Does Medi-Cal estate recovery still exist in California?

Yes, but only against probate estates and only for benefits received at age 55 or older. If the parent dies with assets in a revocable living trust, joint tenancy, or transfer-on-death deed (assets that pass outside probate), Medi-Cal can’t recover from those. This is the central planning move: keep the home and major assets out of probate. Estate recovery is also waived for surviving spouses, minor or disabled children, and in hardship cases.

What is share of cost?

When a person’s monthly income exceeds the Medi-Cal income limit for the applicable program, they have a share of cost: the amount they must pay each month before Medi-Cal pays the rest. For a nursing-home resident, share of cost is typically most of their Social Security and pension income, minus a small personal-needs allowance (currently $35 per month for SNF residents) and minus the allocation to a community spouse if applicable. Share of cost is income-based, and the 2026 asset-limit reinstatement didn’t affect it.

Do I still need a Medi-Cal-compliant annuity or life-estate deed?

It depends on the assets involved. DRA-compliant annuities (single-premium, immediate, non-assignable, naming the state as residual beneficiary) convert countable assets into an income stream for the community spouse. During the 2024-2025 no-limit window the eligibility reason for using them disappeared. With the asset limit back in 2026 ($130,000 single, $195,000 couple), an applicant whose countable resources exceed the limit may again have a reason to consider this kind of planning. Life-estate deeds remain useful for estate-recovery avoidance, because the property passes outside probate to the remainderman at the parent’s death.

Who should be doing Medi-Cal planning?

A California elder-law attorney. The intersection of Medi-Cal estate recovery, the home, the spouse, the IRS, and the eventual probate is not a generalist’s area. Even a high-quality estate planner who doesn’t specifically practice elder law can miss estate-recovery exposure. The cost of an elder-law engagement (typically $3,000 to $8,000 for a planning package, more for complex estates) is small compared to the recovery that can be avoided.

What’s the difference between Medi-Cal planning and estate planning?

Estate planning manages what happens at death: who inherits, how taxes are paid, whether probate is avoided. Medi-Cal planning manages what happens during a long-term care stay: who pays for the nursing home, how the community spouse is protected, what gets recovered after death. The two overlap (a living trust serves both). But the goals differ. A good elder-law attorney does both at once.

What guidance did DHCS issue on these changes?

Two waves. DHCS first issued All County Welfare Directors Letter (ACWDL) 23-14 in late 2023 directing counties to stop counting assets for non-MAGI Medi-Cal effective January 1, 2024. Then, after the Legislature passed AB 116 in 2025, DHCS issued ACWDL 26-02 reinstating an asset limit for those categories effective January 1, 2026: $130,000 for a single applicant, $195,000 for a couple, plus $65,000 for each additional household member. County eligibility workers again verify countable assets for the affected categories. Families with questions about how a denial, termination, or reinstatement affects their case can ask the county or a Medi-Cal eligibility worker to review it.

What does an elder-law attorney actually do in 2026?

Three things mostly. First, structure the estate to keep assets out of probate so Medi-Cal estate recovery has nothing to claim. That means a funded living trust, life-estate or transfer-on-death deeds, coordinated beneficiary designations. Second, evaluate whether the home should stay in the parent’s name (better tax basis at death) or be transferred during life (estate-recovery protection but loss of full step-up). Third, handle the spousal-impoverishment math and fair-hearing requests when one spouse needs nursing-home care and the other stays home. With the asset limit back in 2026, evaluating whether an applicant’s countable resources sit under the $130,000 single or $195,000 couple limit is again part of the work, though the limits are far higher than the historic $2,000 floor.

What are the most common mistakes families make?

Five recur. (1) Transferring the home to children before death, losing the stepped-up basis under IRC § 1014 and creating large capital-gains tax when the children eventually sell. (2) Drafting a living trust but never funding it (no new deed recorded, accounts left in the parent’s individual name). (3) Naming a single adult child as joint owner of a bank account, which creates gift-tax exposure and exposes the account to the child’s creditors. (4) Believing an out-of-state attorney’s advice that the family must wait five years before applying, when California has not enforced the federal look-back for years. (5) Missing the share-of-cost notice and fair-hearing window for the community spouse, locking in a lower monthly maintenance allowance than the family is entitled to.

Should I DIY a Medi-Cal application or use an attorney?

A straightforward application for a single parent with modest assets, well under the $130,000 limit, is often DIY-able with help from CANHR fact sheets, the California Health Advocates online guides, and HICAP (Health Insurance Counseling and Advocacy Program) volunteers. An attorney is worth the cost when there is a community spouse, countable assets near or above the limit, a home worth more than a few hundred thousand dollars, multiple properties, a small business interest, an existing irrevocable trust drafted under earlier rules, or any meaningful estate-recovery exposure. A $250 to $500 initial consultation can settle which lane to take.

Medi-Cal planning after the 2026 asset-limit reinstatement

Q: Does California have a Medi-Cal asset limit in 2026?

Yes. For a brief window in 2024 and 2025 there was no asset limit for non-MAGI Medi-Cal (the elderly, blind, and disabled categories that cover long-term care). Effective January 1, 2026, California reinstated an asset limit for those categories: $130,000 for a single applicant, $195,000 for a couple, plus $65,000 for each additional household member. The home, one vehicle, and personal belongings remain exempt. Income is still counted; estate recovery still applies. Note that SSI-linked Medi-Cal uses the separate $2,000 SSI resource limit, and the MAGI categories (expansion adults and children) have no asset limit at all.

Q: Is there still a look-back period for transfers?

California stopped enforcing the transfer-of-assets penalty period for most Medi-Cal long-term care applicants in 2017 due to non-implementation of the federal Deficit Reduction Act (DRA) of 2005. In practice, transfers of money or property within the 30 months before application were no longer being penalized for most cases. Transfers made during the 2024-2025 no-limit window are not penalized. With the asset limit back as of January 1, 2026, an applicant’s countable resources matter again, but the transfer-penalty machinery is still not being enforced for most long-term care cases. Some federal DRA rules around irrevocable-trust transfers can still create issues; an elder-law attorney can evaluate.

What changed on January 1, 2026

California reinstated the asset limit for Medi-Cal in the non-MAGI categories, which include the long-term care categories for the elderly, blind, and disabled. For a brief window in 2024 and 2025 there was no asset limit at all for these categories. As of January 1, 2026, an applicant can hold up to $130,000 (single) or $195,000 (a couple), plus $65,000 for each additional household member. The home, one vehicle, and personal belongings remain exempt. This followed AB 116, passed by the Legislature in 2025, and DHCS guidance in ACWDL 26-02.

For families this means countable resources matter again, but the bar is far higher than the historic $2,000 floor. A parent applying for Medi-Cal nursing-home coverage can keep a home, one vehicle, and personal belongings outside the count, plus up to $130,000 in other countable resources. Eligibility turns on countable assets, income, residency, and medical need.

What didn’t change

Estate recovery

California Medi-Cal still recovers from the probate estates of Medi-Cal beneficiaries who received benefits at age 55 or older. The Department of Health Care Services (DHCS) Estate Recovery Program files a claim in the probate estate for the amount paid out. Recovery is limited to the probate estate (not the broader gross estate), and there are exemptions: a surviving spouse, a surviving minor child, a surviving child of any age who is blind or disabled, and undue-hardship waivers.

The central planning move, then, is to keep assets out of probate. Common methods:

Revocable living trust holding the home and brokerage accounts
Joint tenancy with right of survivorship (with planning caveats)
Transfer-on-death (TOD) deed for real property under California Probate Code § 5600 et seq.
POD (payable-on-death) designations on bank accounts
Beneficiary designations on brokerage accounts, IRAs, and life insurance

Done right, a parent dies with no probate estate, so estate recovery has nothing to claim against. Done wrong, the family learns about estate recovery six months after the funeral when a DHCS lien letter arrives.

Share of cost

For Medi-Cal applicants whose monthly income exceeds the program’s income limit, share of cost applies. The applicant must contribute a calculated portion of their income each month before Medi-Cal pays. For an SNF resident, the calculation is roughly:

Gross monthly income (Social Security, pension, retirement distributions)
Minus the personal-needs allowance ($35 per month for an SNF resident)
Minus the community-spouse maintenance allowance (if there is a community spouse)
Minus Medicare premiums and other health insurance premiums
= Share of cost (paid to the facility each month before Medi-Cal pays the rest)

Share of cost is the part that neither the 2024 elimination nor the 2026 reinstatement touched. Income still matters. A parent with $4,500 a month in Social Security and pension income still pays most of it to the SNF.

Spousal impoverishment

Federal Medicaid law protects a community spouse (the spouse who stays at home while the other is in a nursing facility) from being impoverished. The community spouse has a Community Spouse Resource Allowance (CSRA) and a Minimum Monthly Maintenance Needs Allowance (MMMNA). These rules still apply in California, for both resource allocation between spouses and share-of-cost allocation. For 2026 the CSRA runs from a minimum of $32,532 up to a maximum of $162,660, and the MMMNA runs from a floor of about $2,555 up to a maximum of $4,066.50 per month. The dedicated spousal impoverishment guide covers this in detail.

The historical look-back, in plain English

Before 2017, California enforced a 30-month look-back for transfers of assets without fair consideration: gifts to family, below-value sales, transfers into irrevocable trusts. A penalty period of Medi-Cal ineligibility was imposed based on the amount transferred. The federal Deficit Reduction Act (DRA) of 2005 extended this to 60 months, but California never implemented the DRA extension, and in 2017 California effectively stopped enforcing the transfer penalty for most long-term care applicants.

Transfers made during the 2024-2025 no-limit window are not penalized. With the asset limit back as of January 1, 2026, countable resources matter again, but the transfer-penalty machinery is still not being enforced for most long-term care cases. Transfers also carry tax consequences (loss of stepped-up basis on the home, gift-tax reporting on large transfers), which remain a central part of any planning conversation.

DRA-compliant annuities and life-estate deeds

A DRA-compliant single-premium immediate annuity is a tool to convert a community spouse’s countable assets into a stream of income, avoiding the transfer penalty. During the 2024-2025 no-limit window the eligibility reason for using it largely evaporated. With the asset limit back in 2026, a couple whose countable resources exceed the $195,000 limit may again have a reason to consider this kind of planning.

A life-estate deed transfers the remainder interest in the home to the children, while the parent keeps a life estate (the right to live in the home for life). At the parent’s death, the home passes to the remaindermen automatically, outside probate, with the children receiving a full stepped-up basis under IRC § 1014 (because the parent retained a life estate). This remains a powerful estate-recovery avoidance tool, though a revocable living trust often accomplishes the same goal with more flexibility.

How the rules moved: 2024, 2025, and 2026

For decades, qualifying a parent for Medi-Cal long-term care looked like a financial obstacle course. The historic asset floor was $2,000 for a single applicant. Families spent months restructuring: opening Medi-Cal-compliant annuities to convert savings into income, signing life-estate deeds, transferring brokerage accounts into the community spouse’s name, sometimes spending real money on dental work or a roof to legitimately reduce countable resources.

On January 1, 2024, DHCS (in ACWDL 23-14) directed counties to stop counting assets entirely for non-MAGI Medi-Cal (the elderly, blind, and disabled categories that cover long-term care). For two years there was no asset limit at all. Then the Legislature passed AB 116, and effective January 1, 2026, DHCS (in ACWDL 26-02) reinstated an asset limit for those categories: $130,000 for a single applicant, $195,000 for a couple, plus $65,000 for each additional household member, with the home, one vehicle, and personal belongings exempt. A parent whose countable resources sit under that limit, with income and medical need met, can qualify for Medi-Cal nursing-home coverage.

What stays the same across all three periods:

Estate recovery against probate estates (still alive, still aggressive in California)
Share of cost based on monthly income (untouched by either change)
Spousal-impoverishment income and resource allocation when one spouse stays at home
Eligibility for the Assisted Living Waiver (ALW), which uses long-term care Medi-Cal eligibility rules
Coordination with IRS basis rules, Social Security, and California probate law
Federal rules around certain irrevocable-trust transfers

For California families in 2026, the asset limit is back, but at a level far above the historic $2,000 floor. Two risks sit on either side: under-planning for estate recovery and share of cost, and over-engineering based on advice written for the old $2,000 era.

When not to over-engineer

Old elder-law playbooks built around the $2,000 floor called for irrevocable Medicaid-protection trusts, careful asset moves between spouses, annuity ladders, and life-estate deeds as a routine package. With the 2026 limit at $130,000 single and $195,000 couple, much of that is unnecessary for families whose countable resources sit comfortably under those numbers. Common over-engineering mistakes to avoid:

Transferring the home into an irrevocable trust during life when a revocable living trust accomplishes the probate-avoidance and estate-recovery goal, and preserves the full stepped-up basis at death under IRC § 1014.
Gifting cash to adult children to get under the limit when countable resources are already under the $130,000 single or $195,000 couple limit, since the gift creates gift-tax reporting obligations plus exposure to the children’s creditors and divorces.
Buying a Medi-Cal-compliant annuity to convert savings to income when the savings already sit under the limit. The annuity has real costs and locks up principal that could have stayed liquid.
Following a five-year wait suggested by an out-of-state attorney when California has not enforced the federal look-back for years.

The center of gravity for planning is narrower than the old $2,000-era playbook: checking countable resources against the reinstated limit, probate avoidance to defeat estate recovery, a current durable power of attorney, a current advance healthcare directive, beneficiary designations that match the trust, and spousal-impoverishment math when applicable.

What counts vs. what doesn’t for eligibility

As of January 1, 2026, non-MAGI Medi-Cal counts assets again, up to $130,000 for a single applicant and $195,000 for a couple, with certain assets exempt. Income is also counted, and certain non-financial eligibility criteria apply. Quick reference:

Category	Counts for eligibility?	Notes
Checking and savings	Yes (countable)	Counts toward the $130,000 single / $195,000 couple limit
Brokerage and investment accounts	Yes (countable)	Counts toward the asset limit
Primary home	No	Exempt; estate-recovery exposure if it passes through probate
Second property, rentals	Yes (countable)	Counts toward the asset limit; income they generate also counted
Retirement accounts (IRA, 401k)	Varies	Treatment depends on payout status; required distributions count as income. Confirm with a Medi-Cal eligibility worker
Cash-value life insurance	Yes (countable)	Cash value counts toward the asset limit
Vehicles	No (one)	One vehicle is exempt; additional vehicles count
Social Security, pension, annuity income	Yes	Drives share-of-cost calculation
Investment income, dividends, rent	Yes	Counted monthly
Medical need and California residency	Yes	Both non-financial eligibility criteria

How to actually plan (step by step)

For a family supporting a California parent who may need long-term care now or in the next few years, the practical sequence in 2026 looks like this:

Inventory the assets. Home, second properties, bank accounts, brokerage accounts, retirement accounts, cash-value life insurance, business interests, vehicles, valuable personal property. Note current title, beneficiary designations where applicable, and approximate value.
Pull current documents. Existing will, trust, durable power of attorney, advance healthcare directive, deeds, beneficiary forms. Note the dates: any planning document drafted before 2024 should be reviewed against current Medi-Cal rules.
Tally countable assets. Add up checking, savings, brokerage, second properties, and cash-value life insurance, then compare against the $130,000 single or $195,000 couple limit. The home, one vehicle, and personal belongings are exempt.
Estimate income. Social Security, pensions, IRA distributions, rental income, investment income. This drives the share-of-cost calculation, which neither the 2024 nor the 2026 change affected.
Identify estate-recovery exposure. Anything that will pass through probate (assets in the parent’s individual name with no POD/TOD designation and no trust) is potentially recoverable by DHCS after death if the parent received Medi-Cal at age 55 or older.
Consult a California-licensed elder-law attorney. Use the State Bar Lawyer Referral Service, NAELA member directory, or CELA certified attorney directory through the National Elder Law Foundation. Initial consultations typically $250 to $500. Bring the inventory.
Fund or update a revocable living trust. If one exists, confirm the home and major accounts are actually titled to the trust (not just listed on a schedule). If one doesn’t exist, draft one and fund it. Drafting typically $2,000 to $6,000 in California.
Update beneficiary designations. Retirement accounts, life insurance, POD bank accounts, TOD brokerage accounts. Coordinate with the trust so nothing falls through.
File the Medi-Cal application when needed. County social services office or online through BenefitsCal. Bring documentation of income, Medicare card, identification, proof of California residency, and asset documentation, which non-MAGI categories require again as of January 1, 2026.
Handle the spousal-impoverishment notice if applicable. If there is a community spouse, the county issues a share-of-cost notice. Review the MMMNA calculation and file a fair-hearing request within 90 days if actual shelter costs justify a higher allowance.
Track ACWDL updates annually. DHCS issues new All County Welfare Directors Letters with updated MMMNA figures, personal-needs allowances, and any rule clarifications. Confirm planning is current each year.

Mistakes families make

The most expensive mistakes are usually invisible until much later, when the family realizes something could have been done and wasn’t. The recurring ones:

Transferring the home to children during life. Loses the stepped-up basis at death and can create six-figure capital-gains tax when the children eventually sell. Almost never the right move post-2024.
Drafting a trust and never funding it. The trust document is signed, the binder sits on a shelf, the home is never retitled. At death, the home goes through probate exactly as if no trust existed.
Joint-owning a bank account with one adult child. Creates gift-tax reporting, exposes the account to the child’s creditors and divorces, and creates inheritance inequality among siblings.
Following pre-2024 elder-law advice in 2026. Annuity ladders, gifting plans, and elaborate irrevocable trusts were designed for a different rule set. Old binders need a fresh review.
Missing the share-of-cost or fair-hearing window. The community spouse has 90 days from the share-of-cost notice to request a higher MMMNA. Miss the window and a lower monthly allowance can lock in for the duration of the institutionalized spouse’s stay.
Believing an out-of-state attorney’s five-year wait advice. The federal 60-month look-back is not California’s rule. Acting on it can mean six figures in unnecessary private-pay nursing-home cost.

Questions to ask before hiring an elder-law attorney

The right counsel is worth the fee; the wrong counsel can be worse than no counsel. Before signing an engagement letter:

Are you California-licensed and do you practice California Medi-Cal work routinely?
Are you a member of the National Academy of Elder Law Attorneys (NAELA), or do you hold the Certified Elder Law Attorney (CELA) designation through the National Elder Law Foundation?
How has your practice changed since the January 2024 asset-limit elimination? (A vague answer is a flag.)
What is the flat fee for a planning package vs. hourly billing?
Will you handle the deed recording and account retitling yourself, or does that fall to the family?
Do you handle the Medi-Cal application itself, fair-hearing requests, and estate-recovery responses, or do you refer those out?
How do you coordinate with the tax preparer for basis and gift-tax issues?
What does your engagement cost and what does it include?

The State Bar of California Lawyer Referral Service (calbar.ca.gov) is one starting point, the NAELA member directory another, and the National Elder Law Foundation directory for CELA-designated attorneys a third. CANHR also maintains practitioner referrals focused on California Medi-Cal work.

Why an elder-law attorney, not a general practitioner

Medi-Cal planning involves several overlapping bodies of law: the Medicaid Manual, California Welfare and Institutions Code, California probate law, federal Medicaid rules, IRS basis rules, and Social Security overpayment rules. The interactions are non-obvious. A common general estate planner mistake is putting the home in a revocable living trust to avoid probate, without realizing that revocable-trust assets are still treated as countable for California eligibility and for federal Medicaid rules.

A California elder-law attorney (look for NAELA membership or Certified Elder Law Attorney CELA designation through the National Elder Law Foundation) deals with these intersections daily. Initial consultations are typically $250 to $500; a full planning package runs $3,000 to $8,000, much less than the value of preserved family assets. Talk to a California-licensed elder-law attorney before making transfers, signing deeds, or relying on a trust drafted before 2024.

Related guides and next steps

This guide explains planning options, not legal or financial advice. Talk to a California-licensed elder-law attorney about your specific situation. California Care Compass does not place referrals on Planning pages.

Medi-Cal planning in California: the asset limit is back in 2026, and what that means.