What changed.
For most of the past decade, Medi-Cal applied an asset test that capped the countable assets a beneficiary could hold and still qualify for coverage. The cap was $2,000 for an individual and $3,000 for a couple for many years, then $130,000 and $195,000 in 2022, then eliminated entirely on January 1, 2024.
The 2024 elimination was always tied to the state budget. As the budget tightened in 2025 and 2026, the legislature voted to reinstate an asset limit. The exact threshold and effective date are still being finalized by the Department of Health Care Services. Families on Medi-Cal need to track the announcements closely.
Who is affected.
Three groups feel the change most directly:
- Families with a special needs child. A child who relies on Medi-Cal for medical coverage and on SSI for income support has both an asset test (Medi-Cal) and an income test (SSI) to navigate. Inheritances, gifts, and even modest savings can disqualify the child if not held in the right structure.
- Aging parents in long-term care. Medi-Cal pays for nursing home and in-home long-term care for qualifying Californians. Assets held in the parent’s name above the limit count against eligibility. Spousal asset rules apply when one spouse is in care and the other lives in the community.
- Adult children with disabilities. An adult who developed a disability later in life and qualifies for Medi-Cal faces the same asset constraints as a child born with a disability. The planning tools differ slightly because first-party special needs trusts have an age cutoff (under 65) and other restrictions.
What a special needs trust does.
A special needs trust is a trust drafted to specific California rules so that assets inside the trust are not counted as the beneficiary’s assets for Medi-Cal or SSI eligibility. The beneficiary still benefits from the assets (the trustee can pay for supplemental needs the public benefits do not cover) but does not own them for eligibility purposes.
Two types matter for most families:
- Third-party special needs trust. Funded with someone else’s assets (typically parents’ or grandparents’) for the benefit of a person with a disability. No payback to the state at death. The standard structure for preserving inheritances.
- First-party (self-settled) special needs trust. Funded with the beneficiary’s own assets, typically from a personal injury settlement or an inheritance received before a third-party trust existed. Subject to a payback provision: at the beneficiary’s death, the state is reimbursed for Medi-Cal benefits paid before any remainder passes to other beneficiaries.
What families should do now.
- Inventory assets in the beneficiary’s name. Bank accounts, vehicles, investment accounts, real property. Anything titled to the beneficiary counts when the limit returns.
- Set up a third-party special needs trust if one does not exist. Future inheritances and gifts route through the trust instead of into the beneficiary’s name. Doing this before the asset limit returns gives you clean structure rather than a scramble later.
- Review existing trusts for compliance. Trusts drafted under earlier Medi-Cal rules may need amendments to align with the reinstated limits. The distribution standards and the trustee’s discretion provisions are the parts most likely to need updates.
- Coordinate with the family estate plan. Parents’ wills, trusts, and beneficiary designations should route the special needs child’s share into the special needs trust, never directly to the child. A single missed beneficiary designation can defeat the entire structure.
- Plan for the 65 cutoff. First-party special needs trusts must be established before the beneficiary turns 65. Adults approaching that age should not wait.
Bob’s role.
Robert P. Bergman is a California State Bar Certified Specialist in Estate Planning, Trust and Probate Law and has drafted special needs trusts for San Jose families since the modern Medi-Cal framework was established. He drafts the trust himself, walks the family through the funding step, and updates the trust when California rules change.
The 2026 asset limit reinstatement is the kind of change that quietly disrupts families who were relying on the 2024 elimination. Bringing the existing plan to a specialist for a review before the limit takes effect is the cheapest insurance available.
