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 Exactly Is Changing for Medi-Cal in 2026?
California will reinstate an asset test for Medi-Cal long-term care. What is the asset limit to qualify for Medi-Cal? To qualify, an individual can hold no more than $130,000 in countable assets; a married couple, $195,000. Anything above that? 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 income still matters, assets are now back in the spotlight. For many Californians, that means rethinking estate plans, trusts, and gifting strategies—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 affording $12,000–$15,000 per month for skilled nursing care. 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 planning risk seeing their IRAs counted against them, forcing spend-downs, liquidations, or premature withdrawals that trigger taxes and penalties. Coordinating estate planning and tax planning is essential.
The “sandwich generation”—adult children juggling kids and aging parents—face impossible choices: quit work to provide care, drain family savings, or lose the family home to Medi-Cal recovery without a Medi-Cal Asset Protection Trust (MAPT) or gifting strategy.
Even those already on Medi-Cal aren’t safe. In 2026, Medi-Cal will conduct redeterminations, and many individuals will suddenly exceed the limit and receive a “Notice of Action” ending their benefits. Bottom line: if you’re on Medi-Cal now, assume your eligibility will be re-reviewed next year.
Can I Still Qualify in 2026 If I’m Already on Medi-Cal?
Possibly—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—using trusts, gifting, or other tools—may preserve 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.
That means: Transferring assets during this window will NOT cause a period of ineligibility for nursing home level of care. Since assets are not part of the 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 (mid-2025) without triggering immediate penalties. But unplanned gifting can still backfire in big ways once 2026 arrives.
On January 1, 2026, Medi-Cal reinstates the 30-month lookback.
At that point, the state will examine all transfers made since mid-2023 — even 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 before 2026 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 be counted against you when applying under the new rules.
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 — it sees the $130,000 transfer — and imposes 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 do it wrong, and 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 is the Medi-Cal Asset Protection Trust (MAPT)—an irrevocable trust that shields assets from being “countable” while 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 strategic gifting over time
Yes, you give up direct control, but you keep the benefits: protection from spend-down and potential savings of hundreds of thousands in care costs.
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—DIY gifting is a recipe for disaster.
What Should You Do Right Now to Prepare for Medi-Cal Asset 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—make sure they include Medi-Cal planning. If they don’t, you may lose your 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 forget. 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—anything 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 court cannot be touched by Medi-Cal’s recovery efforts. Many of our clients create a 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 changes make planning even more critical.
What We Do
The lawyers and staff at CunninghamLegal help people plan for some of the most difficult times in their lives; then we guide them when those times come.
Our experienced legal team specializes in Estate Planning, Tax Planning, Business Law, and Asset Protection to help protect your wealth and legacy for generations to come. With offices across California, we offer in-person, phone, and Zoom consultations to make expert legal guidance accessible wherever you are.
Many of our clients also find our legal webinars invaluable. We cover a wide range of essential topics, including California-specific issues.
Ready to take the next step? Call us at (866) 988-3956 or schedule an appointment online.
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.
