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Both the Medi-Cal and VA Spenddowns are premised on forcing the individual or couple to spenddown assets in order to qualify, thus putting the primary burden on your assets first.  Both programs have a lookback period where assets transferred within that period are subject to penalty. 

The solution is oftentimes to transfer assets and wait out the program’s lookback period – this is known as the GIFT AND WAIT strategy. You turn the lookback period into a waiting period. Additionally, in California you can transfer assets on a daily basis such that the penalty period rounds down to a "zero-month" penalty. This is known as GIFT STACKING.

 

When the amount of assets being transferred is high, most people do not want to transfer the vast majority of their net worth to a person or people because it would expose those assets to the creditors and soon-to-be ex-spouses of the people receiving the assets.

Transferring assets to an Asset Protection Trust is usually the preferred method of accomplishing the GIFT AND WAIT strategy or the GIFT STACKING strategy. Transfers to the Asset Protection Trust are treated like other transfers. Once the assets are inside the trust, a trustee manages the assets for later use or distribution. The assets are no longer considered available towards the spenddown and are considered protected.  After the requisite waiting period or penalty period has passed, the transfer of the assets into the trust are no longer included for eligibility.  Assets in an Assets Protection Trust are also considered protected from estate recovery.


The Law Offices of James Dolenga specializes in helping clients determine if an Asset Protection Trust will help achieve their asset protection goals. The firm has helped set up hundreds of trusts for families across California to protect assets from the long-term care spenddown.  To speak with a member of the James Dolenga team to see if an Asset Protection Trust will help you protect your assets, click here.

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