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California’s Governor and Legislature recently approved a budget agreement that will significantly change Medi-Cal eligibility for older adults and people with disabilities. Effective January 1, 2026, the asset test for most Medi-Cal programs will be reinstated—rolling back the elimination of asset limits that began in 2024 due to budget constraints.

This change means individuals and families applying for or renewing Medi-Cal for long-term care services will once again need to carefully account for what they own.

What Are the New Asset Limits?

Beginning January 1, 2026:

• $130,000 for an individual
• $195,000 for a couple
• + $65,000 for each additional household member

For couples using Spousal Impoverishment protections (when one spouse needs long-term care but the other well spouse remains at home):

• The “institutionalized” spouse can retain up to $130,000
• The “community spouse” may keep assets up to the Community Spouse Resource Allowance (CSRA), which is $157,920 in 2025 (this figure is adjusted annually)

When Will Assets Be Reviewed?

• New applicants: All applications filed on or after January 1, 2026, must report assets under these new limits.
• Current Medi-Cal beneficiaries: Asset reporting will take place at their first annual renewal or change in circumstance review after January 1, 2026.
  • Example: If your renewal month is August, you won’t need to report assets in 2025—but you will in August 2026.

Which Assets Count?

Medi-Cal will once again separate assets into countable and exempt categories. Exempt (non-countable) assets include:

• Your primary residence
• Household goods and personal effects
• One vehicle
• Jewelry
• IRAs or pensions if taking periodic distributions
• Whole life insurance with face value ≤ $1,500
• Term life insurance
• Burial plots, prepaid irrevocable burial plans, and $1,500 in designated burial funds
• Certain business or self-support property

For couples under Spousal Impoverishment protections, the community spouse’s IRA or work-related pension is also not counted, even if they are not taking regular distributions.

Will There Be Transfer Penalties?

Yes—beginning January 1, 2026.

• Transfers of assets on or after this date may trigger a penalty period of ineligibility for Long-Term Care Medi-Cal, depending on the value transferred.
• Transfers smaller than the Average Private Pay Rate (APPR) (set at $13,656 in 2025, amount subject to change in 2026) are not penalized.
• Transfers of exempt assets remain penalty-free.

Important: There are no transfer penalties in 2025, since assets remain exempt for the rest of that year.

Why This Matters

For 2024 and 2025, California temporarily removed Medi-Cal’s asset test, allowing thousands of families to qualify for long-term care coverage without worrying about savings and property limits. That ends on January 1, 2026.

This reinstatement will have significant consequences:

• Families may once again face “spend down” requirements to qualify.   These spend down requirements can be eliminated with proper planning
• Transfer strategies will be scrutinized under new rules if the transfers are not done correctly.
• Married couples and registered domestic partners will need careful long-term care estate planning to protect family resources.

Planning Ahead

At Botti & Morison, we are committed to keeping our clients informed of these major developments. To help families prepare, we have updated our Long-Term Care Medi-Cal Estate Planning eBook to include:

• The new 2026 asset limits
• How exemptions apply to different asset types
• Updated rules on transfer penalties
• Strategic planning options for individuals, couples, and families

Final Thoughts

Our updated free eBook, Understanding Long-Term Care Medi-Cal Planning, explains exactly what’s changing, what these new rules mean for you, and how to protect yourself before it’s too late. Download your copy now.

If you or a loved one may need long-term care Medi-Cal in the coming years, it’s critical to start planning now. The window of 2025 still allows flexibility—but those rules will close quickly in 2026.

Thanks for reading.
Christopher E. Botti, Esq., Certified Specialist in Estate Planning, Trust and Probate Law

This blog is for informational purposes only and does not constitute legal advice. Every situation is unique, and you should consult with a qualified attorney for advice regarding your specific circumstances.