AB 596

This bill requires the Department of Health Services to establish a long-term

care investment program that is administered and promoted by a manager, for which

investments are made by a manager, and that allows an account owner—an

individual, a married couple, domestic partners, or a trust—to establish a long-term

care investment account to cover long-term care costs. The program's functions of

administration, promotion, and investment are performed by one manager or

multiple managers performing any combination of the functions. The bill creates a

procedure for the selection of a manager and the execution of a contract with that

manager and establishes criteria on provisions to be included in the contract with a

manager.

Under the bill, an account owner must meet certain criteria, including having

attained the age of 18, except for persons designated by a trust, and being listed on

the account application. An account owner may contribute to a long-term care

investment account or may authorize another person to contribute.

The bill provides that any amount contributed to an account each year, up to

$5,500, or $8,500 for those over age 50, is exempt from taxation, as is any interest,

dividends, or other gain that accrues in the account if such amounts are redeposited

into the account. Amounts withdrawn from the account are also exempt from

taxation if the withdrawal is for a qualified use. Beginning in 2018, these dollar

amounts are indexed for inflation. Amounts contributed to an account that exceed

the maximum amount that is eligible for the tax exemption may be carried forward

to the next taxable year. Also under the bill, in calculating the itemized deductions

credit, a claimant may not include unreimbursed medical expenses to the extent that

such expenses were paid with amounts withdrawn from an account.

The bill also allows the account owner to select or change the beneficiary, and

to transfer all or a portion of the account to another account. An account terminates

upon the death of the individual account owners, and the proceeds of the account are

distributed to a beneficiary, if named by the account owner. A beneficiary may retain

the account as a long-term care investment account and becomes the account owner

if the beneficiary meets the criteria to be an account owner.

An individual account owner is not eligible for Medical Assistance programs,

including certain long-term care programs and Family Care, until the individual

spends down the income and assets in the account to a level that would qualify for

eligibility for the applicable program. For programs other than Medical Assistance

and other programs that provide long-term care services, any person who is

determining eligibility for a state or federal program must exclude from the

determination any income from or assets accumulated in an account for the account

owner, except this exclusion does not apply to eligibility for federal programs unless

the federal government approves.

The bill specifies certain uses of account funds that are considered qualified