How Medi-Cal categorizes your assets
In determining eligibility, Medi-Cal divides an individual’s assets into two categories: countable assets and exempt assets. Countable assets are those assets that are required for your care, prior to receiving Medi-Cal, and typically include the following:
- Bank deposits
- IRA’s, Keogh plans, pension funds and annuities
- Cash surrender value of life insurance policies
Exempt assets are those assets that are not considered by Medi-Cal for providing care but may be subject to recovery after your death.
Income limits for single and married individuals
A single individual is allowed to have up to $2000 in cash and investments, as well as a primary residence to which they plan to return. A single individual is living in a nursing home is allowed to retain $35 of income per month for personal use, with the rest of the income being applied to the cost of her medical care. For married couples, the countable assets are different, however. The well spouse who still lives at home will be allowed to keep the home, one car, his or her own personal property, and approximately $100,000 (depending on the state’s current limits) in cash and investments. The well spouse may also receive a share of the couple’s monthly income.
1. Use your assets to pay off your debts
One way to Medi-Cal Navigators can help you to protect your assets from Medi-Cal is to use those assets to pay off your debts. In other words, you can use your countable assets to pay bills and expenses before you apply for Medi-Cal. For example, you can pay off existing loans, prepay real estate taxes or funeral expenses, and other large debts. A common example is paying off the mortgage on your home.
2. Buy assets that will not be counted by Medi-Cal
The good news is, Medi-Cal rules do not restrict spending countable assets on non-countable ones of equivalent value. In many cases a community spouse is allowed to take money from countable savings to, for example, purchase a more expensive home; repair or improve an existing home; or buy a new car, new household furnishings, or personal effects.
3. Convert your countable assets to income
Medi-Cal Navigators will suggest different strategies for converting excess assets into income that can be used by the community spouse. The primary requirement is that the community spouse receives something of equal value in exchange for those converted assets. A common strategy is to convert assets to an annuity. An annuity is basically a contract that provides for a stream of income over a period of time. However, there are only certain types of annuities that conform to the requirements imposed by Medi-Cal law. The well spouse can either spend the income from the annuity or reinvest it. That way, the spouse can effectively recoup all of the assets used to purchase the annuity.
Why Medi-Cal is concerned with asset transfers
Unfortunately, some people will anticipate needing long-term care in the future, but they don’t want to give up all of their assets in order to qualify for Medi-Cal benefits. So, they give away many of their assets to relatives in order to reduce the value of their estate. Well, Medi-Cal does not look favorably on this because those assets could have been used to pay for their own care.
What are the rules regarding property transfers?
Based on the Deficit Reduction Act, passed in 2005, your state Medi-Cal agency can impose a period of ineligibility if you give away their assets within five years of applying for Medi-Cal. “Asset transfer” includes outright gifts, charitable donations, sales of assets for less than fair market value, and forgiveness of debt. This period of ineligibility is referred to as the “look back” period, which begins when you apply for Medi-Cal. The length of this period of ineligibility will depend on the amount of property transferred.