Medi-Cal, Spending-Down, and the “Half-a-Loaf” Strategy

Medi-Cal eligibility workers routinely tell Medi-Cal applicants that they must spend-down all of their savings on paying for nursing home care, until they only have $2,000 left, at which point they will finally qualify for Medi-Cal. This is Medi-Cal’s “preferred approach” and Medi-Cal eligibility workers are trained to give people this horrible advice.

First of all, don’t spend down your “whole loaf.” Do some planning! Just spend down a “half-loaf!”

I like the “Half-a-Loaf” Strategy because it is simple and inexpensive. It is a perfect strategy, in particular, for our clients who do not have significant assets to protect, or who, for whatever reason, do not wish to engage in more efficient (and more complex) estate planning.

For example, let’s say that Peter is applying for Medi-Cal, and that his only countable asset is his $75,000 investment account. The lady at the Medi-Cal office tells him to pay all of his money to the nursing home for 11 or 12 months, after which time, he will finally be eligible for Medi-Cal.

Wisely, Peter does not listen to this horrible advice. Instead, he gives $30,000 to a trust account that he sets up for his grand children’s education, and he spends another $15,000 on a new TV, a new easy chair, and other home furnishings, which will make him more comfortable in the nursing home. Because of this spending and gifting, Peter attorney calculates correctly that Peter has become ineligible for Medi-Cal for exactly four months.

Peter keeps the remaining $30,000, which – not so coincidentally – happens to pay his nursing home expenses for a bit more than four months. Peter has now qualified for Medi-Cal in only four months, he has improved his quality of life, and he has provided a significant gift to his grandchildren.

Half-a-Loaf is a lot better than none!

About Paul D. Hunt

If you're a resident of California, and a homeowner, then you should clearly put your home into a living trust. A living trust makes probate unnecessary. (We don't like to say "avoiding probate," because that's misleading!) Probate is very expensive – an average home in Alameda will require a probate fee of about $37,000. Also, probate is very slow, and it's done in public. Our law office is dedicated to getting rid of all of the estate planning myths out there, like the "avoiding probate" myth. We want every family in Alameda to enjoy the many benefits of a trouble-free estate. Come to one of our seminars, or call for a free initial appointment at (510) 523- 2100.
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