by Justin M. Kennedy
Litherland, Kennedy & Associates, APC, Attorneys at Law

Effective January 1, 2019 the principal and interest of 529 education accounts (college savings plans) are exempt assets for Medi-Cal eligibility purposes (AB 1785).

Let’s look at an example:

Ten years ago, Margaret set up 529 education accounts for each of her four grandchildren and each year Margaret deposited $5,000 per grandchild into the 529 education accounts. Currently, these 529 education accounts have a combined value of over $200,000.

Margaret is now in poor health and requires skilled nursing facility care. She contacted our office about applying for Medi-Cal to help her pay for her $11,000 per month skilled nursing facility cost. To qualify for Medi-Cal, Margaret is only allowed to have $2,000 of non-exempt assets.

Margaret’s assets:

Margaret has a home in Willow Glen with a value of $1,400,000 – this is an exempt asset and will not disqualify Margaret from receiving Medi-Cal.
Margaret has an IRA with $1,000,000 in it – this is an exempt asset so long as she is taking her Required Minimum Distributions (RMDs) – which she is, therefore, the IRA will not disqualify Margaret from receiving Medi-Cal.
Margaret has a small checking account that receives her social security and RMDs, but the money is spent on her care as soon as it is received leaving less than $2,000 in the account.

So far, Margaret is looking as if she will qualify for Medi-Cal, even though she has over $2,400,000 worth of assets.

However, that is not all of Margaret’s assets, she also has the 529 education accounts that she set up for her grandchildren with over $200,000 in them. Margaret is still listed as the owner of each of the 529 education accounts. Prior to 2019, those 529 education accounts would have disqualified Margaret from receiving Medi-Cal benefits.

Now with AB 1785 becoming law as of January 1, 2019, the 529 education accounts are treated as exempt assets and will not disqualify Margaret from receiving Medi-Cal. This means that Margaret will be able to qualify for Medi-Cal.

Litherland, Kennedy & Associates regularly conducts free workshops on Medi-Cal Planning. Please join us for our upcoming Medi-Cal Planning workshop on January 31st at 1:00 in Campbell. For more information, click here.