By Judd Matsunaga, Esq.
Historically, the Issei, Nisei, and older Sansei who needed long-term care would send Grandma to Keiro Nursing Home (now Kei-Ai). Since Medicare will not pay for long-term care, families would have to “privately pay” $8,000-$12,000 per month (sometimes much more!) until Grandma was practically penniless (i.e., $2,000 or less). Then Medi-Cal would pay for her care.
But, upon her death, the state would recover benefits paid against her home, leaving nothing for the children to inherit.
Twenty-one years ago, on the front page of the Sunday L.A. Times (May 2, 2004), was an article titled “Public Pays for Wealthy Seniors’ Care” by Times staff writer Evan Halper, who wrote, “At a tremendous cost to taxpayers, aging Americans in California and across the nation are transforming themselves, at least on paper, from affluent seniors to needy individuals eligible for state health benefits.” Here’s how the article starts:
“For older Californians distressed by the thought of nursing home bills devouring their savings, the words of a Los Angeles attorney may seem astonishing: ‘We can qualify even a millionaire for Medi-Cal benefits.’ But as troubled as they may be by such an offer, officials at California’s healthcare program for the poor admit it’s possible.”
If you’re wondering, that “Los Angeles attorney” named in the article is Judd Matsunaga. In the article, I was quoted from an interview, “It’s a matter of knowing the law and working within the rules of the law to do what is legal.” In other words, if you had a million dollars and wanted Medi-Cal benefits, you can’t just give the excess money away — that would trigger a “three-year waiting period.” However, there are legal ways, e.g., spending down, buying exempt assets, stack-gifting, etc. to qualify.
The L.A. Times article also quoted state Attorney General Bill Lockyer, whose office conducted an investigation. Lockyer said, “The state has tried to limit losses by putting liens on the homes of patients after they die, but Medi-Cal officials and elder-law experts say the process can be easily evaded.”
Lockyer said there was only so much he could do: Most of the time it is legal. “If there are legal ways to legitimately pass assets to heirs, I can’t fault people for having that desire,” he said. “If somebody wants the system changed, that’s up to policymakers.”
For over 20 years, I’ve been helping families do just what Lockyer said, i.e., “legitimately pass assets to heirs.” If the attorney general “can’t fault people for having that desire,” and it’s legal, why not help families preserve their savings and protect the family home by getting Medi-Cal to pay for long-term nursing home care before they run out of money? It’s perfectly legal to do, but parents do have to transfer excess assets out of their name.
In a way, there’s a huge advantage working with Japanese American families. When I ask them, “Do you trust your children?,” 99% of the time the response is “yes.” Other ethnic communities aren’t so fortunate. One Jewish elder law attorney told me, “I would never transfer my client’s money to their children.”
In fact, every now and then, you’ll hear a story in the news where a parent transferred title to their home to a child. The next week all the belongings were on the front lawn and the child had sold the home. That doesn’t happen in our community.
There was only one time I’ve seen a elderly Japanese American man get “burned” by gifting title to his house away. After his wife passed, his grandson and wife agreed to move to Los Angeles to take care of Grandpa, but only if he gifted him the house. I told him not to do it, “Why not gift to your son and the son could gift to the grandson?” But the grandson’s wife (not Japanese) wouldn’t have it.
So against my advice, they transferred title to the grandson and his wife. Six months later the grandson and wife decided it wasn’t working out and left town. We asked them to transfer title back to Grandpa, but they wouldn’t do it.
For over 20 years, California law has allowed claims on the estates of those who received any Medi-Cal benefits when they were 55 years of age or older. In 2017, California changed the law on Medi-Cal recovery. For those beneficiaries who die on or after Jan. 1, 2017, recovery is limited to those estates that are subject to probate under California law.
For example, assets transferred via living trusts, joint tenancies, survivorship and life estates are no longer subject to recovery.
Fast forward to 2022. Medi-Cal’s asset limits were increased to $130,000 for an individual, and $195,000 for a couple. But since “millionaires” were still able to qualify for Medi-Cal, California eliminated the asset test on Jan. 1, 2024. That meant that “assets” were no longer considered part of the eligibility determination for all Medi-Cal programs. So for the last two years, a millionaire could qualify for Medi-Cal.
But, not anymore. Starting Jan. 1, 2026, when you apply for or renew your Medi-Cal, they will look at what you own. This is called an “asset check.” Assets are things you own that have value, such as bank accounts, stocks, retirement accounts, cash, vehicles, and property. Not surprisingly, the new rules are causing quite a panic, especially for families who qualified for Medi-Cal in 2024-25 with a million dollars in assets.
“What does that mean?” you might ask. It means that current Medi-Cal recipients will need to report assets at their annual renewal in 2026. If the total value of your non-exempt assets place you above the asset limit of $130,000, you may lose your benefits. In other words, Medi-Cal is reinstating the asset test back to 2022 levels effective Jan. 1, 2026.
But there’s no need to panic. The good news is, we are simply going to the same asset protection strategies that we used prior to 2022.
It is important to note that not all of your assets are counted during eligibility. Medi-Cal divides assets into two categories: exempt and non-exempt. Exempt assets are assets that do not count against eligibility. For example, the primary residence (the home) will be exempt (regardless of its value), one car, household goods and personal effects, jewelry, certain IRAs and work pension account balances, whole life insurance (face value $1,500 or less), term life insurance, burial plot, prepaid irrevocable burial plan, $1,500 in designated burial funds.
This means that you can legally “spend-down” excess non-exempt assets by buying exempt assets. This would include paying off the mortgage. For example, if the outstanding balance on the mortgage is $200,000 and we’re $100,000 over the asset test, we can pay down the mortgage.
If the house is free and clear, I’ll ask the family, “Does anyone need a new car?” A son or daughter would say, “Dad can’t drive.” I would respond, “Doesn’t matter, he’s allowed to own a car as long as it’s used from time to time to drive him to the doctor.”
The Medi-Cal Eligibility Division of the California Department of Health Care Services (DHCS) just released “Important changes about Medi-Cal asset limits rules” dated November 2025. It says, “If you are over the asset limit (i.e., $130,000 for one person, $195,000 for a married couple), you may want to consider spending some of your money or transferring countable assets out of your name so that you can continue receiving coverage.” The same letter provides some examples of ways to reduce/spend-down assets, including:
- Pay medical bills
- Buy clothes or items for your home
- Pay rent or your home mortgage
- Pay educational expenses
- Make repairs to your home
- Pay off your auto loan
- Pay off other debts
However, the problem with “spending down” assets is the money is gone. Most families want to have access to their money in case of a rainy day. If you want liquid assets to stay liquid, e.g., cash to stay cash, there’s a legal way to do it.
Let’s say you scrimped and saved your whole life and have a million dollars. Now, you’re in a nursing home and need to qualify for Medi-Cal. What do you do? What can you do???
THIS IS IMPORTANT!!! The following is not my opinion (i.e., from a private attorney making things up); the following comes directly out of the DHCS letter:
Will transferring assets out of my name affect my Medi-Cal?
For most individuals, giving away or selling their assets does not impact their Medi-Cal eligibility.
If you are living in a nursing home or may need long-term care Medi-Cal in the future, assets that you give away in 2025 will NOT affect your Medi-Cal benefits.
However, after Jan. 1, 2026, giving away your non-exempt (counted) assets for less than their value could delay the effective date of your coverage for long-term care Medi-Cal.
How can I reduce my countable assets?
Most individuals can give away or sell their countable assets to bring themselves within the asset limit without impacting their Medi-Cal eligibility.
If you are living in a nursing home or may need long-term care Medi-Cal in the future, assets that you give away in 2025 will NOT affect your Medi-Cal benefits. After Jan. 1, 2026, individuals who want to qualify for long-term care Medi-Cal, and are over the asset limit, must spend down their countable assets to qualify. Spending down your assets is buying things you want or need to reduce your countable assets.
In conclusion, the point of this Rafu Shimpo article is: Assets that you give away in 2025 will NOT affect your Medi-Cal benefits. So GIFT NOW! Gift CAREFULLY, but Gift NOW.
You have a short “window of opportunity” to transfer assets NOW before the asset test returns on Jan. 1, 2026. Even if you’re not quite ready to act now, it is still be a good idea to consult with a qualified Medi-Cal planning attorney as soon as possible. It will be much more difficult to qualify after the new year.
Judd Matsunaga, Esq., is the founding partner of the Law Offices of Matsunaga & Associates, specializing in estate/Medi-Cal planning, probate, personal injury and real estate law. With offices in Torrance, Hollywood, Sherman Oaks, Pasadena and Fountain Valley, he can be reached at (800) 411-0546. Opinions expressed in this column are not necessarily those of The Rafu Shimpo.