There are two types of non-countable assets for Medi-Cal qualification: Exempt and Unavailable. While they may not count for approval, they can be subject to Recovery.
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.
Here’s the situation.
Mom, who is a widow, is in a nursing home. She lived in her home for 55 years before going to the nursing home. Realistically, she is never going to go home but she would if she could, right? So this is the intent to return home. As long as this intent to return home is established in writing, the home is an Exempt Asset for qualification.
- 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.
What people don’t know is that it isn’t how much you have, but how those assets are arranged.