Eligibility requirements relating to assets

This is another installment in our series on Medi-Cal planning. We have been discussing Medi-Cal eligibility from the standpoint of income. In this blog post we will discuss eligibility requirements relating to assets. In analyzing our client’s situation we have to consider assets. If the client’s assets are of a value greater than what Medi-Cal allows we will not be able to apply for Medi-Cal.

For Medi-Cal purposes there are two different types of assets: exempt and countable. Exempt assets are the assets the applicant is allowed to own and still qualify for Medi-Cal. Countable assets will prevent eligibility. Before submitting our client’s Medi-Cal application we want to make sure he has only exempt assets.

EXEMPT ASSETS

The following assets are generally exempt and therefore not counted in determining long term care Medi-Cal eligibility:

• Your principal residence. Your home is exempt from consideration including if the home is a multiple dwelling unit, one of which is the principal residence of the Medi-Cal applicant.

• Household goods and personal effects.
• ONE car.
• Insurance policies.  Whole life (if total face value is $1,500 or less) and term life.
• Burial plots.  Burial plots are totally exempt including headstone, crypts, etc.
• Prepaid irrevocable burial plan of any amount and $1,500 in designated burial funds. These designated funds must be kept separate from all other accounts.
• Cash reserve up to $2,000.  This includes savings, checking, etc. for the applicant.

• IRAs, 401Ks and Work-Related Pensions.  
  • If the account or pension is in the applicant’s name, the cash surrender value or balance, regardless of value, shall be considered exempt if the applicant receives regular distributions.
  • If the account or pension is in the community spouse’s name it is totally exempt.
• Non-Work-Related Annuities. Generally, the cash surrender value or balance of the annuity is considered exempt if the applicant is receiving periodic payments of interest and principal. The applicant rules relating to annuities are very complicated and vary depending on when the annuity was purchased.

• Other Real Property.  Other real property can be exempt if the net market value of the property (which is the assessed value or fair market value, whichever is less, minus any encumbrances such as mortgages, loans, etc.) is $6,000 or less and the beneficiary is “utilizing” the property, meaning, receiving yearly income of at least 6% of the net market value. Property used as a business can also be exempt if it is actually used as a business, and reported to the IRS.
• Community Spouse Resource Allowance (CSRA) for married couples for 2018:  $123,600. This is the amount of money or other assets the community spouse may own.

Example: Single
Henry is 65 and owns his home worth $650,000 and a car worth $7,000. He has an IRA worth $25,000, from which he receives $100 per month. He has $19,000 in his checking and savings accounts.

Exempt Assets                                                                        Countable Assets

Home $650,000                                                                       Cash $17,000
Car $7,000
IRA $25,000
Cash $2,000

Henry has $17,000 too much to be eligible for Medi-Cal and will need to do some planning in order to be eligible.

Example: Married
Henry, 65, and Wendy, 67, own their home worth $650,000, a car worth $7,000 and another car worth $15,000. Henry has an IRA worth $25,000 from which he receives $100 per month. Wendy has an IRA worth $95,000. Together they have checking and savings of $27,000 and an investment account worth $50,000.

Exempt Assets                                                                       Countable Assets

Home $650,000                                                                      0
Car $15,000
Henry’s IRA $25,000
Wendy’s IRA $95,000
Henry’s Cash Reserve $2,000
Wendy’s Community Spouse Resource Allowance $82,000 (second car $7,000, cash $25,000, investment account $50,000)

Henry and Wendy have no countable assets, so Henry is eligible for Medi-Cal based on their assets.

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If you’re someone who needs to include Medi-Cal planning in your estate plan, we can help. For more information on what Medi-Cal planning should look like, visit https://absolutetrustcounsel.com/practice-areas/medi-cal-planning/ for even more resources to help get you started.