Other Real Property/Business Property

Real property other than the principal residence can be exempt if the net market value of the property (minus encumbrances) is $6,000 or less and if the beneficiary is “utilizing” the property, i.e., receiving yearly income of at least 6% of the net market value. The net market value is the assessed value (which is often lower) or the appraised value, minus encumbrances, whichever is less.

Utilization Requirements

Other real property must meet utilization requirements in order to be exempt. This means that the property must generate at least 6% a year of the net market value. If the property does not generate income, then the full net market value of the property will be counted. (22 CCR § 50416(b),(j) )

Good Cause

If the applicant has made bona fide efforts to meet the utilization requirements but is unable to do so, the utilization period can be extended indefinitely and the applicant can be eligible. For example, if the applicant has made bona fide efforts to sell the property, but is unable to do so, the property won’t be included in the countable resources. Note that the regulations include specific criteria for what constitutes “good cause” and “bona fide” efforts to sell. (§§50416, 50417)

Market Value

The market value of property is very important, since it is used to determine the net market value. The market value of real property in California is one of the following, whichever is less: (22 CCR §50412)

• the assessed value determined under the most recent property tax assessment or
• the appraised value by a qualified real estate appraiser

The market value of real property outside of California is one of the following, whichever is less:

• the value established by the assessment method used where the property is located or
• the appraised value by qualified real estate appraiser.

Business Property

Property used in whole or in part as a business or as a means of self-support is exempt. Rental real property, however, will not be exempt unless the property is clearly held as a business. If the applicant can demonstrate with tax returns or other evidence that the property is clearly a “business,” not just investment property, it can be exempt. (22 CCR §50485(d), ACWDL 91-28)

Income from Real Property

If a Medi-Cal beneficiary is renting real property, including the principal residence, the “net” income from the property is used in determining what will be counted toward the share of cost. Certain expenses are deducted from the gross rental income to determine the net income. These include taxes and assessments, interest payments (not principal), insurance, utilities and upkeep and repairs.

Upkeep and repairs are the greater of either: the actual amount expended for upkeep and repairs during the month or 15% of the gross monthly rental, plus $4.17 per month. (22 CCR §50508). Note that other calculations are used for income from rental of rooms, rental of unit(s) in a multiple dwelling unit or other dwellings on the property. (22 CCR §50508)

Maintaining the Home for Return of LTC Resident

In addition to the $35 for personal and incidental needs, a person in long term care can retain an amount of income for upkeep of a home if all of the following conditions are met:

1. The spouse or family of the LTC resident is not living in the home.
2. The home, whether rented or owned by the LTC patient, is actually being maintained for the return of the LTC resident.
3. There is a verified medical statement that the person will return home within six months.

The amount allowed for upkeep of the home depends on the living circumstances of the LTC resident. (See 22 CCR §50605(c))