Benefits of a California revocable trust

By Jeff Gaffney, a San Diego-based attorney and FreeWill Fellow

Estate planning isn’t just about planning for your death. It also includes planning for what will probably happen to many of us or our spouses — paying the costs of long-term healthcare.

If you’re going to spend some of your golden years in a nursing home, California is the place to do it. Here’s why…

It’s going to cost about $10,000 per month to keep you at a long-term healthcare facility. Medicare will only pay for this the first couple months — after that, you’re on your own.

Medicaid and Medi-Cal are different programs than Medicare, and they will help you pay that bill, but only when you don’t have the funds to pay for it yourself. You’re allowed to keep your house under these programs, but only if you plan to go back to living in it or if you have a spouse still living there. These government agencies will keep track of how much money they spend on your care. Then, when you (and your spouse) have passed away, the government will take the amount it spent on your healthcare out of your estate (mostly from the value of your house) instead of letting you leave it to your kids.

You can avoid this by using trusts. The reason California is the best place to be for your advanced years is that you can protect your house from this “pay back” feature with a simple revocable (living) trust. Just put your house in a revocable/living trust, and the government is unable to take it to reimburse itself for your care. In other states you have to use an irrevocable trust, which is a harsh and unpleasant thing to do. There is still a place in California planning for the irrevocable trust, but it is not needed as widely.

The difference is that a revocable/living trust is like a cardboard box you put your assets into. You can change it every day if you like. Put things in, take things out.

The irrevocable trust is like a pirate treasure chest where you put your assets in, lock it up, and then give the key to someone else! I hope the key holder is someone you can trust, but removing yourself from the control of the asset is the only way to truly protect those assets. The ability for most people to steer clear of the “pirate treasure chest” while planning for their advanced years, without putting their assets at risk, is one of many reasons why it’s great to live here in sunny California.

Like any trust, a revocable trust in California also makes sure that your final wishes are followed while avoiding the lengthy probate process, and it allows you to put requirements in place for your beneficiaries before they get their money, like finishing college. You can even require that money be kept in a trust for an heir’s lifetime, giving them just an allowance if they have shown themselves to be irresponsible with money.

Jeff Gaffney is a 28-year San Diego attorney, former stock broker and retired Navy Captain (Reserve and Active Duty).