Medicaid is a federally funded insurance program that pays for medical services, including long-term nursing care, for individuals and families and families in financial need. In California, Medicaid is administered through a state program known as Medi-Cal. Only applicants who meet certain income and asset requirements are eligible, which can mean having to divest oneself of certain assets. But thanks to rule changes in progress, applicants may be allowed to keep a significant amount of their property while still qualifying for benefits.

Medi-Cal eligibility requirements vary from year to year. Under current rules, an unmarried individual’s monthly income cannot exceed $1,677 and total assets cannot to exceed $130,000. Some assets (or a portion of the value of certain assets) are exempt from the eligibility calculation. An applicant’s interests in real estate are exempt up to $750,000. An exemption for one motor vehicle is also allowed. In addition, applicants may exempt a limited value of jewelry and household goods. Valuations are made based on the current fair market value of each asset at the time of Medi-Cal application.

With proper Medicaid planning, an individual can reduce his or her wealth for the express purpose of qualifying for Medi-Cal. Assets can be gifted away or sold to the applicant’s intended heirs and beneficiaries. Though these transactions are perfectly legal, there are certain restrictions and guidelines for asset depletion that can affect program eligibility.

California is in the process of abandoning the asset cap. The asset limitation was raised over the last two years and will be eliminated entirely in calendar year 2024. In effect, income will be the only limiting factor for program eligibility starting next year. Nevertheless, individuals with earnings above the maximum set by the rules may have to reduce or divert some income using estate planning techniques.

While Medi-Cal is for people of any age, seniors represent the largest pool of beneficiaries. The healthcare services provided are often exorbitantly expensive for those forced to pay out of pocket. For example, long-term care at a quality nursing facility can easily cost $9,000 per month or more. Even people with substantial holdings of cash and other high-value assets can run out of money in just a few years. As such, Medi-Cal eligibility should be an integral focus for seniors creating or revising their estate plans in California.

Favaro, Lavezzo, Gill, Caretti & Heppell, PC provides elder law, Medi-Cal and estate planning advice throughout the North Bay region of California. We have offices in Fairfield and Vallejo. If you wish to create or revise a healthcare or estate plan, feel free to contact us online or call 707-674-6057 for a consultation.