Estate and Medi-Cal Planning Strategies, with Attorney Richard Seff

0:02 As a real estate agent, it is heartbreaking when I talk to customers who discover they really have not planned for their final years that they've worked hard for, saved money for, kept their health in order to enjoy. I literally just got off the phone a couple hours ago with a lady who had her husband passed, never put together an estate plan. there's tremendous tax consequences she's facing with this property. It's her only asset. And I'm not really sure what the solutions are for her in her case, but I do know is had they planned, they'd have there be more options today and a better potential outcome. glad to have here today as our guest on [The Estate Planning Podcast], Richard Seff, who's an estate planning lawyer who deals with these issues to help people plan ahead to protect their the wealth and the property and the future. Richard, thank you for joining us again.

0:47 Wonderful to be with you, and I look forward to our hour together. So I think the easy question I can ask is always what's the biggest mistake people make, and that's not planning. So I think I would say where do you see when people come to you? I know I'm a real estate agent always has to deal with a house, or almost always. what is it that that drives people to finally seek out your advice and plan ahead hopefully by starting the process of an estate plan?

1:15 Well, with elders [snorts] they often procrastinate. Well, not just elders, we all do, especially when it comes to estate planning cuz you're dealing with the realities of you're not going to be here forever, and that's hard to deal with. But

1:38 [snorts] elders in particular are vulnerable. Because they you know, they get a diagnosis of dementia, and that shakes them. But typically, when you get a diagnosis of dementia, you have about a three to four-year window before it gets to a point where it cannot be managed at home. So, that means thinking about nursing home care and the possibility of that, which is very expensive. The average monthly cost of nursing home care in the state of California is 14,600. In Los Angeles, you know, it's not unheard of 12,000 a month, 18,000 a month, which would wipe out a family's estate, a hard-earned estate over a lifetime. many people do not have long-term care insurance. But the wait till maybe they're in the emergency room and they're going to be transferred to a rehab and then to a nursing home.

3:07 So, that's requires an emergency response. And they're going to need Medi-Cal to cover long-term care. But depending on the amount of assets they have, they may not be qualified and it might take a number of months to get them qualified. If they had come a few years sooner when they initially got that diagnosis, we could have protected all their assets and had them qualified for Medi-Cal. So, that's the name of the game, planning ahead, absolutely.

3:46 Yeah, I had a phone this morning with a lady who's 90. Husband passed 20 years ago. Has a house that's worth like maybe almost $2 million, $1.8 million. But she has a reverse mortgage on it, which is a chunk of it. They have a tax liability on it. They haven't really planned anything for that. She's so cash poor. She her car's in disrepair, doesn't drive. Her refrigerator doesn't work. Like how broke do you have to be to not fix a refrigerator? How she even get food or groceries, I have no idea. And you know, as a real estate agent I don't think she has the physical stamina or ability to sign the papers to sell the house. Meaning when you list a property, maybe it's five pages, but there's like a thousand more pages to sign. And I don't believe she has the ability to do it on her own. She has no living relatives, no friends to trust, no attorney or accountant or

4:45 Situation. And basically all this is is a matter of time till she unfortunately suffers from the health decisions she's made. or somebody scams her and it exploits the process. And it's just heartbreaking to watch. And meanwhile, had years ago they put together some sort of plan and named somebody they could at least declare her incompetent, be able to make decisions, sell the property, take the cash, deploy the money in a smart way. And I see this same situation over and over again that the failure plan is planning to fail. And I wish I could That's why I do this podcast is to get people those are some professional realtors to say to our customers, you got to do something. I can't just sell your house, take the money, and let you go. I need to inspire you to as a as a human being to prepare to protect your family, protect yourself. And attorneys to have a tool to say to your clients, it's not just about the fee. I want you to sign the plan to protect yourself. I don't want the phone call to open probate when you pass away and probate litigation and all that. So, okay. So, we're on the same page as far the importance and desire of it. I just don't think people realize how quick it sneaks up on them. You mentioned diagnosis to incapacity might be 3 years. Now, I guess there's different things along the way become a problem. I mean, there's they don't have the legal capacity to sign papers at the end of 3 or 4 years.

6:08 But, I think there's a problem another problem that isn't really covered much, which is they just don't have the administrative ability to sell a property. They just don't you know, between the escrow papers and the and the listing papers they but they don't they still have capacity, you know, at some point they need some help, right? That's the point where you

6:26 Absolutely. Yeah, there's this in between stage where they do have legal capacity. In other words, they know what day of the week is, they know what assets they own, but they're they're a little frail and they're definitely vulnerable and they can get confused easily, you know? They really have to have someone acting for them under a power of attorney.

6:51 Yes. So, that document is so important to get done earlier before you're in that in between stage. there's got to be somebody.

7:03 And I can suggest a professional fiduciary. Right. Someone who can act for them and protect them to avoid the scams. I mean, I just read in an art publication about these real estate wholesalers and they approach elders in that sort of condition that you described.

7:26 Yes. And they use high-pressure tactics. They end up stealing about $50,000 of their equity. Well, they

7:36 And they sign these contracts. It's very aggressive. And they lose out. I mean, on one hand, you know, I see that and I think I see that same person couldn't sell the house in a normal way. Like, they almost need to be scammed to at least get within $50,000 what they're owed because at least they got something out of the house where is the way I'm talking about, I don't see the solution where she isn't up in foreclosure and losing all of it. And what do you do at 90 or 91, homeless with no assets? I mean, that's

8:11 It's a tragedy. It's a tragedy. It's it's a and your husband must have been they have a beautiful home in [unclear] in I don't I don't want to say where, but beautiful home that obviously that never intended for that to happen. Never intended and the anxiety and the other thing about this is I think, you know, at my age, your age, you know, we're still functioning, we're still in business. We deal with stress all the time. You know, you have setbacks, major setbacks. Okay, but we deal with it, we move on. I think even the most minor setback at that age when, you know, you're 90 and people knocking on the door to sell their house, it creates such anxiety that the that having somebody in charge who's who's making those decisions for them would relieve them from. She is so anxious. I'll give you a one detail. I was referred to her by a by her lender who did the loan years before and is facing foreclosure. And I called her, introduced myself. I said I'm referred by this person. And she called me back after I done and said, "Who did you say introduced you?" And I told her name. She said, "No, she didn't. You're lying to me."

9:14 Right. Why? Right. Because my client's name was similar she had said to me a different first name of a woman. She had said this woman's name was coming to her house later. And so she got confused between the person who I mentioned and this and so many people talked to her, they you know, they cold called and knocked on the doors and such. And this other lady came to her house and she said, "Do you I just spoke to Bill Gross, your friend." She said, "I don't know who Bill Gross is." Well, she did it.

9:38 Yep. Yep. I see that all the time. But it's not even just that. It's she's so panicked about it, like you're trying to screw me. No, I'm not at all. You know what? I won't call you anymore. I'm sorry. I don't mean to scare you. She's like, you know, staying up at night worrying about me now as a on the list of people to stir up. So, this is a long-winded story. I have to tell you, I'm just so shaken up today in a way I've never been. To stare in my face, this is where this lady is headed. It's just It's heartbreaking.

10:04 Yeah, I mean These days where people, families break up cuz they're living different parts of the country, and it leaves elders vulnerable. So, you know, maybe a neighbor takes an interest. I've had cases where a neighbor takes an interest. Of course, they end up being the beneficiary. So, there might be some self-interest in that, but they do help them.

10:33 Right. You know, they become their agent, and I work with them. And then you have caretakers. Frequently, people who, you know, advanced stage, need help with activities of daily living.

10:49 Right. but I've also seen where caretakers take advantage. Yes. It's interesting cuz I've seen both. I've seen caretakers who the rest of family abandoned the person, and so you can imagine being elderly and lonely, and here's somebody who comes to your house to really to help you and does things for you. Yes, they're being paid, but you know, I like my gardener, I like the guy who washes my car, I like, you know, the dry cleaner I take my clothes to. Of course, I'm going to like a caregiver who's maybe changing clothes or doing laundry, who knows what. It's an And if nobody else is in my life, you know, who's to say that that's illegitimate? it's certainly dangerous. It's certainly

11:27 Right, but In California, so concerned about caretakers, Yes. that there's a statute Yes.

11:36 That presumes if they're a named beneficiary, it's presumed to be undue influence. Yes. Yeah. And

11:45 Order to get rid of that presumption they would have to go to an independent attorney who okayed it. Right. I can see there are cases that it's legitimate. I can I've seen some, but I've also can imagine it's so right for abuse. And now I find out most of those people who used to be caregivers are now girlfriends who only got the caregiver, you know, aid because they needed the money or whatever they paid for expenses for their lover, whatever that story is. So, you know, another area that that you know, I know you talk about and we've spoken before you know, when I first heard attorneys about a planning for Medi-Cal it sounds at first blush, well, this is a rip-off. They're just taking somebody who has enough money to hire an estate planning attorney and using it to get the benefit designed for people who are of low income means. But at the same time, as a taxpayer I paid for it, why would I not want to be entitled, to have my parents entitled, or my, you know, whoever entitled to a benefit that we're paying for? So, talk about kind of the ethical side of the Medi-Cal.

12:50 Good question. Yeah, so they have a house worth a couple million dollars and they got to put it in a trust and this and all that. How does that How does that square?

12:59 So, here's here's my view of it. You know, if an elder suffers a heart attack or needs a heart bypass Medicare's going to cover it. But if they suffer from a disease like Alzheimer's their whole estate should be wiped out? Why doesn't Medicare cover that, too? So, that's why I justified. And everything is legal under the law, all of our strategies. But yeah, I mean I can get people with a fair amount of assets qualified in a number of months.

13:43 And I think the way I look at that is, you know, the law could be written differently, but it's not. And we get taxed to pay for these programs. So much of what I get taxed for is wasted on stuff that's a complete waste. So you know, maybe this is just one of those benefits where some of the money that we pay in taxes comes back to help people who maybe don't need it, but need it, right? To need it to live a certain lifestyle. And so talk about what are some of the legal ethical strategies you can use where somebody who might think, well, how am I going to get Medi-Cal to pay for nursing care? We're worth too much money or have too much income. What are some of the strategies that can be used under current law to effectively do that for family?

14:25 Okay, so it's pretty complicated, but And we have like 5 minutes, so [laughter] So California is the best state of all to do Medi-Cal planning. First, the home is exempt. So you could have a $3 million home, doesn't matter. You're allowed to have a residence. You just can't have more than 130,000 per individual in cash. And if it's a married couple, it goes up to two something like 290,000. So any cash, not including retirement accounts, generally. So it's straight cash, checking, savings, non-retirement investment accounts. anything over the 130 for an individual or 290 for a married couple is excess. So, we have a lot of tools in our toolbox to deal with that excess, to get them qualified, depending on how much and the number of and the number of months. through setting up something called a Medi-Cal asset protection trust and coming up with a funding strategy of so much per month.

15:54 [snorts] getting that moved into that trust. And so, what happens then is it's within the guidelines, cash assets is within the guidelines. They have their house and then and I presumably there's two a married couple, one spouse has access to assets they need and the other one has the misqualifications to get the Medi-Cal services.

16:18 Exactly. And what about is the benefit for Medi-Cal? How much are you talking about monthly? You mentioned that nursing homes can cost 10, 15, 18,000 dollars a month. How much What does Medi-Cal provide?

16:28 Well, they cover everything. And of course, they get a reduced rate from the facility. Mhm. So, they don't pay that much, believe me. Right.

16:36 They get a reduced rate, but they cover everything, of course. the social security goes directly to Medi-Cal as share of cost on behalf of the patient. and any other monthly income they get. Unless the healthy spouse would need that income.

16:57 Got it. So, it could be a substantial amount of money that one should definitely make the provisions for. And I imagine, you know, with health, you know, one's health care health situation declining, you need to start thinking about these things pretty early.

17:12 Yeah. And so, you say it takes a few months. Is the is the months determined by how much assets you have to move over in the formula? Yes. Or is Yep, it's a it's a formula.

17:22 Got it. Is this something that you do when people get this position? You know, I know on your website it says book a call. Is this something that you can kind of overview somebody if they're going to if it's worth pursuing? Or what's the process How does somebody go from sounds like something I need to talk about to meeting with you? Do they write a check for the whole amount of a plan or

17:42 Yeah, I'm sorry. You cut off. Do they write a check for what? For the whole for the whole plan? Or do they, you know, write they hire you for an hour or two to consult? Or what does that process look like to go from sounds like I need to do something to talking to you?

17:56 Yeah, so, you know, we meet. It can be via Zoom for the initial session. But, I have them fill out an intake form so I understand what their assets are, what their health condition is, the family support structure. And I'm often having a family meeting. And, then I work the numbers and I come up with a detailed report of how it all work. And I give them my, flat fee quote. And the numbers will tell them whether this makes sense.

18:32 Got it. You know, I like that. I think that too often professionals, you know, advise things rather than I feel like my role is always to give the customer all the information to make the right decision and they'll make the right decision based on their risk tolerance and their pain points and their desires. I can't really judge those accurately. But, I certainly know the cost. I should know the cost and I should be able to present it to the customer clearly to make those decisions.

18:58 But, I, come across, following situation all too often. So, the person who's concerned about eventual nursing home care and the need for it, they start hearing things from neighbors and friends and oh, we've got to get assets out of our estate. Okay, so I'm going to gift my home to my children.

19:28 Oh, I see that all the time. And that what that does is trigger a property tax reassessment and if they own the home for a long time, the property tax is going to go up tremendously and the home is exempt anyway. They never had to do that.

19:48 I see that all the time. I see that Well, I see a couple of them. The other one is they deeded to the kid, but it's not done properly. They didn't they the kids married, they didn't put it that married or they're as community property or single. Normally you'd want to keep it out of the out of the community property if you could. And so I've had cases where they deeded it to the to the son-in-law and now it's in his name only and it wasn't even community property.

20:13 Oh. So, yeah. And so you know, I want the son-in-law and the daughter call me and I'm not an attorney, I'm just a real estate agent. And I'm saying to them, well, be honest, the only person who can sell the house is the son-in-law. And they're all looking at me like, what do you mean by that? my mom just put me on for this reason and then and then she passed. And dad's in the house. I said, well, you know, I'm the real estate agent, that's the title. That's how it's titled and if you want to change that or contest it or fix it, you need to talk to attorney about that process, but

20:42 That's a mess cuz what if they get divorced? Right. Well, that happens all the time. Or what if they have kids? What if they have kids from a prior marriage? What if what if they have kids from the next marriage? Yeah, that's where probate estates get litigated and I end up in

20:55 It's very messy. It can be very messy. And I and I think again that if we want to circle back to the very beginning, you know, failing to plan is planning to fail. And I think these are areas that really need some special attention and I think in your case, being able to talk about Medi-Cal planning, I think is really important. And I think otherwise, estate planning. So, let we talk about the Medi-Cal, what is one other area that you see as a driver in your practice of people doing estate plans? You one is obviously medical conditions and aging. Is there another particular case scenario, is that the dominant part of your business?

21:26 Well, a family business. Okay. Mhm. They're getting up there in age, and they have a bunch of rental properties. And the kids want to continue that business. They're not going to sell the properties. The Their intention is to keep that business going.

21:47 [snorts] Without planning, it's going to be reassessed. Because Prop 19 took away in 2021, the way it used to be was when children inherit real property from their parents, they also inherit the property tax base. So, if they own the property for a long time, that's significant.

22:17 Yeah. But here, under the new Prop 19 from 2021, it's going to be reassessed. The only exception from that is if one of the children make a property their principal residence. Then the exemption, will work for the first million dollars of appreciation. But for rental properties, they're not going to make it their residence. It's all going to be reassessed. There's ways to avoid that. And there's ways to have that business continue for multi-generations.

22:55 You know, I don't think people understand the difference in property tax from one generation to the next. You know, I as a real estate agent, I see it all the time where I pull a property profile and in a neighborhood of $5 million houses where they're paying, you know, I guess 50,000 and up for property taxes a year. The neighbor, you know, has a house that they have owned continuously for 40 years and they're paying about $800 a year in property taxes. And deeding it properly to your family will maintain that that tremendous cost savings. And the difference is like a $4,000 a month cost.

23:32 Yeah. Or $2,000 cost for $2 million house. And it's just it's staggering the impact and I just somehow that got passed. I don't think people understand it and you know, I guess if you're not if you don't pay taxes, it's great to take money from that from those transactions, but for people who own property the reassessment is a major issue. One of the things I find as a real estate agent is no matter what happens when people sell a house that they inherited they get a reassessment anyhow even if they're exempt. And I've had many cases where the client went to attorney and they filled out the exemption form. In LA, I think they take a year and a half to evaluate the exemption forms, but they reassess within 6 months. And what happens is then you have a you have a time triggered to appeal that change. And they'll say, "Well, I already filled out the assessment." Well, they don't know that. The two parts that department don't talk to each other. And so this area of reassessment, I just say anything to change the title of property, you need to talk to an attorney and make sure you thought this through cuz it is a you know, $50,000 a year difference for the rest of the property rest of the time you own the property or might force you to sell the property that you don't want to sell when you don't want to sell it.

24:50 Right. Yeah. Yeah, I think within 150 days of the date of death, something called a PCOR, has to be filed with the assessor's office, which lets them know, what's going to happen with that property, lets them know about the death. that's the time to inform them that maybe a child's going to move in and make it the residence. And then you have a year from the day that happens to file the exemption form.

25:22 It's a It's a lot of money, and I definitely think if I always tell people, I don't I know enough to tell you what to be scared of. I don't know enough to solve the problem, and I also know it's worth it to pay for attorney's time, even at a high rate for a couple hours, to avoid a wrong reassessment because

25:38 Yeah. Yeah. That reassessment's going to be there for the rest of time you own that property. It's going to be a very expensive mistake if you don't know what you're doing. Exactly. So, I go into a lot of detail on my website all about Prop 19 and this whole issue of reassessment and how to avoid it. We use, the vehicle of LLCs cuz the property tax reassessment issue goes by entirely different set of rules with LLCs when they own the properties.

26:12 There's a lot on there. I have to say I'm I'm linking to his website, you know, look, Richard, you've been a fountain of information. I really appreciate, what we've covered. I think the thing I was trying to podcast to do is we just cover what are the potential alligators in the swamp, and somebody who is going to try to swim that swamp needs to call you to help get across, but Richard is, an attorney at the Estate Planning and Elder Law Firm. The phone number [phone number shown on screen]. The website is myestateplanlawyer.com. And, I know I always enjoy when we have a chance to speak. and again, if you, didn't get the number cuz you're driving or something, reach out to me. I'd be honored to make the introduction. Richard, thank you for your service to the community and thank you for today sharing with us some of the key insights on a planning and I think for elderly families some of the pitfalls and some of the things you need to get on to avoid those problems.

27:04 Bill, thank you so much for having me. I really enjoyed it. This podcast is such a service to the public. Oh, well, thank you. Thanks so much. After Richard, this is [The Estate Planning Podcast]. We get together almost every week or more often of late an interview with attorneys, state planning attorneys, state planning litigators, vendors. But we don't often get a chance to go as deep as we did today on the Medi-Cal planning. I hope you found that helpful. I'd love to get your feedback. Let me know. Write a comment, send me a text, email. I'm at Bill Gross Probate on social media. As always, make today your best day ever. Thanks so much.