Are you or your parents counting on Medi-Cal to pay for long-term care? If so, 2026 brings massive changes that could jeopardize your benefits and drain your life savings.
By James L. Cunningham Jr., Esq.
Beginning January 1, 2026, California Medi-Cal will once again limit your countable assets to $130,000 per person and $195,000 per couple. The “Golden Age” of unlimited assets is ending—and if you wait until late 2025 to act, it may be too late.
Why? Because Medi-Cal will review 30 months of your financial history. Transfers, gifts, and trust funding done at the wrong time—or the wrong way—can trigger months or even years of ineligibility.
This is your wake-up call: Plan now or pay later.
What Are the Changes to Medi-Cal in 2026?
California will reinstate an asset test for Medi-Cal long-term care in 2026. To meet these new Medi-Cal qualifications, an individual can hold no more than $130,000 in countable assets; a married couple, $195,000. Anything above that and you’ll have to “spend down” before Medi-Cal steps in.
Let’s say you’ve saved $250,000 for retirement. Medi-Cal will tell you to use $120,000 before you’re eligible. And remember, while household income still matters, assets are now back in the spotlight. For many Californians, that means rethinking estate plans, trusts, and gifting strategies. And you’ll need to do it fast.
What Counts as an Asset for Medi-Cal — And What Doesn’t?
Countable assets for the Medi-Cal asset test include:
- Cash
- Savings accounts
- Certificate of Deposit (CD) accounts
- Brokerage accounts
- Second homes & rentals
- Additional vehicles
Exempt assets for the Medi-Cal asset test include:
- Your primary residence
- One vehicle
- Personal items and household goods
- Retirement accounts, if you’re taking required distributions
However, beware: even if your home is exempt during your lifetime, it remains vulnerable to estate recovery. If your assets pass through Probate, the State can file a claim to recover what Medi-Cal paid. That’s why a properly funded trust—not just a will—is crucial.
Who Will Be Hit Hardest by the New Medi-Cal Asset Limits?
This change hits middle-class families the hardest. On paper, they look “wealthy” ($300,000 in savings, a rental property, maybe a second car), but in reality, they’re light-years away from being able to afford $12,000–$15,000 per month for skilled nursing care. If forced to start paying those bills without Medi-Cal asset protection, they’ll burn through their savings in a few short years.
Retirees who did “everything right” may also be blindsided. Their savings account alone could disqualify them from Medi-Cal under the new Medi-Cal limits. Traditional IRAs, 401(k)s, 403(b)s, and similar plans are exempt assets only if the owner is taking Required Minimum Distributions (RMDs), but Roth IRAs are often treated differently.
Monthly RMD payouts are treated as income, which may affect the share-of-cost you pay. Retirees without proper planning risk seeing their IRAs counted against them. This means they’re forced to spend down, liquidate, or take premature withdrawals that trigger taxes and penalties. Coordinating estate planning and tax planning is essential.
The “sandwich generation” of adult children juggling kids and aging parents face impossible choices if they don’t have a Medi-Cal Asset Protection Trust (MAPT) or gifting strategy: quit work to provide care, drain family savings, or lose the family home to Medi-Cal recovery.
Even current Medi-Cal members aren’t safe. In 2026, Medi-Cal will conduct redeterminations, where many individuals will suddenly exceed the asset limit and receive a “Notice of Action” ending their Medi-Cal benefits.
Bottom line: if you receive Medi-Cal coverage now, assume your coverage eligibility will be re-reviewed next year.
Can I Still Qualify in 2026 If I’m Already on Medi-Cal?
You could possibly still qualify for Medi-Cal in 2026 if you’re already enrolled, but only with prompt action. Medi-Cal redeterminations in 2026 will reassess your assets. A sale, inheritance, or payout could push you over the limit. Early restructuring, like using trusts, gifting, or other tools, may preserve your benefits.
What Happens If You Wait Too Long to Plan for Medi-Cal?
Right now, California families are living in a brief window for Medi-Cal planning.
Between January 1, 2024, and December 31, 2025, Medi-Cal’s asset test is suspended.
So, transferring assets during this window will NOT cause a period of ineligibility for nursing home levels of care. Since assets are not part of the Medi-Cal eligibility test, these transfers are not treated as disqualifying under Medi-Cal’s current rules.
Sounds like a free pass, right?
Not quite.
You can transfer assets right now without triggering immediate penalties. But unplanned gifting can still backfire in big ways after 2026.
On January 1, 2026, Medi-Cal reinstates the 30-month lookback.
At that point, the state will examine all transfers made since mid-2023, including those made during the no-asset-test period. If you transfer assets during that lookback, Medi-Cal treats it as if you were “hiding money” and applies a penalty (usually around $13,000 per month).
While gifts made in previous years won’t cause penalties today, they can still trigger ineligibility later if not done strategically.
If Medi-Cal determines you gave away assets without proper planning, those transfers will count against you when applying under the new eligibility requirements.
Example: You gift $130,000 to your children in November 2025.
No penalty now.
However, if you apply for Medi-Cal in mid-2026, Medi-Cal looks back 30 months and sees the $130,000 transfer. They will impose a 10-month penalty (based on approximately $13,000/month in private pay rate).
That means 10 months of ineligibility and $130,000 in out-of-pocket costs before benefits begin. So yes, you can gift now, but if you do it wrong, it will come back to bite you.
How Can You Legally Protect Your Assets for Medi-Cal Before 2026?
One of the most effective tools to protect your assets from Medi-Cal is the Medi-Cal Asset Protection Trust (MAPT). The MAPT is an irrevocable trust that shields assets from being “countable” while still maintaining some family control. This is a common Elder Care planning strategy.
Assets in a Medi-Cal Asset Protection Trust:
- Don’t count against eligibility limits if properly funded.
- Avoid estate recovery (since they bypass probate).
- Allow for strategic gifting over time.
Yes, you give up direct control, but you get to keep the benefits: protection from spend-down and potential savings of hundreds of thousands in higher costs for care.
Why Are Smaller, Strategic Gifts Better Than Big Ones for Medi-Cal Planning?
One large gift = one large penalty.
Example: gift $500,000 → 41-month penalty.
But split it into ten $50,000 gifts → 4-month penalty.
Even better, California’s penalties run concurrently. That means multiple smaller gifts at once can shrink the total penalty period—a unique advantage you won’t find in other states. But this strategy must be carefully planned by an attorney because DIY gifting is a recipe for disaster.
What Should You Do Right Now to Prepare for Medi-Cal Changes?
Start before 2026. Planning takes time, and attorneys’ calendars fill fast during the holidays. Review your estate plan, trust, and durable power of attorney and make sure they include Medi-Cal planning. If they don’t, you may lose access to coverage and any chance to act.
What Is Medi-Cal Estate Recovery—And How Can It Wipe Out Your Inheritance?
Here’s the harsh reality most families don’t realize: even if Medi-Cal pays for your long-term care, the state doesn’t just forget that they spent money on you. When you die, California can (and will) come after your estate to recover every dollar Medi-Cal spent on your behalf.
This process is called estate recovery, and it’s a legal mechanism that allows the state to file claims against your probated estate. Your family home, bank accounts, investments, and anything else that passes through Probate court becomes fair game for the state’s recovery efforts.
The state can recover up to the total amount Medi-Cal paid for your care. If Medi-Cal spent $200,000 on your nursing home costs over five years, the state can claim up to $200,000 from your estate, potentially forcing the sale of the family home to satisfy the debt.
How can you help protect your estate from Medi-Cal recovery? Assets that don’t go through Probate cannot be touched by Medi-Cal’s recovery efforts. Many of our clients create Medi-Cal Asset Protection Trusts (MAPT) because assets transferred to a properly structured irrevocable trust are designed to bypass probate.
The key is planning now, before you need care and before the 2026 Medi-Cal changes make planning even more critical.
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Warm regards, Jim
James L. Cunningham Jr., Esq.
Partner, CunninghamLegal
At CunninghamLegal, we guide savvy, caring families in the protection and transfer of multi-generational wealth.
