California Medi-Cal Spend Down: Asset Limits, Look-Back, and Exemptions

To spend down for California Medi-Cal in 2026, a single applicant must reduce countable assets to $130,000 or less, either by paying down debts and legitimate expenses or by converting excess cash into assets Medi-Cal treats as exempt, such as home equity, one vehicle, or an irrevocable burial trust. Gifting is the wrong move: any transfer for less than fair market value on or after January 1, 2026 falls into a 30-month look-back and can trigger a penalty period during which Medi-Cal won’t pay for nursing home care.

The 2026 Asset Limit

California suspended asset testing for Medi-Cal from 2024 through the end of 2025. On January 1, 2026, resource limits returned for all non-MAGI programs, including Long-Term Care, the Aged, Blind, and Disabled program, Medi-Cal with a Share of Cost, the 250% Working Disabled Program, and Medicare Savings Programs.¹

One person: $130,000 in countable assets
Each additional household member: add $65,000, up to 10 people

A married couple applying together has a combined limit of $195,000. Couples where only one spouse needs long-term care get more generous protections through the spousal impoverishment rules described further down.¹

If you were already enrolled in Medi-Cal when the limit returned, you don’t face an immediate cutoff. You’ll need to report asset information at your first annual renewal after January 1, 2026. Someone renewing in October 2026 has until that month; someone renewing in February has only weeks. Waiting until the last moment usually leads to rushed spending and avoidable mistakes.

Countable vs. Exempt: What You Actually Have to Reduce

The $130,000 threshold applies only to countable assets. Exempt assets never count and never need to be spent down. Every spend-down strategy is built on this distinction, because moving a dollar from the countable column to the exempt column removes it from the eligibility calculation immediately.

Assets That Don’t Count

Your primary home, as long as you, your spouse, or a dependent relative lives there, or you intend to return. California currently imposes no equity limit. A federal $1 million home equity cap is scheduled to take effect October 1, 2028, and even then homes where a spouse, minor child, or disabled child resides remain fully exempt.¹
One vehicle, regardless of value.¹
Household furnishings, clothing, and personal belongings.
Retirement accounts (IRAs, 401(k)s, Keoghs, work-related pensions) when the account holder is not the Medi-Cal applicant. If the applicant owns the account, the county eligibility worker evaluates it under more complex rules.²
Term life insurance with no cash surrender value.
Whole life insurance if the combined face value of all policies is $1,500 or less. Above that, the cash surrender value becomes countable.
Irrevocable burial funds, with no dollar cap.³
Revocable burial funds up to $1,500, kept in a separate designated account.³

Assets That Do Count

Everything else. Checking and savings accounts, CDs, stocks, bonds, mutual funds, non-retirement brokerage accounts, and second homes or rental properties all count against the limit. Up to $6,000 in equity in non-home real estate may be exempt.² Cash surrender value in whole life policies above the $1,500 face value threshold counts too.

Allowed Spend-Down Moves

Every dollar you spend down must go toward the applicant’s needs at fair market value, or toward converting a countable asset into an exempt one. Nothing you do should look like a gift or a below-market transaction.

Home Improvements and Repairs

Because the home is exempt with no equity cap, putting money into it is one of the most effective conversions available. A new roof, HVAC replacement, wheelchair ramp, wider doorways, or an accessible bathroom renovation all move countable cash into exempt equity. The work doesn’t need to be medically related, though accessibility upgrades often help the applicant or a spouse remain at home longer.

Paying Off Debt

Eliminating debt is straightforward. Pay off the mortgage, credit cards, car loans, or outstanding medical bills. Paying down the mortgage is especially efficient: it reduces countable cash and increases equity in an exempt asset in the same transaction.

Buying Exempt Assets

Replacing an aging vehicle, buying needed furniture, or purchasing clothing shifts money into exempt categories. Pay fair market value. Overpaying looks like a disguised gift and raises the same problems.

Prepaying Recurring Costs

Property taxes, homeowner’s insurance, and similar obligations can be prepaid. These are legitimate expenses that draw down countable balances without any transfer to a third party.

Irrevocable Burial Trusts

This is the most powerful pure-conversion tool California offers. Because irrevocable funeral trusts are exempt with no dollar cap, you can fund one with a substantial amount for funeral, cremation, and burial costs. The funds must be held by an authorized trustee (a bank, trust company, or cemetery authority, among others) and irrevocably designated for burial expenses.³ On top of that, you can hold up to $1,500 in a revocable burial account.

Gifts, Transfers, and the 30-Month Look-Back

Giving assets to family is the mistake that costs people the most. Any transfer of non-exempt property for less than fair market value can trigger a period during which Medi-Cal will not pay for nursing facility care.

How the Look-Back Works

Starting January 1, 2026, anyone applying for Medi-Cal nursing home coverage is subject to a 30-month look-back. Medi-Cal reviews the 30 months of financial activity before the application date for gifts or below-market transfers.¹ Transfers made before January 1, 2026 carry no penalty even if they fall inside the 30-month window. Only transfers on or after that date can trigger consequences.

California’s 30 months is shorter than the 60-month period most other states use, but it still captures nearly every last-minute gifting attempt.

How the Penalty Is Calculated

When Medi-Cal identifies a disqualifying transfer, it divides the transferred amount by the state’s Average Private Pay Rate (APPR) for nursing care. The 2026 APPR is $14,440 per month. A $57,760 gift produces a four-month penalty ($57,760 ÷ $14,440), during which the applicant pays privately for nursing home care. The penalty cannot exceed 30 months from the date of the transfer.⁴ 5 At California nursing home rates, even a short penalty can cost tens of thousands out of pocket.

Transfers That Don’t Trigger a Penalty

Not every transfer is a problem. Moving exempt property, most notably transferring the home to a spouse, carries no penalty.⁶ The look-back also targets nursing home care specifically; it doesn’t apply to home and community-based services. And a sale where you received fair market value isn’t a gift at all.

If a penalty would leave you without necessary care, you can request an undue hardship waiver. You’ll need to show that the transferred assets cannot be recovered and that being denied coverage would deprive you of essential medical care or basic needs. The nursing facility can also apply on your behalf with your written consent. Waivers are granted sparingly.

What the Community Spouse Keeps

When only one spouse needs long-term care, federal spousal impoverishment rules protect the other. These rules cover both assets and income.

The Community Spouse Resource Allowance

The Community Spouse Resource Allowance (CSRA) lets the non-applicant spouse keep part of the couple’s combined countable assets. For 2026, the CSRA runs from a floor of $32,532 to a ceiling of $162,660.⁷

The specific amount is set from a snapshot of the couple’s countable assets taken when the applicant first enters institutional care for a continuous stay of at least 30 days. The community spouse gets half of the snapshot total, subject to the floor and ceiling. With $200,000 in combined countable assets, the community spouse keeps $100,000. With $50,000, the floor guarantees them $32,532. These amounts are on top of the applicant’s own $130,000 limit.

Income Allocation

If the community spouse’s own monthly income falls below the Minimum Monthly Maintenance Needs Allowance (MMMNA), some of the institutionalized spouse’s income can be allocated to close the gap. The 2026 MMMNA floor is $2,643.75 per month, and the allocation cannot bring the community spouse’s total monthly income above $4,066.50.⁷ The actual MMMNA may be higher than the floor if the community spouse has significant shelter costs. Medicare premiums and other health insurance costs the community spouse pays are deducted from their gross income before the comparison is made.

Share of Cost If Your Income Is Too High

Non-MAGI Medi-Cal also has an income test. For 2026, the monthly income limit for aged, blind, and disabled applicants is approximately $1,836 for a single person (138% of the federal poverty level). Being over the limit doesn’t automatically disqualify you. California’s Share of Cost pathway functions like a monthly deductible: you pay the difference between your income and the maintenance need level toward medical expenses each month, and once you’ve met that amount Medi-Cal covers the rest for the month.

Qualifying expenses include doctor and hospital bills, prescriptions, health insurance and Medicare premiums, dental and vision care, medical equipment, and medically necessary home modifications. Unpaid medical bills you’re still legally responsible for can be applied too; California cannot impose a time limit on those older bills under a longstanding court order.⁸ The rules on which bills apply and when are slightly different in nursing facility cases, so confirm the specifics with the county eligibility worker.

Estate Recovery After Death

Spend-down decisions have consequences past the applicant’s lifetime. After a Medi-Cal beneficiary age 55 or older dies, the state can seek recovery for what it paid on their behalf for nursing facility care, home and community-based services, and related medical costs.⁹

For deaths on or after January 1, 2017, California can recover only from assets that pass through probate. Property held in a living trust, in joint tenancy, subject to a life estate, or in other probate-avoidance arrangements is beyond the state’s reach. IRAs, work-related pensions, and life insurance are also protected unless they name the state as beneficiary or pour back into the probate estate.

Recovery is barred entirely if the beneficiary is survived by a spouse or registered domestic partner, a child under 21, or a blind or disabled child of any age.⁹ Payments for In-Home Supportive Services and Medicare Savings Program cost-sharing are also off-limits for recovery.

Heirs who receive an estate recovery claim can apply for a hardship waiver within 60 days. California recognizes several grounds, including a homestead of modest value provision: if the estate’s main asset is a home worth 50% or less of the average home price in its county, the state may waive the claim.¹⁰ This is why probate-avoidance structures like living trusts or joint tenancy often belong in the spend-down conversation from the start, not as an afterthought once benefits are already paying out.

1
Department of Health Care Services. Asset Limit Frequently Asked Questions
2
Department of Health Care Services. MC007 Medi-Cal General Property Limitations
3
New York Codes, Rules and Regulations. 22 CCR 50479 Burial Funds
4
Department of Health Care Services. Medi-Cal Questions and Answers
5
Department of Health Care Services. ACWDL 23-28
6
Department of Health Care Services. Medi-Cal Questions and Answers
7
Department of Health and Human Services. 2026 SSI and Spousal Impoverishment Standards
8
Medi-Cal. Share of Cost
9
Medicaid.gov. Estate Recovery
10
Department of Health Care Services. Substantial Hardship Criteria