Dear Len & Rosie,
It looks like my mother needs nursing home care soon, probably in the next year. I asked a lawyer friend of mine if thereís anything that can be done to protect my motherís home and her $200,000 in savings. He said he heard that it would take five years to qualify my mother for Medi-Cal benefits. But he also said he doesnít do elder law like you (heís into securities) so I should ask someone who works in the field. Is there anything my mother can do to protect her assets?
Your friend was right to send you to an elder law attorney. The rules regarding Medi-Cal are very strange. On Feb. 8, 2006, the federal government enacted the Deficit Reduction Act of 2005 (DRA). Under DRA, when someone like your mother applies for Medi-Cal benefits, she will have to disclose any gifts she has made in the five years prior to the date of application. Each gift triggers a transfer penalty period during which your mother wonít qualify for nursing home Medi-Cal benefits.
The length of this penalty is calculated by dividing the total amount of gifts your mother made in the last five years by the Average Private Pay Rate (the average monthly cost of nursing home care in California), which is $7,092 for 2012. If she were to give away $200,000 all at once, there will be a 28 month penalty (rounded down from 28.2 months) unless your mother waits five whole years before applying for Medi-Cal, and this penalty will start when your mother applies for benefits.
Except that it doesnít work that way at all. The California Department of Health Care Services (DHCS) has not yet implemented the federal rules imposed by DRA, even though itís been more years since its passage. But that should come as no surprise. DHCS failed to implement any of the rules created by the Omnibus Budget Reconciliation Act of 1993. Even more surprising, Medi-Calís current eligibility rules, with few exceptions, are based on temporary emergency regulations published in 1990. We are not kidding. Under the current rules, your mother could make multiple gifts within one month, and the transfer penalties will run at the same time instead of being added together.
When will the new rules under DRA come into effect? As of now, DHCS has prepared draft regulations, but these proposed rules have not yet been published in the California Regulatory Notice Register, which is the first step in the official process of getting new regulations made into law. This could take years. The 1993 regulations were in the process of official review in 2006 (after 15 years) when they were removed from the table after the passage of DRA.
So for now, people like your mother who may need nursing home care in the foreseeable future donít have to worry about a five year look-back period. Only gifts made in the 30 months prior to applying for benefits trigger transfer penalties. Also the penalties are retroactive. They start running on the first day of the month in which the gift was made. There are many planning opportunities available for your mother. You and she should see an elder law attorney soon. Not only is it possible to shelter a large portion of your motherís life savings, her home can be protected from Medi-Cal estate recovery claims as well.
Len & Rosie
Len Tillem and Rosie McNichol are elder law attorneys. Contact them at 846 Broadway, Sonoma, CA 95476, by phone at 996-4505, or on the Internet at www.lentillem.com. Len also answers legal questions each weekday, 3-4 p.m., on KKSF Newstalk 910 AM.
Len Tillem and Rosie McNichol are elder law attorneys. Contact them at 846 Broadway, Sonoma, CA 95476, by phone at (707) 996-4505, or on the Internet at www.lentillem.com. Len also answers legal questions each weekday, Noon-1 p.m. and Sundays, 4-7 p.m. on KGO Radio 810 AM.