Medi-Cal is California’s Medicaid program, and it is the largest payer of long-term care in the state. Most of what has been written about “Medicaid planning” — the five-year lookback, spending down to $2,000, converting assets to exempt property, half-a-loaf gifting — describes the law of other states. California is now an outlier, and in the direction that favors applicants.
California eliminated the asset test for the Medi-Cal categories that pay for long-term care. It narrowed estate recovery to the probate estate. And it never adopted the federal sixty-month lookback that most states apply. The result is that California Medi-Cal planning looks very different from Medicaid planning anywhere else, and a plan built from national content will usually be doing unnecessary work while missing what actually matters here.
The Holmes Law advises California families on Medi-Cal eligibility for long-term care, the income rules that still apply, protecting the spouse at home, and the estate planning that keeps assets outside the recovery program.
Two Different Medi-Cal Systems
Medi-Cal operates on two tracks, and knowing which one applies is the starting point.
MAGI Medi-Cal covers most adults under 65 without Medicare, using a modified adjusted gross income test based on the federal poverty level, with no asset test and no estate recovery beyond what federal law compels.
Non-MAGI Medi-Cal covers people who are 65 or older, blind, or disabled — the population that needs long-term care. Historically this was the track with the asset limit, the transfer rules, and estate recovery. It is the track this page is about.
California Eliminated the Asset Limit
Under legislation enacted in 2021, California phased out the non-MAGI asset limit in two steps. The limit first rose sharply in July 2022, and then, effective January 1, 2024, it was eliminated entirely. There is no longer a countable-asset test for the Medi-Cal categories that pay for long-term care in California.
Read that plainly, because the implications are large. A California applicant does not have to be down to $2,000. Savings accounts, a second property, brokerage accounts, retirement accounts, and life insurance with cash value no longer disqualify an applicant on the basis of value. Nobody needs to be impoverished to qualify.
Everything that follows from an asset test therefore falls away too. Californians do not need to convert savings into exempt assets, buy Medicaid-compliant annuities, prepay funerals to shelter cash, or transfer the family home in a hurry. Those techniques exist to solve a problem California no longer has, and applying them here can create genuine harm — most obviously by giving away appreciated property and forfeiting the basis step-up at death for no offsetting benefit.
Because this is a recent change and program rules continue to develop, any plan drafted before 2024, or drafted by someone applying another state’s framework, should be reviewed against the current rules before it is acted on.
Income Is Where the Analysis Sits Now
Eliminating the asset test did not eliminate the income rules, and for most families that is now the whole conversation.
A Medi-Cal recipient receiving long-term care in a facility is generally expected to contribute most of their monthly income toward the cost of that care. This is called the share of cost. The recipient keeps a small personal needs allowance for clothing, haircuts, and incidentals, and certain deductions are permitted — notably health insurance premiums, including Medicare Part B and any supplement, which is why dropping a Medigap policy to “save money” is usually the wrong move. Medi-Cal pays the balance of the facility’s cost.
For someone living in the community rather than a facility, a maintenance need level applies, and income above it produces a monthly share of cost that must be incurred before Medi-Cal pays. There are programs that improve on this outcome for many people over 65 and for people with disabilities, including an income-based program tied to the federal poverty level and a working-disabled program with a modest premium. Which program someone lands in makes a real difference to their monthly budget, and applicants are not always placed in the best one available.
Protecting the Spouse at Home
When one spouse enters long-term care and the other remains in the community, the spousal impoverishment rules apply. With the asset test gone, the resource half of those rules matters far less in California than it does elsewhere. The income half still matters a great deal.
The spouse at home is entitled to keep their own income, and where that income falls below a protected monthly allowance, income can be shifted from the institutionalized spouse to bring the community spouse up to that level — reducing the share of cost accordingly. Where the standard allowance is not enough to meet the community spouse’s actual needs, it may be increased through a fair hearing or a court order. That is a genuinely underused remedy, and it is worth pursuing where housing costs are high, which in much of California they are.
A married couple should not attempt this by themselves. The default treatment a county eligibility worker applies is not always the most favorable one available, and the difference over a multi-year stay is substantial.
Transfers and the Lookback
Most states apply a sixty-month lookback under the federal Deficit Reduction Act of 2005, penalizing uncompensated transfers made within that window. California never implemented it. California continued to apply its own shorter lookback for institutional care.
With the asset limit eliminated, the practical significance of transfer penalties for California applicants has diminished considerably — the usual reason to make a disqualifying transfer was to get under an asset limit that no longer exists. But the transfer rules have not been repealed, guidance continues to evolve, and there are contexts in which transfers still matter. The sensible posture is therefore not “transfers are free in California” but “there is usually no longer any reason to make one.” Do not give away property on the assumption that no penalty could ever apply, and do not give away appreciated property at all without first weighing the loss of the basis step-up, which for a long-held California home is frequently worth more than anything the transfer accomplishes.
Estate Recovery — and Why Probate Avoidance Is the Real Planning
Federal law requires states to recover certain Medicaid expenditures after a recipient’s death. California narrowed its program substantially, effective for deaths on or after January 1, 2017. California recovery now:
- Is limited to assets passing through the probate estate.
- Reaches only the categories of service federal law requires — principally nursing facility services and related home and community-based services for recipients who were 55 or older.
- Cannot be pursued at all against the estate of a person survived by a spouse or registered domestic partner.
- Is capped at the value of the estate, and is subject to hardship waivers.
- Allows a beneficiary to request a statement of the amount claimed.
The limitation to the probate estate is the whole game. Assets that never enter probate — a home and accounts held in a funded revocable living trust, a properly recorded transfer on death deed, joint tenancy, community property with right of survivorship, and beneficiary designations — are generally beyond the reach of California recovery.
So the most effective Medi-Cal planning available to most Californians is the ordinary probate-avoidance planning they should be doing anyway. No irrevocable trust, no giving the house to the children, no loss of control, no lost basis step-up. Fund the living trust, record the deed, keep the beneficiary designations current. That is a striking contrast with a state like Idaho, whose recovery statute expressly reaches living trusts and joint tenancy interests.
The Home
Questions about the house dominate these conversations, and in California the answers are now relatively comfortable. With no asset limit, the home’s value does not affect eligibility. With recovery confined to the probate estate, a home held in a funded trust or subject to a recorded transfer on death deed is generally protected at death.
What still deserves thought is the tax side. Keeping the home until death preserves the step-up in basis, and for a married couple holding it as community property, Internal Revenue Code section 1014(b)(6) resets the basis of both halves. Giving the home away during life sacrifices that. Separately, when the home eventually passes to a child, Proposition 19 limits the parent-child reassessment exclusion to a family home the child occupies as a principal residence, with a capped exclusion amount — so the property tax consequence should be understood in advance rather than discovered on the next bill.
Applying for Medi-Cal
Applications are filed with the county social services agency. Expect to document identity, California residency, immigration or citizenship status, income, health insurance, and medical need for the level of care requested. Even without an asset test, counties may still request financial records, and responding accurately and promptly matters — requests for verification carry deadlines, and a missed deadline produces a denial that has to be appealed rather than simply corrected.
Retroactive coverage is available for a limited number of months before the application month where the applicant would have been eligible, which can capture bills already incurred. Do not delay an application on the theory that the family should “get organized first.”
If an application is denied or a share of cost is computed incorrectly, there is a right to a state fair hearing, with a filing deadline. Errors at the county level are common enough that a denial should be reviewed rather than accepted.
None of this works unless someone has legal authority to act for the applicant. A durable power of attorney drafted with the necessary authority, and an Advance Health Care Directive, need to be in place before capacity is lost. Without them the family’s only route is a probate conservatorship.
Planning That Still Matters in California
- Fund the living trust and keep it funded. This is the estate recovery answer.
- Get the income analysis right — the program category, the share of cost, the deductions, and the community spouse allowance.
- Do not transfer appreciated property without weighing the basis step-up you would be giving up.
- Use a written personal care agreement where a family member is providing care, so payments are documented compensation rather than gifts.
- Direct an inheritance for a disabled family member into a special needs trust, so it supplements rather than replaces benefits.
- Sign the durable power of attorney and health care directive now, with the authority long-term care planning actually requires.
- Pursue IHSS where care can be delivered at home; eligibility is tied to Medi-Cal, and the elimination of the asset test widened access.
Frequently Asked Questions
Is there still an asset limit for Medi-Cal in California?
No. The asset limit for non-MAGI Medi-Cal was eliminated effective January 1, 2024. Income rules and share of cost still apply.
Does California have a five-year lookback?
California never implemented the sixty-month federal lookback and applied a shorter period. With no asset limit, transfer penalties have far less practical relevance here, but the rules are not repealed and guidance continues to change — transfers should not be made on the assumption that no penalty could apply.
Should I put the house in my children’s names?
Almost never in California. It is unnecessary for eligibility, unnecessary to defeat recovery if the home is in a funded trust or covered by a transfer on death deed, and it forfeits the basis step-up while exposing the property to the children’s creditors and divorces.
Will Medi-Cal take our house if my husband is still living in it?
No. California cannot pursue recovery against the estate of a person survived by a spouse or registered domestic partner. Planning should still address what happens at the second death.
Can I qualify if I am already in a nursing home?
Yes. Crisis applications are routine, and California’s rules make them far more straightforward than in most states. Retroactive coverage may also capture bills already incurred.
Speak With a California Medi-Cal Planning Attorney
The Holmes Law advises California families on Medi-Cal eligibility for long-term care, share of cost and community spouse income protection, estate recovery and the trust and deed planning that avoids it, personal care agreements, special needs trusts, and appeals of county determinations.
To discuss Medi-Cal planning, contact the office. You may also want to review our pages on California elder law, CA long-term care, CA special needs trusts, and CA incapacity and powers of attorney.