You Don’t Have to Be Broke to Qualify for Medi-Cal
by Karl Kim, CFP, CLTC
One of the more popular myths is that you have to be absolutely flat broke before someone can qualify for Medi-Cal. You have to sell your house, spend all of your IRA funds and spend all of your savings and investments, before you can even think about applying.
This is absolutely NOT TRUE!
What people don’t know is that when it comes to assets, some things count and some things don’t. And my friend, you will be absolutely astonished at what doesn’t count!
Medi-Cal determines your eligibility based on how much you have in
An asset can be countable or non-countable (these are exempt or unavailable). Approval is based upon how much you have in countable assets.
Countable assets are anything that can be readily turned into cash. For example:
- Checking accounts
- Savings and money markets
- Time deposits or certificates of deposit
- Mutual funds
- Life insurance cash values
- Other cars, motorcycles, trailers, motor homes
- Real estate other than your home like vacant land, time shares, vacation homes, rental real estate
- Retirement accounts (if no income is being paid out)
A single person can have no more than $2,000 in countable assets. This has to be done by the end of the month.
If one spouse is applying, a couple can have no more than $115,640 in countable assets for 2012. This number changes every year. And just like a single person, it doesn’t matter whose name is on the account or asset. For qualification, all countable assets are added together.
What is an EXEMPT Asset?
First, an exempt asset doesn’t count.
That’s right. Regardless of the value of the asset or account, it doesn’t count.
An “Exempt Asset” is your home regardless of value. Whether you live in a mobile home or a mansion in Beverly Hills, my friends it doesn’t matter.
- One car is also exempt. It could be a $100,000 car or a $5,000 van. If it is your vehicle, it doesn’t count.
- A little known secret is that Medi-Cal also doesn’t count burial insurance otherwise known as pre-need plans.
My friends, you can have the simplest of arrangements or a lavish going away celebration. If the irrevocable beneficiary is the mortuary, it doesn’t count.
But be careful. The correct pre-need contracts are sold only through mortuaries in California. And don’t forget, the irrevocable beneficiary has to be the mortuary.
Pre-need plans sold by insurance agents are not exempt in California. Your plan must be purchased through a cemetery or mortuary.
- One burial plot is exempt though Medi-Cal will request copies of the deed and purchase contract.
- Term life insurance is also exempt because it has no cash value.
Make sure that there is a person as a beneficiary. Medi-Cal can recover against this policy if there is no beneficiary or the living trust is the beneficiary.
- Cash value life insurance is exempt if the face amount is $1,500 or less. If the policy or policies exceed that amount then the entire cash value counts.
- Jewelry such as a wedding ring is exempt.
- Household goods and personal effects are exempt. The case worker is not going to come out to the house.
What is an UNAVAILABLE Asset?
Unavailable assets also don’t count.
The largest unavailable or non-countable asset for many applicants will be their retirement accounts including IRA’s, Roth IRA’s, 401(k), 457, and 403(b)’s if an income is being taken on a regular basis.
Here’s an example of how this works:
Let’s say that a 55 year old aerospace engineer has a health care crisis and is applying for Medi-Cal.
He has $400,000 in his 401(k) plan. Because he was still working and contributing to his plan, the $400,000 is a countable asset.
Fast forward to the future.
Let’s say that now he is a 75 year old retired aerospace engineer, has $400,000 in his IRA Rollover account and is applying for Medi-Cal. What does the IRS say has to occur no later than age 70 ½?
That’s right. He has to take a Required Minimum Distribution. For Medi-Cal qualification, his $400,000 IRA Rollover account now doesn’t count as a Countable Asset.
In addition, suppose that he is married to a CEO of a large company and she has $1,000,000 in her 401(k) plan. Because she is the spouse, the $1,000,000 in her retirement plan doesn’t count even if she isn’t taking a distribution.
Yes! Did we do anything illegal?
NO! It is simply “knowing the rules”.
What people don’t know is that it isn’t how much you have, but how those assets are arranged.
Karl Kim, CFP, CLTC is the President of Retirement Planning Advisors, Inc. and is a Medi-Cal specialist. His office is located in La Mirada, CA and can be reached at 714-994-0599 or at www.KarlKimCo.com. He has submitted over 1000 applications with a 99.9% success rate over the past twenty years with a 99.9% success rate. This is meant to be an educational article. Do not make any decisions solely on the information contained herein. Consult your tax advisor, financial planner and attorney before taking any action. We are not responsible for any inaccuracies or misinformation.