Medi-Cal Spousal Impoverishment: Assets, Income, and Recovery

Under the Medi-Cal spousal impoverishment rules, when one spouse in a California couple enters a nursing home or begins certain home-based care, the at-home spouse can keep up to $162,660 in countable assets and receive a monthly income of up to $4,066.50 for 2026, on top of an exempt family home and one vehicle.¹ These protections keep long-term care costs from wiping out a couple’s savings and leaving the healthy partner with nothing.

What the At-Home Spouse Can Keep

The at-home spouse, sometimes called the community spouse, is entitled to the Community Spouse Resource Allowance. California sets this at the federal maximum: $162,660 in countable assets for 2026.¹ Countable assets include bank accounts beyond the primary checking account, investment portfolios, stocks, bonds, and similar liquid holdings. Anything above the allowance generally has to be spent down before the spouse in care qualifies for coverage.

Several categories of property sit outside the count entirely. The family home is exempt as long as the at-home spouse continues to live there, and California is the only state that imposes no cap on home equity for this exemption. Other states drop the exemption once equity crosses a federal threshold that sits between $752,000 and $1,130,000 in 2026; California does not apply that limit. One motor vehicle, household goods, personal belongings, and certain prepaid burial funds are also excluded.²

Retirement Accounts

Retirement accounts in the at-home spouse’s name are fully exempt, regardless of balance. An IRA or 401(k) belonging to the community spouse does not count toward the $162,660 limit. Monthly withdrawals from those accounts still count as that spouse’s income, however, which matters for the income allowance discussed below. The institutionalized spouse’s own retirement accounts are generally countable unless they are in payout status under certain conditions.

Monthly Income for the At-Home Spouse

The Minimum Monthly Maintenance Needs Allowance, or MMMNA, guarantees the at-home spouse a floor of income each month. California uses the federal maximum, $4,066.50 per month for 2026.¹ If the at-home spouse’s own Social Security, pension, and other income falls short of that figure, part of the institutionalized spouse’s income is redirected to close the gap. The state never requires the at-home spouse to put their own income toward the other spouse’s care.

Boosting the Allowance for High Housing Costs

When housing expenses are unusually high, the MMMNA can be increased through the excess shelter allowance. You add mortgage or rent, property taxes, homeowner’s insurance, and a standard utility allowance, then subtract a baseline housing figure set by the federal government ($811.50 per month for most states effective July 2026).³ Whatever exceeds that baseline is added to the MMMNA, up to the federal cap. This adjustment matters most in high-cost parts of California where rent or a mortgage payment alone can exceed the standard allowance.

Fair Hearings for Exceptional Needs

If the standard allowance and the shelter adjustment still leave the at-home spouse short, you can request a fair hearing through the California Department of Social Services. At the hearing, you can present evidence of exceptional circumstances that justify a higher allowance, such as uncovered medical costs, unusually high transportation expenses in a rural area, or other documented needs the formula does not capture.

What the Spouse in Care Pays

Once Medi-Cal approves coverage, the spouse receiving care contributes most of their income toward the cost of that care each month. This is called the share of cost. Start with the institutionalized spouse’s total monthly income and subtract: a $35 personal needs allowance, the income allocation transferred to the at-home spouse, health insurance premiums the institutionalized spouse pays, and other allowable deductions. What is left is the share of cost that goes to the facility or care provider.

The county communicates the share of cost directly to the care facility after eligibility is determined, and the figure appears on the Notice of Action sent to the couple. If income or circumstances change, either spouse can report the change and have the share of cost recalculated.

Moving Assets Between Spouses

California implemented a 30-month look-back period for Medi-Cal long-term care starting January 1, 2024.⁴ Gifts or transfers made for less than fair market value during the 30 months before an application can trigger a penalty period during which Medi-Cal will not pay for care.

Transfers between spouses are exempt from that rule. Moving assets into the at-home spouse’s name to meet the Community Spouse Resource Allowance is specifically permitted and triggers no penalty. California law provides a 90-day window after the eligibility determination to retitle protected assets into the at-home spouse’s name alone. Completing those transfers within that window prevents the assets from being attributed to the institutionalized spouse during later eligibility reviews.

Federal law allows unlimited transfers between spouses without gift tax when the recipient is a U.S. citizen, so no gift tax return is required for these moves.⁵ The less obvious catch is cost basis. When you transfer an appreciated asset to your spouse during your lifetime, the recipient keeps your original basis. If that spouse later sells, capital gains are calculated from the original purchase price plus improvements, not current value. Property inherited at death, by contrast, receives a stepped-up basis equal to fair market value at the time of death, which can wipe out decades of gains. For families with significant unrealized gains on real estate or investments, that trade-off is worth weighing before moving property around during lifetime.

Estate Recovery After Death

After a Medi-Cal recipient dies, the state can seek reimbursement for benefits paid for nursing home care, intermediate care for developmental disabilities, home and community-based waiver services, and related hospital and prescription drug costs.⁶ Recovery reaches only assets that pass through probate, so property held in a living trust or in joint tenancy with right of survivorship may be out of reach depending on the circumstances.

For married couples the key rule is simple: California permanently bars any estate recovery claim when the Medi-Cal recipient is survived by a spouse or registered domestic partner.⁶ The claim is prohibited, not deferred. Recovery is also barred when the recipient is survived by a child under 21 or a child of any age who is blind or disabled.⁷ The surviving spouse should keep in mind that after their own death, the state may still have a claim against what remains.

How to Apply

Two forms drive the application. The SAWS 2 Plus is California’s standard health coverage application and the gateway to Medi-Cal eligibility.⁸ The MC 007, or Resource Assessment form, is specific to spousal impoverishment and asks for a detailed inventory of all assets held by either spouse at the time of application.² On the MC 007 you categorize each asset as community or separate property, which determines what counts toward the resource allowance.

Gather these documents before filing:

Marriage certificate or domestic partnership registration
Recent Social Security award letters, pension statements, and tax returns for both spouses
Two to three months of statements for every bank account either spouse holds
Deeds, mortgage statements, and property tax bills for any real estate
Life insurance policies showing cash surrender values
Current balances for IRAs, 401(k)s, and similar retirement accounts

You can submit the package at your local county social services office in person or through the BenefitsCal online portal. An eligibility worker reviews the file and issues a Notice of Action that spells out the Community Spouse Resource Allowance, the income allocation, and the institutionalized spouse’s share of cost. If anything on the notice looks wrong, you have the right to request a fair hearing to challenge it.

1
Medicaid.gov. 2026 SSI, Spousal Impoverishment, and Medicare Savings Program Resource Standards
2
Department of Health Care Services. Medi-Cal General Property Limitations
3
Medicaid.gov. 2026 SSI and Spousal Impoverishment Standards
4
Department of Health Care Services. ACWDL 23-28 – Medi-Cal Look-Back Period
5
Internal Revenue Service. Instructions for Form 709
6
California Legislative Information. California Welfare and Institutions Code 14009.5
7
Medicaid.gov. Estate Recovery
8
California Department of Social Services. SAWS 2 Plus Application for CalFresh, Cash Aid, and Medi-Cal