Is Long-Term Medi-Cal Planning Inappropriate?

Is Long-Term Medi-Cal Planning Inappropriate?

By |2018-03-29T13:59:10-07:00Thursday, April 26th, 2018|Medi-Cal|2 Comments

If you’ve been following my blog for any amount of time, you probably realize that planning for long-term Medi-Cal can be a highly complicated process. Because of this, some people who are not used to complicated financial or other planning can be wary of it, wondering if it’s somehow inappropriate. Even if it’s technically legal, they may ask, does it nonetheless violate the “spirit of the law”?

Well, I don’t think so—for at least two reasons: First, when you consider Medi-Cal planning in the context of other sophisticated legal planning techniques, you realize that such planning is not at all unusual. Second, the “spirit of the law” is to help Californians, and the Medi-Cal laws and regulations are designed to do just that without impoverishing Medi-Cal beneficiaries.

Medi-Cal Planning in Context: Sophisticated Planning is Everywhere

Sophisticated legal planning is everywhere. Perhaps most obviously, wealthy individuals and businesses engage in it. For example, many big corporations pay very low (or no) income taxes even when they realize record profits. That’s all thanks to special tax breaks for businesses and the corporate wherewithal to pay armies of lawyers and accountants to figure out how to qualify for those benefits.

A bit closer to home, we estate planning lawyers help wealthy clients do this all the time to minimize their estate tax bill. We do this using both straightforward approaches—such as advising clients to make gifts that are tax-free under the annual gift-tax exclusion—and more sophisticated approaches—such as those involving trusts or partial interests in business entities.

But you don’t have to be wealthy to benefit from this type of planning. If you have ever consulted an accountant late in the year, then you’ve likely engaged in income tax planning. Maybe your accountant suggested that your business buy equipment in December so it could write off the expense come March or April. Or maybe he or she suggested that you put a little more into your retirement account, prepay property taxes, or make charitable donations before year’s end—all so you could (legally!) reduce your income-tax bill.

The point of these comparisons is that, although highly technical planning like that involved in qualifying for long-term Medi-Cal may seem unusual to some, it fits into a broader context in which such planning happens every day.

The Spirit of Medi-Cal is Helping Californians

There’s a long-running philosophical debate about which matters more: the letter of the law, or the spirit of the law? That is, which is more important—what the law says, or what it was intended to do? I won’t pretend that I can resolve this ancient controversy in this post, but luckily I don’t have to. When it comes to long-term Medi-Cal planning, the spirit of the law and the letter of the law both point in the same direction.

First, consider what the law says: It sets out a clear roadmap for protecting your property while still qualifying for long-term Medi-Cal benefits. The law tells you what property it counts in determining eligibility, and what property it excludes. It tells you what kinds of planning transactions will trigger a period of ineligibility, and what kinds of transactions do not. The law was even recently amended to make it easier for Californians to protect their property from Medi-Cal’s estate recovery program.

In short, California law practically invites Californians to engage in sophisticated Medi-Cal planning by carefully explaining precisely how to do so.

All that also helps us understand the spirit of the law, which is to help Californians with their long-term-care needs. The law is not intended to punish those who don’t quite qualify for long-term Medi-Cal. Rather, it’s meant to provide a safety net for Californians without driving them into poverty.

Do You Still Have Questions?

I hope this post has convinced anyone wary of Medi-Cal planning that there is nothing inappropriate about it. If you still have questions about long-term Medi-Cal planning, whether technical or philosophical, please give me a call or email me today. I will be happy to discuss your questions and concerns about the process in more detail and in a more personal setting!

About the Author:

Bridget Mackay is a Petaluma estate planning attorney who has been practicing law since 1996. She is a member of the Sonoma County Bar Association, California State Bar Association Trust and Estates Section and on the Board of the Sonoma County Women in Law. She also sits on the Board of the Cinnabar Arts Corporation in Petaluma. Connect with Bridget on Google


  1. Cynthia April 26, 2018 at 7:15 pm - Reply

    My 64 year old brother lives in a little cottage on our property. He collects $620 on social security and is on Medicare-cal. He also has other benefits such as food stamps and meals on wheels. Our older sister died and he is an heir listed in her will. He is due to inherit a $38,000. IRA and $20,500. from the sale of her home. Can keep the IRA and then keep the $20,000 plus in the trust account that has an EIN number? Or could he release his part of the inheritance to his 30 year old son?

    • Bridget Mackay May 3, 2018 at 3:22 pm - Reply

      Hello Cynthia,

      Both the IRA and cash from the house would disqualify him from Medi-Cal. However, if he does structured gifts in the month he receives both, this could be avoided. You would definitely need the help/advice of counsel to proceed this way. You can give our office a call or any attorney who practices in Medi-Cal benefits for help.

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