Will the State Take Your Home If You Need Long-Term Care?

It is the question that keeps families up at night: if a parent needs a nursing home, does the family lose the house they spent a lifetime paying for? The honest answer is reassuring more often than people expect. In California, your home is generally a protected asset while you are alive and receiving Medi-Cal, and the state can usually only reach it after death if it passes through probate. With planning done early and correctly, many families are able to do four things at once: qualify a parent for Medi-Cal long-term care, keep the home in the family, preserve the favorable tax treatment heirs receive, and avoid a property-tax reassessment that could otherwise force a sale.

The catch is in the words “early” and “correctly.” The rules are technical, they changed meaningfully in 2026, and a well-meaning do-it-yourself move can do more harm than the problem it was meant to solve. That is the work this practice does: helping California families structure the family home and savings so that long-term care does not have to mean financial ruin.

What this practice covers

Long-term care planning sits at the intersection of elder law, estate planning, public benefits, and real estate. We help clients and their adult children with the legal structures that protect a home and savings in the face of long-term care costs, including:

• Planning to qualify for Medi-Cal long-term care benefits while protecting the family home and other assets
• Designing and drafting irrevocable trusts intended for asset protection and Medi-Cal planning
• Reviewing whether an existing revocable living trust actually protects the home from later recovery (it often does not, on its own)
• Advising on the caregiver-child and sibling transfer rules that can move a home out of harm’s way without a Medi-Cal penalty
• Coordinating the plan with Proposition 19 so a transfer to children does not trigger an avoidable property-tax reassessment
• Coordinating with your tax professional so the plan preserves, rather than forfeits, the step-up in cost basis your heirs would otherwise receive
• Powers of attorney and advance directives that give a trusted person the authority to act if you become unable to

The goal is not to hide assets or to game a public program. It is lawful planning that uses the exemptions and structures California and federal law already provide.

The problem: long-term care is expensive, and Medicare does not cover it

Most people are surprised to learn that Medicare does not pay for extended long-term care. It covers short rehabilitation stays, not the months or years of custodial care that a stroke, a fall, or a dementia diagnosis can require. In California, that care is costly. As of the most recent published industry survey (2024 data), the median cost of a private room in a California nursing home was well over $180,000 per year, and assisted living and in-home care, while lower, still run tens of thousands of dollars annually. These figures change over time and vary by region; we mention them only to show the scale of the exposure. (Source figures as of drafting; confirm current costs for your area.)

Medi-Cal, California’s version of Medicaid, is the program that does pay for long-term skilled nursing care. But it is needs-based, which means eligibility depends on how much you own. And as of January 1, 2026, California reinstated an asset limit for these programs after a brief period with no limit at all.

What changed in 2026

For most non-MAGI Medi-Cal programs, an asset limit returned on January 1, 2026: as of that date, an individual applicant is generally allowed to keep up to $130,000 in countable assets, with an additional allowance for each additional household member, and a married couple’s limit is commonly described as $195,000 (special rules apply when one spouse remains at home). Along with the asset limit, California reinstated a look-back period for transfers made to qualify, which phases in gradually for transfers made on or after January 1, 2026. These figures and rules are set by the California Department of Health Care Services and are adjusted over time; the amounts and timing stated here are current as of drafting and should be confirmed before you act. (Confirm current limits and look-back rules with counsel or DHCS.)

The practical takeaway is simple: the rules that govern whether your home and savings are protected are back in force, they are technical, and the best time to plan is before care is needed. Planning done in a crisis is still possible, but earlier planning generally offers more options.

How planning protects the home

There is no single right answer, because the right structure depends on the family. What we can say generally is that the form in which you hold the home matters enormously. A revocable living trust is an excellent probate-avoidance and estate-planning tool, but on its own it generally does not shield the home from Medi-Cal estate recovery or remove it from the countable estate, because you retain control of it. An irrevocable trust designed for Medi-Cal planning works differently, and when it is drafted carefully it can remove the home from the countable estate while still aiming to preserve the tax advantages your family would otherwise lose. Other families are better served by a transfer that fits within the caregiver-child or sibling exemptions, or by a different tool entirely.

Each of these paths has trade-offs, deadlines, and irreversible consequences if done wrong, which is why this is a decision to make with a lawyer rather than from an online form. We walk families through the options, model the consequences, and build the structure that fits their situation, their timeline, and their goals.

Coordinating with Proposition 19 and the tax basis

This is where a combined estate-and-real-estate perspective matters, and where general elder-law advice often stops short. Two issues commonly collide with Medi-Cal planning for the home:

First, Proposition 19. Since 2021, transferring a California home to your children no longer automatically keeps the low property-tax base. Unless the child makes the home their principal residence and meets the requirements within the deadlines, the property is generally reassessed to market value, and even when the exclusion applies it is capped. A transfer made for Medi-Cal reasons without accounting for Prop 19 can hand your children a much larger property-tax bill. Any specific figures here change on a set schedule and should be confirmed at the time of your transfer.

Second, the step-up in cost basis. When heirs inherit appreciated property, they generally receive a “stepped-up” basis that can dramatically reduce capital-gains tax if they later sell. Some do-it-yourself transfers — adding a child to the deed, for example — can forfeit that benefit and leave the child with a large taxable gain. The interaction between protecting the home for Medi-Cal purposes and preserving these tax advantages is one of the most important reasons to plan carefully and to coordinate with your tax professional. (We are not tax advisors; tax outcomes should be confirmed with a qualified CPA or tax professional.)

Who this is for

This planning is for California homeowners and their families, particularly:

• Aging homeowners whose home is paid off or nearly so, but who have limited cash — the “house-rich, cash-poor” situation
• Adult children helping a parent plan before a health crisis, or responding to one
• A spouse facing the prospect of long-term care for their partner and worried about being left without resources
• An adult child who has been living with and caring for a parent and wants to understand whether the home can pass to them
• Anyone who set up a revocable living trust years ago and assumes, often incorrectly, that it already protects the home from long-term care costs

Why work with Bay Legal

Long-term care planning for the home is not a fill-in-the-blank exercise. It draws on estate planning, public-benefits rules, real estate, and tax coordination at the same time, and a mistake in one area can undo the work in another. Bay Legal brings those disciplines together in one place, with a California-specific focus, so the plan that protects your Medi-Cal eligibility does not accidentally trigger a property-tax reassessment or a capital-gains problem for your children. We explain the options in plain language, respect that these are emotional family decisions, and build a plan you understand.

If you are worried about what long-term care could do to your home and savings, the most useful first step is a conversation. Call us in Northern California at (650) 668-8000 or in Southern California at (213) 668-8000, or schedule a consultation at baylegal.com/contact. The earlier we talk, the more options you are likely to have.

Frequently Asked Questions

Will Medi-Cal take my house in California?

Generally, your home is an exempt asset while you are alive and receiving Medi-Cal, so it is not counted against you for eligibility. After death, California’s estate recovery program can seek repayment, but as of current law it can generally only reach assets that pass through probate. Planning that keeps the home out of probate, such as certain trusts, is often what protects it. Because the rules are technical and change over time, you should confirm your specific situation with an attorney.

What is the Medi-Cal asset limit in California in 2026?

As of January 1, 2026, California reinstated an asset limit for most non-MAGI Medi-Cal programs. An individual is generally allowed to keep up to $130,000 in countable assets, with an additional allowance for each additional household member, and a married couple’s limit is commonly described as $195,000, with special rules when one spouse remains at home. These amounts are set by the state and adjusted over time, so confirm the current figures before acting.

Does a living trust protect my home from Medi-Cal?

Usually not by itself. A revocable living trust is a strong probate-avoidance and estate-planning tool, but because you keep control of the assets in it, it generally does not remove the home from the countable estate or shield it from estate recovery. An irrevocable trust designed for Medi-Cal planning works differently. Whether it is right for you depends on your circumstances, and it is a decision to make with an attorney.

Can I give my house to my children to qualify for Medi-Cal?

Transferring a home can be part of a lawful plan, but doing it incorrectly can create serious problems: a Medi-Cal transfer penalty, a Proposition 19 property-tax reassessment, the loss of a valuable step-up in tax basis for your children, and exposure to a child’s creditors. Certain transfers, such as those to a caregiver child or a qualifying sibling, may avoid a penalty. Because the consequences can be irreversible, this is something to plan with a lawyer rather than do on your own.

When should I start long-term care planning?

Generally, the earlier the better. Planning done well before care is needed typically offers the most options and the cleanest protection, in part because of the look-back rules that apply to transfers. Planning is still possible during a crisis or after care has begun, and there are strategies for those situations too, but earlier planning usually gives a family more flexibility.

Disclaimer

This page is provided for general informational purposes only and does not constitute legal, tax, or financial advice. Reading this page or contacting Bay Legal, PC does not create an attorney-client relationship; that relationship is formed only by a signed engagement agreement. This information addresses California law and may not apply elsewhere. The law and the figures stated here change over time, and you should consult a qualified attorney about your specific situation before acting.