Is Money Owed on a Loan an Asset for Medi-Cal Purposes?

Q Does Medi-Cal consider a promissory note an asset? For example, if I sell my house and I carry the contract, does the mortgage I hold constitute an asset for Medi-Cal planning purposes? If so, is the asset value based on the amount still owed on the contract or on the selling price of the house? If it's considered an asset, does that mean that the buyers would have to refinance in order to pay off their loan to me? Would it matter if this occurs within or before the five-year look-back period?
A

The short answer is that the mortgage is an asset and its value is the amount left to be paid on it, not the original amount of the loan. And if the transaction is for fair market value and a fair interest rate, there should be no transfer-of-asset issue if it is taken out within the five years before applying for Medi-Cal.

However, the reality could be more complicated, and potentially better. You might be able to argue that the mortgage should not be counted as an asset because there is no market for it. You can argue that it should be counted as an income stream with the monthly payments going to the facility. Of course, in that case it may still be in your estate at your death and subject to a reimbursement claim by the state Medi-Cal agency.

Kinds of Trusts

Testamentary Trusts

A testamentary trust is one created by your will, and it does not come into existence until you die. In contrast, an inter vivos trust, starts during your lifetime. You create it now and it exists during your life.

Revocable Trusts

Revocable trusts are often referred to as "living" trusts. With a revocable trust, the person who created the trust, called the "grantor" or "donor," maintains complete control over the trust and may amend, revoke or terminate the trust at any time. This means that you, the donor, can take back the funds you put in the trust or change the trust's terms. Thus, the donor is able to reap the benefits of the trust arrangement while maintaining the ability to change the trust at any time prior to death.

Revocable trusts are generally used for the following purposes:

Asset management. They permit the named trustee to administer and invest the trust property for the benefit of one or more beneficiaries.

Probate avoidance. At the death of the trust grantor, the trust property passes to whoever is named in the trust. It does not come under the jurisdiction of the probate court and its distribution need not be held up by the probate process. However, the property of a revocable trust will be included in the grantor's estate for tax purposes.

Tax planning. While the assets of a revocable trust will be included in the grantor's taxable estate, the trust can be drafted so that the assets will not be included in the estates of the beneficiaries, thus avoiding taxes when the beneficiaries die.

Irrevocable Trusts

An irrevocable trust cannot be changed or amended by the grantor. Any property placed into the trust may only be distributed by the trustee as provided for in the trust document itself. For instance, the grantor may set up a trust under which he or she will receive income earned on the trust property, but that bars access to the trust principal. This type of irrevocable trust is a popular tool for Medicaid planning.

Testamentary Trusts

As noted above, a testamentary trust is a trust created by a will. Such a trust has no power or effect until the will of the grantor is probated. Although a testamentary trust will not avoid the need for probate and will become a public document as it is a part of the will, it can be useful in accomplishing other estate planning goals. For instance, the testamentary trust can be used to reduce estate taxes on the death of a spouse or to provide for the care of a disabled child.

Supplemental Needs Trusts

The purpose of a supplemental needs trust is to enable the donor to provide for the continuing care of a disabled spouse, child, relative or friend. The beneficiary of a well-drafted supplemental needs trust will have access to the trust assets for purposes other than those provided by public benefits programs. In this way, the beneficiary will not lose eligibility for benefits such as Supplemental Security Income, Medicaid and low-income housing. A supplemental needs trust can be created by the grantor during life or be part of a will.

Credit Shelter Trusts

Credit shelter trusts are a way to take full advantage of state and federal estate tax exemptions.

How Much Does It Cost to Ask an Elder Law Attorney a Question?

Q How much does it cost to ask a question of an elder law attorney? Is it cheaper to talk to an attorney by phone or e-mail? Before the attorney gives advice does the attorney have to advise whether there will be a fee for the answer or advice?

A

There is no single answer to your question -- it depends on the lawyer and the question itself. Some lawyers will speak with any prospective client on the phone while others will require that they come in for a meeting. Some charge for an initial meeting and some do not.

In terms of the nature of the question, lawyers are much more likely to answer a general question about the law than a specific question about the prospective client’s situation. There are at least two reasons for this. First, without a full discussion of the person's situation, the attorney may give the wrong answer. Second, even if the attorney is not paid anything, answering a specific question could be considered creating an attorney-client relationship, which would make the attorney responsible for providing accurate legal advice and subject to claim if the advice turns out to be wrong. So, attorneys generally are reluctant to give specific advice without being formally engaged by the client.

New Federal Law Puts Focus on Preventing Elder Abuse

A new federal law is designed to address the growing problem of elder abuse. The law supports efforts to better understand, prevent, and combat both financial and physical elder abuse.

The prevalence of elder abuse is hard to calculate because it is underreported, but according to the National Council on Aging, approximately 1 in 10 Americans age 60 or older have experienced some form of elder abuse. In 2011, a MetLife study estimated that older Americans are losing $2.9 billion annually to elder financial abuse.