Medi-Cal planning is one of the most important yet misunderstood parts of estate and long-term care planning for California families. In this episode of Estate Planning Beyond the Binder, Brian Chew, managing partner of OC Wills and Trusts, explains how seniors can qualify for Medi-Cal benefits while protecting their homes and financial assets.
What Is Medi-Cal and How Does It Work for Long-Term Care?
Medi-Cal is California’s version of Medicaid, the government-run program that helps cover medical expenses for individuals with limited income and resources. One of its most critical roles is paying for long-term care in nursing homes.
The cost of a nursing home in Orange County currently averages around $10,000 per month. Unlike Medicare, which only covers short-term rehabilitation, Medi-Cal provides ongoing nursing home coverage when a doctor determines 24/7 medical supervision is necessary.
It is important to note that Medi-Cal does not generally cover assisted living or board-and-care facilities, which means families often pay those expenses out of pocket.
What Are the Financial Requirements for Medi-Cal Eligibility?
To qualify for Medi-Cal’s nursing home benefit, individuals must have less than $2,000 in financial assets. This includes cash, stocks, and bonds but excludes certain “exempt” assets.
Exempt assets include:
- A primary residence
- One vehicle
- Most personal belongings
When someone has more than $2,000 in countable assets, a common strategy is to “spend down” by paying off debts, mortgages, or purchasing necessary items. This reduces available cash while preserving long-term value in exempt assets like the family home.
What Is the Medi-Cal Look-Back Period?
California has a 30-month look-back period for Medi-Cal eligibility. This means the state reviews all financial transactions during the previous 30 months.
If assets were given away, transferred, or sold for less than fair market value, Medi-Cal considers it a gift. These transfers can result in disqualification from benefits for up to the full 30-month period.
Unlike some other states, which use a 60-month look-back period, California’s rules are somewhat shorter—but still require careful planning.
What Are the Biggest Mistakes Families Make?
One of the most common mistakes is unnecessarily giving away the family home. Many families assume they must transfer ownership to children in order to qualify for Medi-Cal. In reality, a home is considered an exempt asset and does not disqualify someone from receiving benefits.
Giving away the home can also create significant tax issues for children and open the door to unintended problems if the child later faces divorce, lawsuits, or death. A better approach is placing the home in a revocable living trust. This keeps ownership with the original owner, avoids probate, and eliminates the need for Medi-Cal estate recovery liens.
Another frequent mistake is transferring assets too late in the process, which can trigger penalties under the look-back period.
How Does Medi-Cal Estate Recovery Work?
Estate recovery rules have changed in California. In the past, Medi-Cal would seek reimbursement for benefits paid by sending questionnaires to families after a recipient’s death. Many families unknowingly paid money back, not realizing the questionnaire was voluntary.
Today, recovery occurs only through the probate process. If assets such as a home are properly titled in a revocable trust, probate can be avoided and Medi-Cal cannot place a lien. This makes trust planning a vital part of asset protection.
What Tools Help Families Preserve Assets?
Planning ahead is critical. Brian Chew emphasizes that families should begin Medi-Cal planning in their 50s or 60s, well before long-term care is needed. Options may include:
- Revocable living trusts to avoid probate and estate recovery.
- Irrevocable trusts to transfer ownership of assets while retaining some protections, though these must be set up well before care is required to avoid look-back penalties.
- Long-term care insurance or other financial strategies to pay for assisted living, which Medi-Cal generally does not cover.
The key question families must ask is how much control they are willing to give up. Once assets are transferred into an irrevocable trust or given to children, they are no longer under the parent’s control, which can create risks.
When Should Families Start Medi-Cal Planning?
The best time to begin planning is before a health crisis. Waiting until someone is already in need of assisted living or nursing care is often too late. Medi-Cal does not automatically cover assisted living, and Medicare only covers up to 100 days of skilled nursing following hospitalization.
Families should meet with an estate planning attorney or financial advisor to analyze their assets, consider future care costs, and decide whether Medi-Cal or private funding makes the most sense.
What Is the First Step in Creating a Smart Medi-Cal Strategy?
The first step is to analyze assets and determine what can be preserved under Medi-Cal rules. This typically involves:
- Identifying exempt assets such as a home and car
- Reducing countable assets to below $2,000 through strategic spending or debt repayment
- Considering trust planning to avoid probate and minimize estate recovery
Ultimately, Medi-Cal planning is about balancing asset protection with realistic expectations about long-term care costs. As Brian Chew explains, there is no one-size-fits-all solution—every family’s situation is unique.
