Medicare coverage in a skilled nursing facility.

Although a person may be placed in a skilled nursing facility, there is no guarantee that s/he requires skilled nursing services. Skilled nursing service is usually defined as that care that is so complex and complicated it can only be provided by or coordinated by a registered nurse. Services that consist of assistance with a person’s Activities of Daily Living are considered “custodial” and not skilled care. The need for skilled care must be determined to exist seven days a week. If a person does not require skilled nursing seven days a week, s/he can still retain Medicare coverage in a skilled nursing facility if rehabilitation is required and the person progresses. Where the patient plateaus, Medicare coverage will be discontinued.

Once Medicare coverage is terminated, whether due to the lack of need for skilled care, the diminution of progress or simply because the 100 days have run, the costs of long term care in a skilled nursing home fall on the individual. This is true in most cases even where the patient has a supplement insurance policy that provides for more than 100 days of coverage in a skilled nursing facility since most supplements only cover Medicare approved services.

At the termination of Medicare coverage, the cost of long-term care falls on the person requiring skilled nursing facility services. The average private pay rate for a skilled nursing facility in the State of California is $8,189.00 per month (2017). This rate may be significantly higher where the skilled nursing unit is part of an acute medical hospital.


Medi-Cal is actually the California enhanced federal Medicaid program. Unlike Medicare, Medi-Cal is restricted to those in need of assistance and is based on a resource limitation. The program is coordinated by the California Department of Health Services and administered through the local Social Welfare office. Medi-Cal will pay for the costs of long-term care in a skilled nursing facility provided that you are properly placed but will not cover the costs of care in facilities providing lower levels of care such as “retirement housing,” “board and care” or residential care facilities.

As a starting point to qualifying for Medi-Cal in a skilled nursing home facility, you must first be either aged (65 years of age or older), disabled (as determined by the Social Security Administration) or blind. Once you have met one of these basic requirements, you must then prove that you do not possess non-exempt assets in excess of the allowable resource limit. This statement is of little assistance unless we understand the concept of Medi-Cal “exempt” and “non-exempt” assets.


A Medi-Cal exempt resource is an asset that the applicant may retain without adversely affecting the applicant’s eligibility. By definition, a Medi-Cal non-exempt resource is everything that is not exempt (not surprisingly, this is a governmental definition). The following is a brief description of the most common Medi-Cal exempt assets allowable for both single and married applicants. Later in the discussion, we will consider some of the special rules and allowances for married couples where one spouse is in long-term care.

(1) Principal Residence: Currently, a person’s principal residence is exempt without regard to value, equity or size. Once the Deficit Reduction Act is implemented, however, the State will restrict the allowable value of the principal residence. Although we anticipate the value limitation to be $750,000.00, the details and methods for valuation are still unknown at this time. The principal residence may be a fixed or mobile home, be located on land or water and includes all of the land surrounding or touching the principal residence. It also includes any other buildings or structures located on the land surrounding or touching the principal residence. By definition, the principal residence could be a home, duplex, apartment complex, hotel, the house in which you reside along with every other lot and house that touches your principal residence. As is obvious, this is one of the most significant exemptions allowed under the Medi-Cal program. In order to maintain the exemption, you must either live on the property, have a spouse, child under the age of 21 or a dependent relative (normally a disabled child) who lives on the property or, where none of the above exist, maintain a “subjective intent to return” to the residence. The subjective intent merely requires that if you are absent from your residence for any purpose including placement in a skilled nursing facility, you intend to return to the residence if and when you are able. The intent need not be based on reality but merely represent a desire to return. The intent should be expressed in writing. Any real property not determined to be your principal residence may be considered non-exempt.

exempt medicare assets

(2) Property Used in a Trade or Business: All land, buildings, inventories, vehicles and other equipment that form a part of your business are exempt. This exemption is extremely valuable for protecting farm land and grazing acreage not surrounding or touching the principal residence.

(3) Property Necessary for Employment or Self-Support: Equipment, inventory, licenses and materials necessary for employment or self-support are excluded from Medi-Cal countable resources. However, the Department of Health Services has taken the position that rental property that produces income for self-support is not exempt.

(4) Motor Vehicle: You can own one motor vehicle as exempt whether you still drive or not as long as the vehicle can be used to meet your transportation needs (shopping, visits, medical appointments, etc.). There is no limit on the value of the vehicle. You cannot exempt a recreational or commercial vehicle if you have any other type of vehicle.

(5) Personal Effects: You can retain your furnishings, furniture, clothing, heirlooms, wedding and engagement rings and some jewelry (limited to $100.00 if you are single and unlimited if you are married and one spouse is institutionalized) as exempt. It is also possible to exempt collectibles such as art, coins, guns, dolls and musical instruments.

(6) Burial Plots, Vaults or Crypts: All burial plots, vaults and/or crypts that will be used by any member of the applicant’s immediate family is exempt without regard to the number or value of such items.

(7) Irrevocable Burial Arrangement: An irrevocable burial trust or prepaid burial contract for funeral, cremation or interment is exempt without regard to total value. In addition, each applicant and/or spouse can set aside an additional $1,500.00 in a revocable burial fund for unexpected burial costs.

(8) Life Insurance: All term or group insurance is exempt since there is no cash surrender value attached to such policies. In addition, if the total face value of all of a person’s whole life insurance does not exceed $1,500.00, the cash surrender value of the policies is exempted.

(9) Individual Retirement Accounts (IRAs): The principal amount in a non-institutionalized spouse’s IRAs, 401K accounts, Deferred Retirement Compensation Plans and other retirement type of accounts belonging to the non-institutionalized spouse are fully exempt, whether the accounts are paying minimum distributions (after age 70 1/2) of principal and interest or not. This retirement income, however, will be considered in determining the applicant’s share of cost as discussed below.


All assets that are not exempt are considered non-exempt and will be valued and included in your Medi-Cal excess resources. There is one exception to this statement. Any assets that are not available to you will not be included as part of your excess resources.

(1) Availability of Assets: In order for an asset to be available, you must have the legal right, power and authority to liquidate that asset. If you own an asset with another person who is unwilling to sell the asset, you may have legal right to the asset but, without securing court involvement, you do not have the power to liquidate the resource. Medi-Cal, in that case, would not count the asset as part of your non-exempt resource limit. While the issue of unavailability may help to qualify you for Medi-Cal benefits when you have excess resources, it is not a good idea to put a great deal of reliance on the approach. Unavailable resources are considered available at your death and the State may place a claim for benefit recovery against those previously unavailable assets.

(a) Individual Retirement Accounts (IRAs): The one area where unavailability is beneficial both for qualifying and for later protection against a death claim for benefit recovery is work-related retirement plans owned by the institutionalized person. As stated earlier, IRAs, 401K accounts, Deferred Retirement Compensation Plans and other retirement type of accounts belonging to the non-institutionalized spouse are fully exempt. Unfortunately, those same accounts belonging to the institutionalized spouse are not considered as exempt. If the accounts are paying out periodic payments of both income and principal, the retirement accounts belonging to the institutionalized spouse will be considered unavailable and the principal amount held in the account(s) will not be included in the non-exempt resource valuation. If not paying out periodic payments of principal and interest, the institutionalized spouse’s retirement accounts will be considered available non-exempt resources. When a person reaches age 70 1/2, s/he should begin making minimum distributions from the retirement accounts. This minimum distribution is considered a periodic payment of principal and income even if only made once each year. Persons under the age of 70 1/2 can also receive periodic payments of principal and income but such action should not be taken without first consulting with your accountant and/or attorney.

(2) Ownership and Valuation of Non-Exempt Assets: If an asset is not classified as exempt and is available to the applicant, Medi-Cal will treat that asset as a non-exempt resource and add its value to the applicant’s property reserve. Since the applicant’s property reserve is used to determine Medi-Cal eligibility, two major issues must be considered: (1) ownership; and, (2) valuation.

(a) Ownership and Transfer of Asset Penalties: The issue of ownership is often confusing and may create unexpected problems. In the case of a single Medi-Cal applicant, issues of ownership normally involve assets held in joint tenancy with a child or loved one. First, ownership in joint tenancy must be equal. If you place a child on title to real property in joint tenancy, you each own a one-half interest in that property. Second, placing a person on title to your asset(s) normally constitutes a transfer or gift of an interest in that asset and may subject you to a period of ineligibility if the transfer occurs within thirty (30) months of your Medi-Cal application (please note this period is sixty (60) months in all other States besides California). Unfortunately, placing another person on your asset(s) does not always constitute a gift and/or a reduction in your total assets.

To constitute a gift and/or reduction to your total assets, the transfer of an interest in your assets must be complete and irrevocable. For example, if I give my son $1,000.00, the gift is completed with the transfer of the money and irrevocable since my son did not agree to later return my funds. If the transfer of this money occurred within 30 months of my Medi-Cal application, the gift would have to be disclosed and may involve some period of ineligibility. A different result occurs if I intend to transfer $1,000.00 to my son by placing his name in joint tenancy on my bank account which contains $2,000.00. In that case, merely placing my son’s name on my account does not constitute a completed and/or irrevocable gift. At any time before my son withdraws the money, I can revoke the gift merely by withdrawing the funds myself. The gift only becomes complete upon my son’s withdrawal. Therefore, any period of ineligibility for Medi-Cal only begins with such a withdrawal and only to the amount withdrawn.

It is also very important to realize that placing another person on title to your asset(s) may allow access to those assets to the other person’s creditors should your co-owner be sued or experience financial problems.

In the case of a married couple, the issue of ownership for Medi-Cal eligibility purposes is straight forward but not always fair. Medi-Cal considers all assets owned by either or both spouses to be available for the care of the Ill Spouse. While this approach may seem appropriate in a long-standing first marriage, it is much less so in a short-term second marriage. Take Husband (H) and Wife (W) for example. H and W have been married for less than one week. W, who brought all of the assets to this marriage as her separate property, had H sign a pre-nuptial agreement that stipulated that the assets were W’s separate property. H is now in a skilled nursing facility and will require Medi-Cal assistance to pay the $5,500.00 per month cost. Medi-Cal will not distinguish between separate and community property in this case and will consider all of the assets available to either spouse in determining H’s eligibility.

(b) Methods for Valuating Non-Exempt Assets: As with issues of ownership, the value of a non-exempt asset is critical to establishing Medi-Cal eligibility. The following methods of valuation are allowable under Medi-Cal law:

(i) Non-Exempt Real Property: California real property that is not exempt may be valued at the tax assessed value less encumbrances. This may be extremely favorable where the property has been held for a long period of time and is protected under Proposition 13. If the property is co-owned, the applicant will be credited with the taxed assessed portion of his/her interest. The creation of co-ownership may constitute a transfer subject to the 30 month look back period (discussed below) and a period of ineligibility.

(ii) Bank Accounts: A bank account is valued according to the balance of funds remaining in the account at the time of application. Medi-Cal will consider the full account to belong to the applicant unless the co-owner can establish that s/he contributed to the account.

(iii) Stocks. Bonds. Mutual Funds. Brokerage Investment Accounts: The value of the stocks, bonds, mutual funds and/or brokerage accounts is determined according to the valuation of the assets at the time of application. If the consent of all owners of the assets is required to sell or liquidate, the value of the applicant’s interest alone will be applied to the applicant’s property reserve. The addition of a person to an asset or account will constitute a transfer and may result in a period of ineligibility if the addition occurred within 30 months of application for Medi-Cal.

(iv) Life Insurance Policies: If the total face value of all whole life insurance policies belonging to the applicant exceeds $1,500.00, then the cash surrender value of all of those whole life insurance policies will be included in the applicant’s property reserve. If the face value of all of the whole life insurance policies is less than $1,500.00, the cash surrender value of all of the policies is disregarded. Term life insurance without a cash surrender value is not included in the above calculations and/or as part of the property reserve.

(v) Promissory Notes: A promissory note is valued at the remaining amount owed on the note (principal) or the market value of the note (discounted value) if the note were to be sold. Co-ownership in a note reduces the value charged to the applicant but may constitute a transfer if the co-owner’s name was merely added without adequate compensation.

(vi) Deferred Annuity: The surrender value of a deferred annuity is included in an applicant’s Medi-Cal property reserve. It is treated in much the same manner as a traditional certificate of deposit bank account.

(vii) Individual Retirement Accounts (IRAs): As stated earlier, the full value of an IRA belonging to a Medi-Cal applicant is considered available and included in the property reserve unless it is paying out periodic payments of principal and interest.


The value of each Medi-Cal non-exempt asset is added together to arrive at the property reserve valuation. Based on that valuation Medi-Cal will determine if the applicant is eligible to receive Medi-Cal benefits. In order to qualify for Medi-Cal, an applicant cannot exceed the following property reserve limits:

(1) Asset Limitation for a Single Person: A single person will qualify for and remain eligible to receive Medi-Cal benefits when his/her property reserve (non-exempt assets) does not exceed $2,000.00 on the last day of the month.

(2) Asset Limitation for a Married Couple: Qualification for a married couple usually falls into one of two general categories: (1) a married couple living together; and, (2) a married couple with one spouse in a skilled nursing facility (SNF).

Normally, where both spouses are either both living outside of a skilled nursing facility or both living in a skilled nursing facility, the couple is considered to be living together. If a married couple apply for Medi-Cal while living together, both partners will receive benefits. A married couple living together will qualify for and remain eligible to receive Medi-Cal benefits when the couple’s total non-exempt assets do not exceed $3,000.00 on the last of the month.

If one spouse of a married couple is in a skilled nursing facility (Institutionalized Spouse) while the other is not (Community Spouse), the Institutionalized Spouse will become eligible for Medi-Cal benefits when the couple’s total non-exempt assets do not exceed $120,900.00 (2017) on the last day of the month of application. Thereafter, the Community Spouse may acquire assets in excess of $120,900.00 while the Institutionalized Spouse remains eligible for Medi-Cal benefits in the skilled nursing facility. Ninety (90) days after qualifying for Medi-Cal benefits, the Institutionalized Spouse’s name cannot appear on non-exempt assets totaling more than $2,000.00 on the last day of the month.


The role of income in the Medi-Cal long term care system is extremely important but often misunderstood. Simply stated, a single person or married couple’s income does not have any effect on Medi-Cal eligibility. This is not to suggest, however, that an applicant or beneficiary’s income is not considered in the Medi-Cal process.

(1) Single Person’s Share of Cost: Once a single person or institutionalized spouse has been determined eligible for Medi-Cal long-term care benefits, the monthly co-payment for that Medi-Cal must be calculated. This monthly co-payment is referred to as, “share of cost.”

In the case of a single Medi-Cal beneficiary, the share of cost calculation is fairly straight forward. All of the beneficiary’s monthly income is first determined. Included in that income is the beneficiary’s Social Security, Railroad Retirement, pension, quarterly adjustments to pension (normally associated with the State Teacher’s Retirement System), Individual Retirement Account (IRA) distributions, interest and dividends (whether actually received, retained or reinvested), rent (including rental of an exempt principal residence) and certain goods and services contributed by family and/or friends (referred to as “in-kind income”). From the total gross monthly income, the Beneficiary’s Medicare premium is deducted. The beneficiary is then entitled to retain $35.00 per month for his/her personal needs allowance. And finally, the beneficiary may retain sufficient monthly income to pay for his/her monthly Medicare supplemental insurance (Medigap) premium. The remaining monthly income must be sent to the skilled nursing home as the single beneficiary’s share of cost. Medi-Cal will pay the remainder of the beneficiary’s monthly cost of care directly to the skilled nursing facility.

elderly marreid couple sharing assets

(2) Married Couple’s Share of Cost: The determination of the share of cost for a married couple where one spouse is institutionalized and one is not is much more difficult. As with the single person, all of the monthly income received by both spouses is counted toward the monthly share of cost. And, as with the single person, the Medi-Cal beneficiary may retain sufficient income to pay for the beneficiary’s Medicare premium, the monthly personal needs allowance ($35.00) and the beneficiary’s Medicare supplemental insurance premium. After the above deductions have been calculated, the non-institutionalized or Community Spouse is given an election.

The Community Spouse is entitled to retain a minimum monthly needs allowance (MMMNA) of $3,023.00 (2017) from all income received by both spouses, or all of the income received in the Community Spouse’s name alone, whichever is greater. To better understand this election, consider the following hypothetical case:

Henry (H) and Wanda (W) are married. H was placed in a skilled nursing facility last month and has just qualified for Medi-Cal long-term care benefits. After all allowable deductions for H’s Medicare premium, his personal needs allowance ($35.00), and H’s Medicare supplemental insurance premium, the couple receives a total monthly income of $4,500.00. Of this total, H receives $3,500.00 per month in Social Security and Pension benefits while W receives $1,000.00 from her Railroad Retirement. Since W has the option of retaining $2,980.50 per month from all income received in both spouse’s names, or all the income received in W’s name alone, whichever is greater, W will select the guaranteed $3,023.00 as her minimum monthly needs allowance (MMMNA). If, however, W is the institutionalized spouse and H is the Community Spouse, H will select all of the income that comes in H’s name alone since that income ($3,500.00) is greater than the guaranteed $3,023.00 alternative.

(3) Method of Paying the Share of Cost: While the share of cost is determined for each month, the actual allocation is normally accomplished on a yearly basis at the time of establishing eligibility and each redetermination thereafter. If the amount of income changes from the date of eligibility or the last redetermination, the beneficiary, his/her spouse or the beneficiary’s authorized representative must report the changed income within 10 days of the change. Failure to report changes of income or assets can result in a determination of ineligibility, overpayment or both.

It is important to note from the above discussion that Medi-Cal does not alter the method in which a person receives his/her income. If the beneficiary receives his/her Social Security and/or pension through the direct deposit process, the direct deposits will continue after Medi-Cal eligibility has been determined. It is the responsibility of the beneficiary, his/her spouse or authorized representative to provide the skilled nursing facility with the established monthly share of cost.


The above-described system continues until the Medi-Cal recipient recovers, becomes ineligible or dies. If a person recovers or becomes ineligible for Medi-Cal benefits, Medi-Cal, in contrast to common belief, does not attempt to recover the benefits paid during the recipient’s life.

It is important to note that the term “lien” is not used in describing the recovery program. Medi-Cal rarely imposes a lien on a recipient’s assets during the recipient’s life. Instead, Medi-Cal defers reimbursement for the benefits paid to or on behalf of an individual until that person’s death. This post death recovery is referred to as a death claim.

**2017 Medi-Cal Recovery Reform Update** The Medi-Cal post-mortem recovery laws were changed and will affect those who die on or after January 1, 2017. For individuals who died prior to January 1, 2017, the old recovery rules still apply. This overview will outline recovery for deaths occurring prior to January 1, 2017 and any changes to the law for deaths on or after January of 2017 will be addressed in bold as indicated.

As a starting point, currently Medi-Cal can only recover for those benefits paid to or for an individual who was over age 55. Any benefits paid to or for that person prior to reaching age 55 are not recoverable under current law. Beginning January 1, 2017, individuals who were under the age of 55 but “permanently institutionalized” will also be subject to recovery claims. Further, recovery is limited to the amount of benefits paid (after age 55) or the value of the deceased Medi-Cal recipient’s “Estate,” whichever is less. To better understand recovery, let’s look first examine the Medi-Cal Recovery System as it relates to a single Medi-Cal recipient.

(1) Recovery Against a Single Person’s Estate: John, a 75 year old single man, has been in a skilled nursing facility and on Medi-Cal long-term care for the past six years. After “spending down,” John owns a Medi-Cal exempt residence valued at $100,000.00 held in joint tenancy with John’s son, Fred, an exempt vehicle worth $7,000.00 held in John’s name alone and approximately $1,500.00 in a checking account held in John’s name with Fred as an agent. At John’s death, Medi-Cal has paid $75,000.00 for John’s benefit.

John dies, passing his Estate to his son, Fred, by right of survivorship through joint tenancy. Under California Probate Code ‘215, Fred must notify the Department of Health Services (DHS) of John’s death. The notification required involves sending a copy of John’s death certificate to the Director of DHS in Sacramento, California. Merely informing the local County Welfare worker of John’s death is not sufficient and does not constitute formal notice.

Once the Department of Health Services has been notified of John’s death, DHS will send a creditor’s claim to Fred. That claim should describe each and every service paid for by Medi-Cal by date. Fred should examine the services for accuracy. Once Fred has determined that the creditor’s claim is accurate, Fred should determine the value of John’s Estate. Since John was on Medi-Cal and limited to not more than $2,000.00 of non-exempt assets, the bulk of John’s Estate is made up of exempt resources.

(a) House: Although the house was held in joint tenancy with Fred and is not part of John’s probate estate, for deaths occurring prior to January 1, 2017 the State of California will include John’s one-half (2) interest in the house in John’s Estate for recovery purposes. This is due to California’s 1993 expanded definition of “Estate” which includes everything in which John had any legal title or interest at the time of John’s death including all assets passing by joint tenancy, tenancy in common, by survivorship, by life estate, in a living trust or any other similar arrangement. Since the house is worth $100,000.00 at John’s death and John owned a one-half (2) interest in the house, the State can assert a $50,000.00 claim against the house.

(1) For deaths occurring on or after January 1, 2017, only assets considered part of the decedent’s “Probate estate” would be subject to recovery. As the house was held in joint tenancy at John’s death, it would be exempt from recovery and sole ownership would pass to John’s son Fred.

(b) Vehicle: Since the vehicle is held in John’s name alone, the State may assert a claim in the amount of $7,000.00 against the vehicle. Claims against vehicles are rare but have occurred.

(c) Checking Account: The $1,500.00 checking account was owned by John with Fred able to sign for John as an agent under a power of attorney. As the authority of an agent ends upon the death of the principal (John), Fred cannot claim any ownership interest in the account and the State can recover the entire $1,500.00 checking account.

The value of John’s Estate for recovery purposes is $58,500.00 ($50,000.00 interest in house, $7,000.00 interest in the vehicle and $1,500.00 interest in the checking account). The State has paid $75,000.00 for John’s care. As the State’s claim is greater than the recoverable value of John’s Estate, Fred would pay the State $58,000.00 if he died prior to January 1, 2017 and $8,500.00 if he died on or after January 1, 2017. The State will release the unpaid remainder. Fred is not liable for the difference. If, on the other hand, John’s recoverable estate was greater than the State’s claim, Fred would pay the State claim and the remainder would go to John’s heirs under his Will.

As should be clear from the above, the use of a living trust, joint tenancy or similar arrangements did not protect the assets of a single Medi-Cal recipient from State recovery if he/she died prior to January 1, 2017. The State is prohibited from recovery, however, when the Medi-Cal recipient leaves a minor, blind or disabled child even if that child is not a beneficiary of the Medi-Cal recipient’s assets. The State may also be prevented from recovery where such an action would cause a hardship. Historically, however, the hardship waivers were few and far between. Effective January 1, 2017, however, the State will be required to waive a claim for substantial hardship when the estate is a homestead of modest value. This would be for homes whose fair market value is 50 percent (50%) or less of the average price of homes in the county where it is located.

Also beginning January 1, 2017, only assets considered part of the decedent’s “Probate estate” will be subject to recovery. Therefore, living trusts, joint tenancies and similar arrangements, when used appropriately, would effectively avoid recovery at the death of a single individual. However, it is rarely, if ever, advisable for a single person to own assets in joint tenancy with another person, particularly his/her primary residence. Sound legal advice as to the liability exposure, negative tax consequences, and Medi-Cal ramifications should be sought prior to transferring any property into joint tenancy. Although maintaining ownership of the home in a living trust will avoid recovery at death, renting out the home while the Medi-Cal recipient is in skilled nursing will adversely affect his/her share of cost, and sale of the home may cause the Medi-Cal recipient to lose his/her Medi-Cal coverage.

(2) Recovery Against a Married Person’s Estate: While recovery against the Estate of a single Medi-Cal recipient is fairly straightforward, the same was not true for recovery against the Estate of a married Medi-Cal recipient. To better understand the previous rules of recovery of assets belonging to a deceased married Medi-Cal recipient, it is helpful to review the manner in which recovery was made in the relatively recent past. To simplify the matter, let’s examine Herman (H) and Wanda (W).

H and W were married for fifty years and had three children, one of whom is permanently disabled. Upon placement in the skilled nursing facility, H and W owned a small amount of cash and investments. W was able to qualify H without much trouble and H remained in the skilled nursing facility for approximately two years. At the time of placement and for the remainder of H’s life, the couple owned and maintained a principal residence held in the names of H and W as joint tenants. The residence was worth approximately $150,000.00. H and W both received Social Security income and a small pension totaling less than $2,000.00 per month. While H was receiving Medi-Cal, W did not have to pay a monthly share of cost or co-payment. The couple owned $84,000.00 in non-exempt assets and W had removed H’s name from those assets while H was still competent.

At H’s death, W notified the local Medi-Cal case worker by phone and sent a copy of H’s death certificate to the Department of Health Care Services (DHCS) in Sacramento as required by law. A few weeks later, W received a letter from DHCS claiming that the State had spent $100,000.00 on H’s care. Included with the letter was a simple form requesting information concerning the assets owned by H at his death including all of those assets held in joint tenancy. W replied to the request for information and waited for a response.

Within a few months, W received a legal form entitled, “Creditor’s Claim,” wherein W was informed that H owed the Department of Health Services $100,000.00 and to send the payment to the Sacramento office. W did not have $100,000.00 and did not respond to the Claim. Without providing any further notice or an opportunity to be heard, the Department simply recorded a lien against H and W’s house. W was not aware such a lien had been imposed until two years following H’s death when she sold the house to move closer to her children. Upon the close of escrow, W received a check for $50,000.00 and the Department received H’s share of the sales proceeds.

As should be clear from the above, the State of California recovered its payments through the use of an unnoticed and unheard lien procedure. That procedure, in failing to provide adequate notice and an opportunity for hearing, was a violation due process. Based on the Department’s due process failure, the State of California was permanently enjoined and prohibited from recovering against the Estate of a deceased Medi-Cal recipient spouse without first providing the surviving spouse adequate notice of the State’s recovery intent and allowing for a hearing by that spouse to object to the action.

In response to the injunction, the State of California reformed its recovery procedure involving assets belonging to a deceased Medi-Cal recipient’s spouse. Those procedures are in effect for deaths occurring prior to January 1, 2017 and are as follows:

At the death of a spouse who had received Medi-Cal benefits at any time after reaching age 55, the Department of Health Care Services must be notified. The Department may then (and does) inquire into the assets belonging to the deceased spouse at his/her death. Thereafter, the Department must defer recovery until the death of the second spouse. Further, the recovery at the second spouse’s death is restricted only to those assets that passed to the surviving spouse from the deceased Medi-Cal recipient spouse.

Although the Department continues to utilize this approach for deaths occurring prior to January 1, 2017, there remain many unanswered questions. For example, if H left W his interest in the house and W later sold the house, was the State entitled to the proceeds from the sale at W’s death or only a share of the house? What if W invested the proceeds in Internet stock and increased the value of the proceeds, is the State entitled to share in the appreciation? On the other hand, what if W invested her money and lost all of the sales proceeds, is the State entitled to seek other funds belonging to W at her death?

As you can see, there remai many unsettled issues involving recovery against a deceased spouse who received Medi-Cal benefits subsequent to reaching age 55. And, as in the past, recovery is easily avoided by taking action during a recipient’s lifetime.

In response to the ambiguous and often unequitable application of recovery laws at the death of the second spouse, the Medi-Cal Recovery Reform Act was adopted to greatly simplified this issue. Beginning January 1, 2017, if an individual is survived by a spouse or domestic partner, a claim is prohibited and forever barred. Additionally, effective January 1, 2017, the State will no longer be able to recover for basic health services (such as doctor’s office visits) provided by Medi-Cal unless they are related to nursing home care, or home and community based services. Cost of premiums, co-pays, and deductibles paid on behalf of Qualified Medicare Beneficiaries (QMBs), Specified Low-Income Medicare Beneficiaries (SLMBs), Qualifying Individuals, Qualified Disabled and Working Individuals who are categorized as a group of dual eligibles are also not recoverable.

3. **Summary of Medi-Cal Recovery Reforms 2017**: Senate Bills 33 and 833 incorporated the Medi-Cal recovery reform provisions, which severely restrict Medi-Cal recovery for those who die on or after January 1, 2017. The new recovery law:

  • Prohibits claims on the estates of surviving spouses and registered domestic partners;
  • Limits recovery for those 55 years of age or older (or under 55 if permanently institutionalized) to services provided in nursing homes or in community based services. Thus, no longer recovery for basic health services such as doctor’s visits, prescription drugs, managed care reimbursements, unless serveces are related to nursing home care or home/community based services);
  • Limits recovery to only those assets subject to California probate;
  • Restricts the amount of interest the State can charge on liens;
  • Creates a substantial hardship waiver for homesteads of modest value (i.e. a home worth 50% or less of the average price of homes in that county); and
  • Requires the State to provide each current or former Medi-Cal recipient with a copy of the amount of Medi-Cal expenses that may be recoverable.


As should be obvious from the above discussion, Long Term Care Planning for Medi-Cal eligibility is highly technical and complex. If done improperly, it can result not only in ineligibility and/or recovery, but can have adverse tax and estate consequences as well. For this reason, consultation with a qualified attorney specializing in Long Term Care Planning is money well spent. To find a Certified Elder Law Attorney in your area, please contact the National Academy of Elder Law Attorneys at (520) 881-4005 or visit www.nelf.org or www.naela.org.

Nicole R Plottel and Neil A Harris AttorneysAbout the Authors: Neil A. Harris is the founding attorney for The Estate and Long Term Care Planning (LTC Center). The LTC Center, staffed by Certified Elder Law Attorneys Neil A. Harris and Nicole R. Plottel, provides a wide range of legal services designed specifically for the elderly and those with special needs. Mr. Harris was one of the first attorneys to become certified as an Elder Law Attorney, with almost thirty (30) years of specialty experience in Estate Planning and Long Term Care Planning. Ms. Plottel is one of only 15 attorneys in California to be dual certified in both Elder Law and Estate Planning, Trust & Probate Law. For more information, please call (530) 893-2882 or visit www.HarrisPlotttel.com.

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January 9

When Do I Need An Estate Plan?

By Nicole R. Plottel, Attorney at Law

Many people think an estate plan is only for the wealthy. Not so. In order to know when you need an estate plan, you must first understand its purpose. People often think an estate plan is solely intended to distribute assets at death, perhaps avoid a probate or even minimize estate tax exposure – all good issues involving your wealth and your death.

Equally important, and often overlooked, a good estate plan authorizes someone to properly manage your affairs while you are living regardless of the size of your estate. Executing appropriate durable powers of attorney, both for health care and financial decisions, regardless of whether you are married, single, wealthy, or not, is the most important component of a comprehensive estate plan and should be implemented now. I emphasize the word “appropriate” because not all durable powers of attorney are the same and may cause unintended consequences if done incorrectly or without sound legal advice.

wealth is just one factor in estate planning

Wealth is just one factor to consider when beginning an estate plan.


In considering when to implement an estate plan, understand that wealth is only one factor that affects the type of estate planning tools used, i.e. whether to use a trust or a will, etc. Other nonfinancial aspects of an estate plan address the care of minor children or the treatment of a spouse at your death. The birth of a child, a marriage, a divorce, a death in the family, a special needs child, the purchase of a home, the receipt of an inheritance, or a diagnosis of an illness are all appropriate times to consider creating or amending an estate plan. Ultimately, the design of your estate plan will be dependent on the many factors unique to your situation.

Nicole R Plottel Certified Elder Law AttorneyNicole R. Plottel, Certified Elder Law Attorney is Managing Partner of the Firm. She is also a Certified Specialist in Estate Planning, Trust and Probate Law by The State Bar of California Board of Legal Specialization. Ms. Plottel is further accredited by the Department of Veterans Affairs to represent and present veterans’ claims and focuses her practice in the areas of Estate Planning, Medi-Cal/Veteran’s benefits, Probate and Trust Administration. She is a longstanding member of National Academy of Elder Law Attorneys (NAELA) and also volunteers on the Incapacity Subcommittee of the Executive Committee of the Trust & Estates (TEXCOM) Section of the State Bar of California. Ms. Plottel actively serves the local community as a Board Member for the Enloe Hospital Foundation and the Gateway Science Museum Community Advisory Board, and the Chico Community Scholarship Association. She is also a longtime advocate for the Alzheimer’s Association.


December 1

Use Of Durable Powers Of Attorney In A Long Term Care Planning

Many people often confuse Estate Planning and Long Term Care Planning. Although Long Term Care Planning may involve the same planning documents (Will, Trust, Durable Powers, etc.) as found in an Estate Plan, the powers and authorities provided and/or retained in those documents can be quite different.

For example, a Trust may be very effective in eliminating or reducing the need for a probate but that same Trust offers little or no protection of assets should the Settlor (owner of the Trust) require Medi-Cal assistance. Another common example of where an instrument created for Estate Planning purposes is insufficient when used as a Long Term Care Planning tool is the traditional Durable Power of Attorney. The usual Durable Power of Attorney for Financial Management used in an Estate Plan normally provides the agent with sufficient authority with which to conduct business on behalf of the principal. The agent is often authorized to deposit into and/or withdraw from the principal’s accounts, pay bills on behalf of the principal, sell or purchase assets on behalf of the principal and, in some cases, file and pay the principal’s taxes. The agent is the principal’s fiduciary and must act in the best interest of that principal. If, however, the principal winds up receiving Medi-Cal or Veteran’s assistance, the agent cannot, without the express consent of the principal, transfer assets out of the principal’s name. Such inaction could result in the loss of the principal’s residence at the principal’s death.

In this article, we will explore some of the basic tools used in Long Term Care Planning. Many of the instruments discussed may be familiar but we will examine particular uses and shortcomings of that instrument where long term care and/or Medi-Cal is involved.

Long Term Care Planning

A primary purpose in designing a good Estate Plan is to insure that a person’s directions and instructions are carried out subsequent to that person’s death. A good Long Term Care Plan should, in addition to that same objective, insure that the person’s directions and instructions are carried out subsequent to that person’s incapacity but prior to his/her death.

old people couple together planning for the long term

Medical Decision Planning

Perhaps the most common tool used in Long Term Care Planning is a current and valid Advance Health Care Directive (formerly referred to as a Durable Power of Attorney for Health Care (DPAHC)). Advance Directives enable you to express and insure that your wishes concerning medical treatment and care are enforced should you become unable to act on your own. Under California’s Health Care Decisions Law, you can express your medical treatment instructions (referred to as an Individual Health Care Instruction) in writing or make those statements orally to your treating physician. In addition, you can use a written Durable Power of Attorney for Health Care to appoint an agent to make or enforce your health care decisions should you later become unable to act on your own.

As should be obvious, the use of an Advance Health Care Directive, whether in the form of a written Individual Health Care Instruction and/or a Durable Power of Attorney for Health Care is a must for any good Long Term Care Plan and for anyone over the age of majority.

Durable General Powers of Attorney

While many people are familiar with Durable Powers of Attorney for Health Care, most people do not know about or are unwilling to use a Durable General Power of Attorney.

A Durable General Power of Attorney (DPA) allows a person (the “Principal”) to appoint another (an “Agent” or “Attorney-in-Fact”) to act on behalf of the principal in matters related to finances and assets. Care must be exercised when creating and using a DPA.

First, not all Powers of Attorney are durable. Unless your Power of Attorney provides that the instrument shall not be affected by your incapacity, your agent’s authority is not durable and ends upon your inability to act. Simply stated, if your Power of Attorney does not expressly provide that the instrument is not affected by your incapacity, your agent cannot act if you become incapacitated.

Second, not all Powers of Attorney are general. A Power of Attorney can be used for nearly anything that a principal can do his/herself. The Power of Attorney can be restricted to one specific act or limited in time. Unless restricted, however, a Power of Attorney is considered general and the agent is authorized to perform all acts allowed under current law. There are, as we will examine later, limits to the authority of the agent.

Third, not all Powers of Attorney are immediately effective. Unless otherwise provided in your Durable Power of Attorney, your agent’s authority to act begins upon your signing of the document. If, however, you

want your agent to act on your behalf but only when you become unable to act yourself, you should consider a Springing Durable General Power of Attorney.

Springing Durable Power of Attorney

A Springing Durable Power of Attorney only “springs” into effect upon the occurrence of a predesignated event. In creating the Springing Durable, the principal defines the “springing” mechanism. The “spring” can be a date or event. For example, many people only want their Durable General Power of Attorney to become effective if and when they become incapacitated. In that case, the principal should include a provision in the Durable that the instrument shall only become effective upon the principal’s incapacity and remove the provision that the Power of Attorney shall not be affected by the principal’s incapacity.

springable powers of attorney

While establishing a Springing Durable Power of Attorney is not difficult, documenting that the “spring” has been sprung is more problematic. Since the purpose of all Durable Powers is to enable your agent to act on your behalf, it is critical that third persons know when your Durable is in effect. For that reason, most people use a “spring” that is easy to document. If you want your agent to act only when you are unable to act yourself, the “spring” can be a declaration from your physician stating that you are not able to manage your own financial affairs. That declaration must be attached to your Durable in order to be in effect. Some people use the statements of loved ones attached to the Durable to demonstrate that the “spring” has been sprung.

In determining whether to use a Durable General Power of Attorney that is immediately in effect or one that “springs” to life upon the occurrence of a stated event, you should consider your health, independence and reliance on others. If your health (physical or mental) is quickly failing, an immediately effective Durable Power of Attorney may be more practical. If you are still healthy and independent, the use of a Springing Durable Power of Attorney may give you future assistance and present peace of mind.

And finally, not all Powers of Attorney are the same. Many clients ask if a stationary store or online Durable Power of Attorney is adequate. The simple answer is, “it depends on what you want your agent to do.” If you expect your agent to pay your bills and conduct simple business on your behalf, a simple Durable General Power of Attorney may be sufficient. If you are concerned about protecting your Estate should you become incapacitated and require long term care, a simple Durable General Power of Attorney isn’t worth much.

Durable General Powers of Attorney can contain pages upon pages of granted authorities or merely provide all powers allowed by law. Neither guarantees that your agent will have sufficient authority with which to preserve your Estate if you need Medi-Cal or other public benefits such as Veteran’s benefits.

Under California law, an agent is not automatically granted certain powers under a Power of Attorney. In order to act in those areas, the principal must provide written authorization within the Durable itself. Examples of actions that must be expressly provided for in a Durable Power of Attorney include, but are not

limited to: (1) Creating, modifying or revoking the principal’s trust; (2) Gifting or transferring the principal’s assets; (3) Disclaiming or refusing an inheritance of the principal; (4) Creating or changing a survivorship interest in the principal’s property; (5) Designating or changing a beneficiary to receive the principal’s property at the principal’s death; and, (6) Making a loan to the agent.

While these powers are not normally included in a typical Durable Power of Attorney, they are often necessary in cases where the principal is incapacitated and on Medi-Cal or Veteran’s benefits. Let’s explore how some of the above powers can be used in a Long Term Care Plan. Before beginning that discussion, however, the following information is important to know and understand.

First, if the Principal is competent and capable, s/he should be personally involved in the planning process. The Agent should only become the decision maker if and when the Principal is unable to participate.

Second, a DPA designed for use in Long-Term Care planning is usually an extremely powerful document and often authorizes the Agent to make decisions on behalf of the Principal that may have the effect of impoverishing the Principal. For that reason, the creation of a DPA with Long-Term Care planning provisions must not be taken lightly and should only be used where the Principal is comfortable with the possible transfer of all of the Principal’s assets to another person(s).

Third, the use of a DPA does not in any way alter existing Medi-Cal and VA law and, in fact, may even restrict certain actions available to the Principal acting alone. Simply stated, if the Principal is prohibited from acting in a certain manner, the Agent will be similarly restricted.

And finally, allowing the Agent to perform certain acts may be disadvantageous to the Agent. Where a Principal authorizes an Agent to act in the same manner as the Principal, that authorization may result in adverse tax consequences to the Agent should the Agent predecease the Principal. This issue will be discussed in greater detail under the gifting section below.

With the above said, we will explore some of the common uses of a DPA in Long-Term Care Planning including: (1) Gifting or Transferring the Principal’s Assets; and (2) Creating, modifying or revoking the Principal’s Trust. Due to space limits, I will not discuss in great detail various Medi-Cal restrictions concerning each of the above actions but it should be noted that Medi-Cal will penalize the transfer of a Medi-Cal non-exempt asset made within thirty (30) months of application.

 mountain road sunset the long term

Transferring/Gifting Principal’s Assets

In creating a Durable General Power of Attorney, most Principals expect their Agent to pay the Principal’s bills, deposit funds in the Principal’s accounts and, in general, conduct the Principal’s business. Unfortunately, if the Principal requires long-term care in a skilled nursing facility and/or requires Medi-Cal or VA assistance, conducting the Principal’s business will not protect or preserve the Principal’s assets. Simply put, in order to protect or preserve a Medi-Cal recipient’s assets, the

Medi-Cal recipient cannot own the assets. This applies to all assets of the Medi-Cal recipient including those classified as Medi-Cal exempt. For this reason, the Agent’s ability to gift or transfer the Principal’s assets should the Principal require Medi-Cal assistance and be unable to complete the transfers him/herself is critical.

Since an Agent cannot transfer or gift on behalf of the Principal unless expressly authorized in the DPA, the Principal, if s/he wishes to protect his/her assets once on Medi-Cal, must provide such authorization in the document. Such authorization, however, may expose both the Principal and Agent to potential problems.

If the Principal unrestrictedly allows the transfer of his/her assets by the Agent, the Agent may impoverish the Principal prematurely or unnecessarily, the Agent’s creditors could seek satisfaction from the Principal’s assets once in the hands of the Agent, the Agent may use the Principal’s assets to

November 17

Things To Consider When Estate Planning

Estate Planning Papers

What exactly is an Estate Plan? Isn’t it only for the wealthy?

An Estate Plan is designed not only to pass assets at your death, but also to provide management of your personal and financial affairs while you are living. Wealth is only one factor when considering whether to do an estate plan. A properly devised estate plan is intended to avoid a probate at death, avoid the potential for a conservatorship during life, provide clear instructions on how to manage your affairs while living, how to distribute assets at death, and how to care for spouses, minors, or disabled heirs, all in a manner that minimizes expenses and tax implications to the greatest extent possible.

What exactly is “Probate?”

Probate is a court supervised administration of a deceased person’s estate. It is a lengthy public proceeding that follows strict procedural formalities as mandated by the California Probate Code. A typical probate lasts about a year, but could last longer. The expense of a Probate is broken down into attorney’s fees, executor’s fees, and costs (costs include court filing fees, publication fees, recording fees, etc.). Fees for the attorney and executor are statutorily based on a percentage of the gross value of the Probate Estate (“gross” meaning the value of the estate is not offset by any debts or mortgages owed). By way of example, the combined attorney’s and executor’s fees to probate a $300,000.00 home (even if the home is encumbered) would be $18,000.00 plus additional costs averaging $1,500.00. These fees and costs do not include any other expenses such as taxes.

What is some basic terminology I should know about Estate Planning documents?

A typical trust-centric estate plan includes a Revocable Living Trust, Pour-Over Will, Durable General Power of Attorney, and an Advanced Health Care Directive.

Revocable Living Trust: This document is a legally binding contract wherein the creator of the trust (called the Settlor/Grantor/Trustor) enters into an agreement with the Trustee (or manager of the assets) to manage the Settlor’s assets according to the terms of the contract for the benefit of the Beneficiary (the person receiving the benefit of the assets). Typically, the Settlor may also be the initial Trustee and initial Beneficiary of the Trust.

PourOver Will: If you have a trust-based estate plan, then your Last Will and Testament will be used to transfer certain assets into your trust at the time of your death. It will “pour over” certain assets into the Trust that you did not transfer into your Trust prior to your death. The creator of the Will is called the Testator. The Testator nominates an Executor to administer the Will, however, only the Probate Court appoints the Executor to administer the Will.

Durable General Power of Attorney: This document, also known as a Financial Power of Attorney, allows the Principal (the person creating the document) to appoint an Agent or Attorney-in-Fact to manage assets held in the Principal’s individual name such as retirement accounts, vehicles, or life insurance policies. It typically does not allow the agent to manage or access assets held in the Revocable Living Trust (only the Trustee of the Trust can manage Trust accounts). A Springing Durable General Power of Attorney only goes into effect once the Principal becomes incapacitated, whereas an Immediate Durable General Power of Attorney becomes immediately effective once the Principal signs it.

Advance Health Care Directive/Power of Attorney for Health Care: This document allows the Principal to designate an Agent to make health care decisions on the Principal’s behalf if he or she is unable. It also contains a written set of instructions or guidelines about the Principal’s wishes regarding life-sustaining treatment.

filing trust papers

What information should be included in my Trust?

As stated above, a Trust is a legally binding contract and is therefore unique. A Revocable Living Trust should contain detailed instructions covering three important periods of your life:

  1. What happens while you are alive and well;
  2. What happens if you become mentally incapacitated; and
  3. What happens after your death

It should define all the players of the Trust (Settlor/Trustee/Beneficiary); it should nominate successor Trustees; it should clearly define how a Trustee can resign or be removed and what authorities a Trustee has; it should state who gets the Trust’s income and principal and in what manner; it should provide clear instructions on what happens at the death of the first spouse (i.e. does the Trust require a division into two or more sub-trusts at the spouse’s death); it should provide clear instructions on where the assets go at the Settlor’s death and in what manner. Finally, the Trust must be properly funded with assets (this requires formal retitling of certain assets, transfer deeds, etc).

What should I do to prepare for my Estate Planning appointment?

Here are some tips to help you get organized and prepared for your first meeting with an Estate Planning Attorney:

  1. Make a list of all of your assets and approximate values of those assets. You may wish to locate your real property deeds, property tax bills, life insurance policies, bank and investment accounts, etc.
  2. Decide who will be in charge of your financial and personal affairs if you are unable to do so yourself. Think about alternates or successor decision makers as well.
  3. Decide who will inherit your estate, how they will inherit, and when they will inherit. Consider their ages and any disabilities they may have as well.

What does an Estate Plan normally cost?

To help put this question into perspective, you should also ask yourself “what would it cost me not to have an Estate Plan?” The cost to prepare an Estate Plan depends on many factors, such as the client’s needs/wants (i.e., does the Trust divide into multiple sub-trusts for the beneficiaries), types of assets (i.e. are there several pieces of real property), the sophistication of the estate plan (are there business interests to address), tax implications, etc. In our area, most attorneys charge hourly for the initial consultation ($275-$375 per hour) and may charge a flat rate for the preparation of the Estate Plan ($1,500.00-$3,500.00+). Some may charge hourly for the preparation of the Estate Plan. You should ask the attorney what their billing practices are prior to retaining their services.

Nicole R. Plottel Certified Elder Law AttorneyNicole R. Plottel, Certified Elder Law Attorney is Managing Partner of the Firm. She is also a Certified Specialist in Estate Planning, Trust and Probate Law by The State Bar of California Board of Legal Specialization. Ms. Plottel is further accredited by the Department of Veterans Affairs to represent and present veterans’ claims and focuses her practice in the areas of Estate Planning, Medi-Cal/Veteran’s benefits, Probate and Trust Administration. She is a longstanding member of National Academy of Elder Law Attorneys (NAELA) and also volunteers on the Incapacity Subcommittee of the Executive Committee of the Trust & Estates (TEXCOM) Section of the State Bar of California. Ms. Plottel actively serves the local community as a Board Member for the Enloe Hospital Foundation and the Gateway Science Museum Community Advisory Board, and the Chico Community Scholarship Association. She is also a longtime advocate for the Alzheimer’s Association.