It’s a common myth that an inheritance and MediCal are mutually exclusive. Sometimes a client will want to disinherit a disabled adult child because that child is receiving public assistance.
As many of you may know, public assistance is a “needs based” payment of money or entitlement to services (such as medical care). Therefore, a recipient may have only a limited amount of income and resources. Loss of the medical insurance (called Medi-Cal here in California) can be devastating for someone who relies upon medication for control of a medical condition. Others receive monthly income that they use to pay for rent and food.
Outright inheritance may disqualify someone from receiving benefits until the recipient has spent it all. So concerned parents (or other family members) do “ self-informed Medi-Cal planning” out of ignorance of the law. Let me clarify a few things by way of example.
Unintended Consequences of Disinheriting a Relative on Medi-Cal
Let’s say I have a son, Doug, who receives public assistance in the form of Medi-Cal. Because I erroneously think that Doug will lose these state insurance benefits if he inherits a portion of my estate, I make plans to give Doug’s share of my estate to his sister Ruthy. After all, I know that Ruthy loves Doug and will take care of Doug and his all his needs for years to come!
There are two problems with this approach. If Ruthy dies and her estate is distributed to her spouse or children, they may not have the same feelings for Doug that Ruthy had. Or, despite my best intentions, Ruthy may consider the money her own and resent any funds she pays for Doug’s care. Either way, you can see that my desire for Doug’s long-term financial well-being could be compromised.
5 Examples of Special Needs Not Covered by Medi-Cal
- Certain dental procedures
- More than one pair of eyeglasses
- Purchase of a monthly bus pass
- Tickets to a ball game
- Computer or other electronic equipment
These are only a few examples which come to mind given a recent client. Your situation will net its own list, and it will likely be a long one. Most parents want to make sure a certain level of comfort and quality of life is maintained for their disabled, adult child. There are ways to see that happens.
An Example of How MediCal and Inheritance Can Coexist
Often, the solution in a situation like this is for the parents to establish a Special Needs Trust in their own estate plan. Instead of disinheriting Doug, simply give his share to the trustee of the Special Needs trust. This type of Trust may not be attacked by government agencies. Doug still receives his public assistance and he his special needs may be provided for by the trust.
This blog contains general information and is not meant to apply to a specific situation. Please seek advice of counsel before proceeding as each case is unique.