Q. I heard that, as part of the recently passed Trump Tax Bill, that home equity will become a factor for Medi-Cal eligibility, at least for Seniors. That wasn’t really discussed in the press. Is it true?
A. Yes, indeed, effective January 1, 2028. You are correct that this issue was not really discussed in the press leading up the passing of the so-called Big Beautiful Bill (“BBB”) in Washington, signed by President Trump on July 4. Yet, this limit is in the new law and will be effective January 1, 2028 for those individuals over age 65 seeking to establish or retain eligibility for long term care Medi-Cal. Here are some aspects of the new federal law of which to be aware:
1) It will have a dramatic change to the way Medi-Cal has long treated the home in California, where — regardless of value – it has always been considered an exempt resource, and the value did not count at all when assessing eligibility for Medi-Cal;
2) It will have a dramatic effect for many seniors living in high cost areas of California, where homes – especially in the Bay Area and parts of Southern California – carry high values, often well over One Million Dollars, even for so-called average homes;
3) On the good side, the increased home value cap will not apply if the Medi-Cal applicant’s spouse or minor or disabled child is living in the home;
4) Advance planning techniques will be all the more important. These may include carefully designed transfers of all or some of the equity in the home to trusted family members, transfers of the home (or portions thereof) to certain Irrevocable Asset Protection Trusts, use of Life Estate Deeds (i.e. transfers to trusted family members with a retained right of occupancy), reducing home equity by taking out new home loans, fractionalizing equity by creating co-tenancy interests with trust family members, etc.
5) If contemplating transfers of home equity to non-resident children, the effect of Proposition 19 must be considered in order to avoid a dramatic increase in property taxes.
6) By its terms it will apply to “nursing facility services or other long-term care services”. Questions yet to be answered: Will this phrase include home care under the In Home Supportive Services Programs (“IHSS”), or Home and Community Based Services programs (“HCBS”) now offered by Medi-Cal? What about Medi-Cal for routine care for non-disabled seniors living at home? We must await clarification by the California Department of Health Care Services for these and other questions.
7) It will not apply to homes that are zoned for agricultural use. Might this provision be an opening for some creative planning? Would raising chickens in the backyard qualify one’s home for agricultural zoning in your county?
8) Very important: The home equity cap will not apply to those individuals under age 65 who are not disabled, and for whom assets do not count at all, and where eligibility is based solely upon their Modified Adjusted Gross Income (“MAGI”), and who are sometimes referred to as the MAGI population, where eligibility stems from the Affordable Care Act signed some years ago by President Obama.
Planning should be considered early. Between now and the effective date of the new rule, I and my Elder Law colleagues throughout the state intend to pool our collective wisdom in order to develop strategies to help our clients in need meet the new home equity cap. So, stay tuned.