By JUDD MATSUNAGA, ESQ.
In previous Rafu Shimpo articles, I’ve referenced a popular saying from Mary Kay Ash, founder of direct sales company Mary Kay Cosmetics. She said, “There are three types of people in this world: those who make things happen, those who watch things happen, and those who wonder what happened.”
Since I don’t want Rafu readers to wonder “what happened,” this Rafu article is help Group 2, i.e., those who watch things happen, so they can plan ahead.
Our government knows it cannot afford to pay for the long-term care needs of the Baby Boom generation (the leading edge turns 80 this year). Since the average age of a nursing home resident is 81 and healthcare costs are skyrocketing, politicians are trying to shift the financial burden of long-term care off the public sector and onto the private sector. Since no politician is going to run for office on a platform to raise taxes, they must “balance the budget” by cutting government spending.
The government is going to shift the financial burden of long-term care off the public sector and onto the private sector. “Say what?” you might say. The government plans to force workers to buy long-term care insurance.
There’s one state in the nation already doing it on a pilot program — Washington State. Workers are having long-term care premiums deducted from their paycheck just like Social Security. Workers are allowed to “opt out” by purchasing their own long-term care insurance, but the vast majority of workers were caught off-guard and got stuck with state-sponsored insurance that isn’t very good.
“What about California?” you might ask. Did you know that California Gov. Gavin Newsom is the leading Democratic candidate for the 2028 presidential election? Newsom would love to campaign for president on a proven track record of cutting government spending in California. For the 2026-27 budget year, Newsom proposed to save the state up to $500 million in healthcare costs by slashing Medi-Cal’s asset limit by 98%.
“Say what?” you might say (again). Currently the asset test for Medi-Cal is $130,000 for one person or $195,000 for a married couple. Add $65,000 for each additional family member (up to 10 people). The governor proposed returning to an asset limit of just $2,000 for individuals and $3,000 for married couples starting Jan. 1, 2027. Newsom cited that federal policies have imposed substantially higher costs and requirements on both state and local governments for the health and human services programs they provide to their citizens.
However, healthcare advocates and disability rights activists urged lawmakers to reject Newsom’s proposals. They called it forced poverty, saying this prevents people from saving for emergencies or for medical expenses not covered by insurance. Repair, rent, root canal, or casket? Elder rights advocates opposed Newsom’s proposals, stating that balancing a budget shouldn’t be on the backs of seniors.
After much debate, California’s 2026-2027 state budget is now final. On June 30, Gov. Newsom finalized California’s budget after negotiating with the Legislature. The deal spares some Medi-Cal programs from the governor’s proposed cuts, but it still cuts healthcare coverage that low-income Californians, older adults, people with disabilities, and immigrant communities need and deserve.
“California avoided some of the most devastating proposed Medi-Cal cuts, but this budget still takes our state in the wrong direction,” said Kim Lewis, managing director of California Advocacy. “Delaying harmful cuts does not eliminate them, and too many Californians will continue to face uncertainty about the health care they rely on. (Source: https://healthlaw.org/news/californias-final-2026-2027-budget)
The new asset limits of $21,000 for an individual and $31,000 for a couple are substantially higher than the governor’s proposed $2,000/$3000 asset limits, but still much lower than the current threshold of $130,000. The budget delays lowering the current Medi-Cal asset limits ($130,000 for an individual, $195,000 for a couple) until July 1, 2027. This is a partial win for people who would otherwise be forced to spend down their savings to qualify for Medi-Cal and long-term care.
Now that you know what happened, and when it happens, the question is how do you plan for it? First of all, don’t panic. There’s still time. But being “prepared” and “planning” couldn’t hurt. If I had the energy to host my annual Nisei Week seminars, I would try to cover the following three points: (1) Get your estate planning documents updated; (2) Think again about protecting your home; and (3) How to protect your savings.
ESTATE PLANS: Not all estate plans are equal. Some are better than others. Some of you got estate plans that didn’t include a durable power of attorney (POA) for assets. Some of you have estate plans naming people as agents and/or beneficiaries who have already passed away.
For example, if you originally named your sibling as the successor trustee, but he or she died, so you crossed out and initialed the new name. Do you think the bank is going to release money??? Probably not without a court order.
Make sure your trust allows the trustee to do long-term care planning and has the right to qualify you for Medi-Cal benefits. Also, make sure that your bank will honor your POA. You say, “Why wouldn’t my bank honor my POA?” Some banks are taking the position that the Patriot Act allows federal law to pre-empt state law, therefore giving banks the discretion (or the duty) to place other restrictions on use of POAs.
The bigger the bank, the more difficult they are. For example, Bank of America is so big that they say, “If you want to use a POA at our bank, you must fill out the BofA power of attorney.” They don’t want the cost of sending 101 different attorney-drafted POAs to their “Legal Department.”
Others have POAs that require two doctor letters of incapacity. It’s hard enough to even see your doctor, let alone two. If you are already trusting your primary care-giving child with your finances, why not make it easier for them to help you by giving them a POA that’s effective “now”?
The same goes with your living trust. Chances are, you named an adult child as your successor trustee. If you named two or more of your children as “co-trustees,” my advice is to change it. What if they don’t agree? They’d have to go to court to get a judge to decide. My advice is to appoint one child as the primary successor trustee, and the second child as the alternate.
Finally, many adult children want their parents’ trust updated, e.g., “The bank won’t talk to me because I’m only the successor trustee. They say I have to be a primary trustee.”
PROTECTING YOUR HOME: The current law on Medi-Cal recovery is a 2017 law that says the state can only recover against the probate estate. Therefore, simply putting your home in a revocable living trust that avoids probate will protect the home from recovery. NOT SO FAST!!! If they keep changing the law about the Medi-Cal asset test, is it possible that they can change the law about Medi-Cal recovery?
You bet. In fact, I’ve been expecting it. The state is running out of money and “beefing up” recovery will be done to handle the Baby Boom generation. “So what do I do?” you might ask. Since it is very likely that Medi-Cal recovery laws could be changed back to pre-2017 rules where a revocable living trust will not protect the home from recovery, you may want to transfer your home out of your name now before they change the law again.
“Say what?” you might ask. Your home is probably your biggest asset. If you want to pass your home to your children upon death as their inheritance, you can guarantee that will happen even if you need Medi-Cal in your lifetime and they change the law allowing homes to be protected from recovery.
But transferring you home out of your name (or your trust) to your children while you’re still alive has tax consequences — both capital gain tax and property tax implications.
Perhaps the biggest concern would be the loss of step-up in basis that only happens upon death. If you keep your home in your trust and it transfers to your children upon death, the children receive a full forgiveness of gain, i.e., the step-up in basis. However, if you end up in a nursing home paid for by Medi-Cal, a future law could allow Medi-Cal recovery against the home.
The solution is to transfer now with a Lifetime Right to Occupy Agreement, which still allows the step-up in basis upon your death (Estate of Linderme v. Commissioner (52 T.C. 305, 1969).
PROTECTING YOUR SAVINGS: Last year (2025), you could qualify for Medi-Cal benefits even if you had $1 million in the bank. On Jan. 1 of this year, they brought back the asset test limiting non-exempt savings to $130,000 for a single person, and $195,000 for a married couple. As mentioned above, on July 1, 2027 the new asset limits will be $21,000 for an individual and $31,000 for a married couple.
It is likely,we will soon thereafter see the $2,000 for an individual and $3,000 for a couple reinstated eventually.
You could take a “wait and see” approach, i.e., do nothing. Or you could take a more pro-active approach and start moving your money out of your name now. If your goal is to pass on as much of an inheritance to your children as possible, this approach might be best for you. You might say, “Won’t gifting my savings to my children now trigger a three-year waiting period for Medi-Cal benefits?” Yes, if you do it in one lump sum.
However, it is also possible to gift excess, non-exempt assets to your children now but only trigger a 3-6 month ineligibility period. That’s my advice. There’s very little risk to you if you trigger three months of ineligibility for Medi-Cal because if you fall down, have hip surgery, and are discharged from the hospital to the long-term care facility, Medicare (which you have if you’re over 65) will pay the first 100 days of short-term care. If you trigger six months of ineligibity, just don’t go the hospital for three months after the transfer.
In conclusion, if any Rafu Shimpo reader was looking for this year’s Nisei Week seminar that didn’t happen, I’m willing to give a free consultation. Just call the office and ask for the “Nisei Week Special.” I’d be happy to provide a private consultation and the $350 consultation fee will be waived through Aug. 31, 2026.
Judd Matsunaga, Esq., is the founding partner of the Elder Law Services of California, specializing in estate/Medi-Cal planning, probate, personal injury and real estate law. With offices in Torrance, Encino, Pasadena and Fountain Valley, he can be reached at (310) 318-2995. Opinions expressed in this column are not necessarily those of The Rafu Shimpo.