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How Are Retirement Accounts Treated for Medicaid Long-Term Care Eligibility in New York?

If you or a loved one is considering applying for Medicaid to cover long-term care in New York—such as nursing home care or home care services—it’s essential to understand how retirement accounts (like IRAs and 401(k)s) are treated during the Medicaid eligibility process. These accounts can significantly impact whether you qualify, how much you may have to spend down, and what planning options are available.

Medicaid Basics: Income and Resource Rules

To qualify for Medicaid long-term care, applicants must meet strict income and asset limits. In 2025, an individual applying for Medicaid in New York can have $32,396 in countable assets. If they are applying for nursing home Medicaid coverage, they can only keep $50 of their monthly income. If they are applying for home care coverage, the income limit is $1,799.95 (some deductions and allowances apply, and further planning can be done to allow income above that limit to be preserved).

Retirement Accounts: Countable or Exempt?

Whether a retirement account is counted as a resource depends on whether the account is in “Pay Out Status.”

Payout Status means that the Medicaid applicant is receiving Required Minimum Distributions (RMDs) from the retirement account, paid in monthly payments.

The monthly payments are considered countable income by Medicaid.

This rule applies to retirement accounts such as:

• Traditional IRAs
• 401(k)s
• 403(b)s
• Other qualified plans

There are differences in the definition of “Payout Status” under IRS rules and Medicaid rules:

• Under IRS rules, a retirement account owner doesn’t have to take RMDs until they reach a certain age (73), but under Medicaid rules, regardless of your age, you would have to take the RMDs in order for Medicaid to exempt the principal amount of the retirement account.
• IRS only requires an annual payout, whereas Medicaid requires that the payments from the retirement account be made monthly.
• Even though a ROTH IRA, which is funded with post-tax income, doesn’t have to be put in payout status under the IRS rules, Medicaid would require that it be in “Payout Status” to be an exempt resource for Medicaid eligibility.
• The Department of Social Services uses its own life expectancy table, which could be shorter than the IRS table, which could result in the retirement account owner having to take a higher distribution amount under Medicaid rules to exempt the account as a Medicaid resource.

Example:
A 75-year-old applicant has a $200,000 IRA and takes the required annual distribution payable in monthly installments. The $200,000 principal is not counted toward the $32,396 asset limit. However, the monthly RMD amount (e.g., $1,000/month) is added to the applicant’s countable income.

If the retirement account was not in payout status, meaning the applicant is not receiving monthly distributions as per the life expectancy table, then the entire retirement account is treated as a countable asset.

Planning Strategies for Retirement Accounts

Before applying for Medicaid, if the applicant has not yet been taking RMDs, or the RMDs have not been distributed in monthly payments, the applicant should begin taking the payouts or restructure to monthly payments to exempt the account principal. This should be done before the Medicaid application is filed.

Don’t cash out and transfer the retirement account without a really good reason that would be advised by the experienced elder law attorney you are working with. Cashing out will trigger significant consequences, such as tax liability, loss of creditor protection, and loss of a source of exempt funds that could be tapped into in the event you needed more than your allowable resource limit. Therefore, you should never do that unless you have reviewed the repercussions with an elder law attorney and financial advisor, and it is still advisable for your unique situation.

Conclusion

Retirement accounts are not automatically qualifying or disqualifying for Medicaid—but how they’re handled can make or break eligibility. Getting the right legal advice early allows families to preserve assets and avoid costly mistakes.

If you’re planning ahead or facing an urgent Medicaid need, consulting an experienced New York elder law attorney is the most effective way to navigate retirement account issues and implement a tailored strategy.

Need Help?

We assist clients across Nassau County and the greater New York area with Medicaid planning, Medicaid asset protection, and long-term care planning. Contact us today to schedule a consultation and start planning with confidence.

What is the difference between a Durable Power of Attorney and a Non-Durable Power of Attorney?

A Power of Attorney is a document that allows someone to give authority to an individual that they choose to manage their legal and financial affairs on their behalf. The authority can be very specific to only certain transactions, standard to include the powers outlined in the statutory form, or it can be very broad and include provisions dealing with more complex matters such as trust planning, tax planning, and long-term care asset protection.

The key difference between a durable and non-durable power of attorney lies in what happens when the person who granted the power (the "principal") becomes incapacitated or mentally incompetent. A durable power of attorney remains in effect when the principal becomes incapacitated. A nondurable power of attorney is no longer in effect if the principal becomes incapacitated.

When signing a power of attorney for a limited transaction, such as representing you in the sale of real estate or assisting you with managing an investment, it is possible that you only want the individual to have authority while you have capacity and can call the shots. In this case, a “non-durable” power of attorney would serve your purpose. In the event you become incapacitated, your agent will no longer have authority to act on your behalf. 

However, if you are signing a power of attorney as part of your estate planning, to make sure that if you become incapacitated, the individual you appoint will have authority to act on your behalf, your power of attorney must be a “durable” power of attorney.

Durable Power of Attorney:

• Remains effective even if the principal becomes incapacitated or mentally incompetent
• Contains specific language stating it will survive the principal's incapacity (often called a "durability clause")
• Continues until the principal's death or until formally revoked while the principal is still competent
• Most commonly used for estate planning and long-term care planning purposes
• Essential for situations where someone may need ongoing financial or healthcare decision-making assistance

Non-Durable Power of Attorney:

• Automatically terminates if the principal becomes incapacitated or mentally incompetent
• Only remains valid while the principal maintains mental capacity
• Becomes void precisely when the principal would most need someone to act on their behalf
• Useful for specific, temporary situations when the principal is traveling or temporarily unavailable
• Not useful for long-term care planning or estate planning purposes

Practical Implications: The durability feature is crucial for estate planning because incapacity is often when families most need someone to manage financial affairs, make healthcare decisions, or handle legal matters. Without a durable power of attorney, families may need to go through expensive and time-consuming guardianship or conservatorship court proceedings to gain authority to act for an incapacitated loved one.

It is critical to note that even if your power of attorney is “durable,” it is still critical that your power of attorney include provisions that you may require in the future. A basic statutory power of attorney does not have provisions that would allow your agent to protect your assets or income in the event you needed Medicaid long-term care, or provisions that would allow your agent to perform tax planning to minimize estate taxes. You must be sure to consult with an elder law attorney to make sure that the necessary provisions are included to maximize the planning strategies that your agent may need to perform on your behalf in the event you become incapacitated and need long-term care.

For these reasons, it is important to seek the assistance of an elder law attorney to prepare a durable power of attorney for you as one of the foundational documents you will need for a comprehensive estate plan.

Contact us today at 516-466-WILL (9455) and we will be happy to help you with your estate plan.

If you already have a 529 education savings plan as part of your family's financial strategy, there are important estate planning considerations that often go overlooked. As families face potential long-term care needs and Medicaid planning becomes a reality, understanding how your 529 account fits into this picture is crucial. Additionally, many 529 account owners fail to address what happens to these accounts upon their death, potentially subjecting their families to unnecessary probate proceedings.

Understanding Your 529 Plan Structure

A 529 plan is a tax-advantaged savings account designed for future education costs. As the account owner, you maintain complete control over the funds, including investment decisions, withdrawal timing, and beneficiary designations. This control structure has significant implications for both Medicaid planning and estate administration that many families don't fully understand.

The key distinction in 529 planning is between the account owner (you) and the beneficiary (typically your child or grandchild). This separation creates unique opportunities and considerations when planning for long-term care needs and estate administration.

Medicaid Planning Implications

One of the most critical considerations for 529 account owners is how these assets affect Medicaid eligibility for long-term care. The treatment of 529 accounts in Medicaid planning depends on several factors that require careful analysis.

As the account owner, the 529 assets are generally considered your resources for Medicaid purposes, which could impact your eligibility for benefits. However, the specific treatment can vary by state, and there are potential planning strategies that may help protect these education funds while preserving Medicaid eligibility.

For beneficiaries of 529 accounts, the assets typically don't count toward their Medicaid resource limits since they don't own or control the funds. This distinction is particularly important for families with special needs beneficiaries who may require government benefits throughout their lives. The account owner's retention of control prevents the funds from disqualifying the beneficiary from crucial benefits.

However, distributions from 529 accounts can affect Medicaid eligibility. When funds are withdrawn and used for the beneficiary's expenses, this could potentially impact their benefit calculations. Understanding the timing and structure of distributions is essential for families navigating both education funding and benefit preservation.

The Critical Importance of Successor Custodians

Many 529 account owners overlook one of the most important aspects of their account setup: naming a successor custodian. This oversight can create significant problems for families after the account owner's death.

Without a named successor custodian, your 529 account may become subject to probate proceedings when you die. This means the court will need to determine who has authority to manage the account, potentially causing delays in accessing education funds when your family needs them most. Probate proceedings also increase administrative costs and create public records of your family's financial affairs.

Most 529 plans allow you to designate a successor custodian directly through your account documents. This person will automatically gain control of the account upon your death, allowing for seamless management and distribution of education funds. The successor custodian should be someone you trust to make decisions in your beneficiary's best interests and who understands the family's educational goals.

When selecting a successor custodian, consider their financial sophistication, proximity to the beneficiary, and long-term stability. You may also want to name a secondary successor in case your first choice is unable to serve when needed.

Ongoing Account Management Considerations

If you're facing potential long-term care needs, review your 529 account strategy with qualified professionals. Depending on your state's Medicaid rules and your family situation, there may be opportunities to restructure ownership or adjust beneficiaries to better align with your overall care planning strategy.

Consider whether changing the account beneficiary might benefit your family's overall educational goals. The ability to change beneficiaries within the same family provides flexibility that can be valuable in long-term care planning scenarios.

Regular review of your successor custodian designation is also essential. Life changes such as divorce, death, or relationship changes may require updates to ensure the right person will manage these important education funds.

Integration with Your Overall Estate Plan

Your 529 accounts should be coordinated with your broader estate planning documents. Ensure your attorney understands how these accounts fit into your overall plan, particularly if you're implementing Medicaid planning strategies or special needs planning for beneficiaries.

The flexibility of 529 accounts can be both an asset and a complication in estate planning. While the account owner's control provides valuable planning opportunities, it also requires careful coordination with other estate planning tools to avoid unintended consequences.

Moving Forward

If you own 529 accounts, don't let these important considerations fall through the cracks. The intersection of education funding, Medicaid planning, and estate administration requires careful attention to ensure your family's needs are met both now and in the future.

Work with experienced estate planning professionals who understand both Medicaid rules and 529 account structures. They can help you navigate the complexities of long-term care planning while preserving your family's educational goals and ensuring proper account succession planning.

Contact us and we will be happy to help.

On April 29, 2025, the New York State Assembly passed the Medical Aid in Dying Act by a vote of 81-67 after nearly five hours of emotional debate. This legislation allows mentally competent, terminally ill adults with six months or less to live to obtain a prescription for lethal medication. If enacted, New York would become the 11th state to legalize medically assisted death, joining states that already have similar programs.

The bill includes safeguards such as evaluations by two doctors to confirm the patient's capacity to choose and a formal written request signed by two unrelated witnesses. Despite its progress, the bill faces uncertain prospects in the Senate, and Governor Kathy Hochul has not yet taken a public stance on the issue.

As with any deeply personal and ethically complex legislation, the Medical Aid in Dying Act has sparked a wide range of reactions. Supporters emphasize autonomy and compassion, while opponents raise concerns about potential abuse and moral implications. Below are some of the key arguments on both sides to provide a fuller understanding of the law’s potential impact.

Pros of the Medical Aid in Dying Act

1. Respecting Patient Autonomy

The act empowers terminally ill individuals to make decisions about their own end-of-life care, allowing them to choose a peaceful and dignified death.

2. Providing Relief from Suffering

For patients experiencing unbearable pain and suffering, this law offers an option to end their lives on their own terms, potentially alleviating prolonged agony. ​

3. Aligning with Public Opinion

A recent poll found that over 70% of New Yorkers support the Medical Aid in Dying Act, indicating strong public backing for the legislation. ​City & State New York

4. Safeguards Against Abuse

The bill includes multiple safeguards, such as requiring two physicians to confirm the patient's diagnosis and mental capacity, and a mandatory mental health evaluation if necessary. ​

Cons of the Medical Aid in Dying Act

1. Potential for Coercion

Opponents argue that the law could pressure vulnerable individuals, particularly those with disabilities, into choosing assisted death due to societal or familial pressures. ​

2. Ethical Concerns

Some religious and ethical groups contend that the act undermines the sanctity of life and could lead to a slippery slope, potentially expanding to non-terminal conditions.

3. Impact on Medical Professionals

Healthcare providers who oppose the practice on moral or religious grounds may face dilemmas, despite provisions for immunity from liability for those who refuse to participate. ​

4. Implementation Challenges

The law's success depends on effective implementation, including ensuring that all safeguards are rigorously followed, which could pose challenges in practice.​

The passage of the Medical Aid in Dying Act in the New York State Assembly marks a significant step in the ongoing debate over end-of-life choices. While the act offers a compassionate option for terminally ill individuals seeking control over their final days, it also raises important ethical, moral, and practical considerations. As the legislation moves forward, it will be crucial to balance patient autonomy with robust safeguards to ensure that the law is implemented responsibly and equitably.

At its core, this legislation is about how we honor the final chapter of life—balancing medical reality with personal dignity. Whether one supports or opposes the Medical Aid in Dying Act, the conversation it has sparked invites all of us to think more deeply about compassion, choice, and how we care for one another at the most vulnerable moments. These are not easy questions, but they are profoundly important ones.

Creating a trust as part of your estate plan could have many benefits. But those benefits can be completely missed if you don’t title your assets properly and they don’t end up in the trust! A crucial aspect of trust planning that cannot be overlooked is funding your trust.

Establishing a trust can have a variety of benefits. They may include avoiding probate, protecting assets, providing for a beneficiary with special needs, minimizing estate tax, or protecting an inheritance. However, while it is critical to include the right language in the trust document to achieve your objectives, it is equally critical to make sure the right assets end up in the trust.

We are currently assisting a lovely client through an estate administration process that could have been avoided. Her deceased mother had created a trust (with another law firm) but never followed through with properly funding her trust As a result, when our client sought our help to “administer the trust,” we found that upon review of the mother’s assets, there was nothing actually held in the trust.

If the trust had been properly funded, and the assets outside the trust had all been designated with named beneficiaries, the entire estate would have been readily available for distribution to the appropriate parties. Instead, our client did not have immediate access to her mother’s assets and had to petition the Surrogates Court to be appointed as the Estate Administrator, in order to collect and distribute the assets.

This court administration process caused legal expense and delay that could have been avoided. Additionally, by going through the court-supervised estate administration, the assets were now exposed to potential claims from creditors. If the mother had been receiving Medicaid benefits, the estate assets could have also been subject to Medicaid estate recovery, further reducing the inheritance for the intended beneficiaries. All of these issues could have been prevented if the mother’s trust had been properly funded during her lifetime.

A critical part of the estate planning process is not only creating the documents, but reviewing each asset and updating either the ownership or beneficiary designations to make sure the process is as smooth and economical as possible after lifetime.

Contact us to review your estate plan and ensure the smooth administration of your estate. We are happy to help you with this process.

The deadline for companies existing before 2024 have until the end of the year to get in compliance with their obligations under the Corporate Transparency Act.

The federal law, known as The Corporate Transparency Act, was enacted in 2021 and went into effect as of January 1, 2024. Many companies active in the United States are now required to report information disclosing the identity of the individuals that own and control the companies.

New companies have 90 days from the registration or creation date to file, while companies existing before January 1, 2024 have a deadline of January 1, 2025 to file their report.

“Reporting entities” include corporations, limited liability companies, and any other entity that is formed by filing a document with the secretary of state or other government office. There are certain entities that either do not fall under these categories, or are exempt from reporting.

A trust does not fall under the category of a “reporting entity”, however, if a trust is a shareholder of a corporation or a member of an LLC, there will be reporting requirements.

If you have business ownership, it is important to become familiar with this law and be sure that you are in compliance before the end of this year.

Read More Here

For most people, receiving an inheritance is something to celebrate. However, for a nursing home resident on Medicaid, an inheritance may not be such welcome news.

What Is Medicaid?

Medicaid is a public assistance health insurance program for people who have limited means. For many older adults, or individuals with disabilities, Medicaid often serves to help cover the expensive costs of long-term care.

Medicaid eligibility requirements for long term care come with extremely strict income and resource limits. Because Medicaid is a federal program that is run separately by each individual state, the income and resource limits varies by state, and more specifically, by each Medicaid program. In many states, an individual may not have more than $2,000 in their name to qualify for the program. Generally, New York State has a limit of $31,175 (for 2024).

When applying for Medicaid long-term care benefits, the review process goes beyond just examining an applicant’s current assets. Medicaid also scrutinizes the applicant’s financial transactions for a period leading up to their application date. This review, known as the “lookback period,” typically spans 60 months and is designed to prevent individuals from qualifying for benefits by giving away or transferring assets for less than fair market value.

Interestingly, while New York State has established a 30-month lookback period for community-based long-term care (such as home care services) in 2020, the lookback has not yet been implemented to date. If Medicaid uncovers any uncompensated transfers during the lookback period, they will assess a penalty, potentially affecting the applicant’s eligibility for benefits.

The Medicaid program’s strict asset limits can turn an inheritance into a double-edged sword for recipients. While seemingly a windfall, an inheritance can actually jeopardize a recipient’s Medicaid benefits, potentially disrupting their care. Even worse, without proper planning, the inheritance itself might be consumed by high care costs. To avoid these negative outcomes, it’s crucial to engage in careful planning. This ensures that an inheritance enhances the recipient’s quality of life rather than undermining their Medicaid-funded care or disappearing into medical expenses.

Inheritance Money is Income in the Month Received

An inheritance counts as income in the month you receive it. You or whoever is representing you will have to inform the state Medicaid agency about the inheritance. If you receive an inheritance and the amount puts you over the income limits for your state, you will not be eligible for Medicaid benefits for that month. If you can properly spend down the money from an inheritance in the same month that you receive it or make a transfer of the money that is exempt from a lookback penalty, you will be eligible for Medicaid again the following month.

Preserving Your Inheritance

An elder law attorney can identify and advise you on your options to preserve your inheritance. The attorney will determine the rules for your specific state program and identify whether any exceptions to the lookback are available to you that will allow you to preserve some or all of the inheritance. If there are no exceptions applicable to your situation, the attorney still can advise you on the proper way to spend down the inheritance to gain some benefit from the inheritance while minimizing the reduction of Medicaid benefits. Further, there may be additional strategies that the attorney can identify to help you for maximum preservation of the inheritance.

Advance Planning is Best, If Not Too Late

If you have a loved one that may be receiving Medicaid benefits when you die, even unexpectedly, it is best for your estate plan to direct their inheritance to a Medicaid compliant special needs trusts. This would allow your loved one to benefit from their inheritance without jeopardizing either their Medicaid or the inheritance. An elder law attorney can help you with your estate planning.

Conclusion

The Medicaid program is, in and of itself, quite complicated. With different rules in every state, and changing requirements from year to year makes the task of navigating Medicaid even more daunting. Trying to navigate this yourself can result in avoidable loss to your benefits or your inheritance. Seek guidance from an experienced elder law attorney.

We are happy to help you - call (516) 347-7356 today.

In estate planning, details are crucial. The seemingly innocent act of removing staples from a valid, properly executed will could lead to unintended and potentially catastrophic consequences. Let’s explore why an unstapled will might cause serious complications.

What Is Your Will Used For and How Do Your Wishes Go Into Effect?

A will is a vital legal document that serves several important purposes in estate planning. It specifies how you want your property, money, and other assets distributed after your death, names your beneficiaries, appoints an executor, and may designate a guardian for your surviving minor children.

However, a will doesn’t automatically take effect upon the testator’s death. The nominated executor must petition the Surrogate’s Court and follow the probate process to have the will “admitted to probate.” This means the executor must go through specific legal steps before they can act on the will’s terms. The Surrogate’s Court plays a crucial role in ensuring the will’s validity and accurate representation of the decedent’s wishes.

What Happens if Your Will is Unstapled?

While an unstapled will isn’t automatically invalid, it can invite challenges. The court may question the will’s authenticity, as they must verify that the complete document matches exactly what the deceased person signed. Concerns may arise about pages being swapped or removed. If the will appears damaged or torn, the court might interpret this as a sign of revocation.

More problematically, disinherited relatives could contest the will’s authenticity. If the will isn’t in the same intact, attached form as when it was signed, these relatives will have an easier time arguing for its invalidity. This situation can lead to significant issues, potentially delaying the probate process, causing unnecessary stress, wasting time, and incurring additional legal fees. In the worst-case scenario, the court might reject the will entirely.

Conclusion

The humble staple plays a surprisingly crucial role in maintaining your will’s integrity and validity. Keeping your will properly fastened and intact is more than just good organization—it’s a vital step in ensuring your final wishes are carried out as intended. This simple precaution can save your loved ones from unnecessary stress, legal battles, and potential loss of inheritance during an already difficult time.

Often, the drafting attorney will hold your original will for safekeeping. But if you have your original will in your own possession, you should consult with a legal professional to ensure your will is in proper order to withstand potential challenges. Remember, in estate planning, even the smallest details can have far-reaching consequences. By taking care to keep your will intact and properly stapled, you’re not just preserving a document—you’re protecting your legacy and your loved ones’ future. Don’t let a simple staple become the weak link in your carefully crafted estate plan.

As the costs of long-term care continue to rise, many couples find themselves grappling with how to protect their assets while still qualifying for Medicaid assistance. One strategy that sometimes comes up in these discussions is divorce. But is ending a marriage truly a good way to shield assets from Medicaid spend-down requirements? Let’s explore this complex and sensitive topic.

Understanding Medicaid Long-Term Care

Medicaid is often the last resort for covering expensive long-term care costs. To qualify, applicants must meet strict income and asset limits, which vary by state but are generally quite low. New York State allows a Medicaid applicant to retain up to $31,175 in non-exempt assets, but other states have a limit as low as $2,000. Without advance planning, these strict eligibility rules often require spending down assets during a crisis. Additionally, while New York and other states may allow “Spousal Refusal” enabling one spouse to obtain Medicaid benefits even if the other spouse has significant assets, Medicaid may still seek spousal contribution from the healthy spouse.

The “Medicaid Divorce Strategy”

The idea behind a “Medicaid divorce” is that by legally ending the marriage, the couple can allocate most of their assets to the healthy spouse, allowing the spouse needing care to qualify for Medicaid more easily. In theory, this could protect the couple’s life savings from being depleted by long-term care costs.

However, this strategy will not work. If a couple is divorced, leaving one spouse a “ward of the state”, namely, in need of Medicaid long term benefits, any distribution that is less than equitable for the Medicaid applicant spouse can be challenged. Medicaid can consider an agreement or divorce settlement granting the healthy spouse a greater share as a “transfer” resulting in a Medicaid penalty during the five-year “lookback,” and further, the healthy ex-spouse can be sued by the state (in place of the Medicaid applicant spouse) for monthly maintenance to be applied to the impoverished Medicaid recipient spouse.

In addition, divorce is not something to take lightly. Even if this strategy worked for Medicaid purposes, there are other significant risks and drawbacks, such as social security and other retirement benefits, the emotional toll which shouldn’t be underestimated, not to mention ethical considerations.

Alternative and Better Strategies

Instead of considering divorce, there are often better ways to protect assets while still qualifying for Medicaid:

1. Irrevocable Trusts: When properly structured and timed, these can protect assets from Medicaid spend-down.
2. Utilizing Medicaid-Exempt Transfers: Transferring assets to certain exempt individuals (like a spouse or a disabled child) or into specific types of trusts that are recognized by Medicaid rules. These transfers may not trigger penalties if done correctly and in compliance with state and federal regulations.
3. Other Strategic gifting done before the five-year look-back period (at least 5 years before you or your spouse need nursing home care), can preserve assets.
4. Spend-Down Strategies: Using countable assets for exempt purposes, like home improvements or paying off debt, can be beneficial.

Conclusion

While the idea of a “Medicaid divorce” might seem like a clever solution, it is not recommended as an asset protection strategy and there are better alternatives available.

If you’re concerned about protecting assets in the face of potential long-term care needs, it’s crucial to consult with an experienced elder law attorney. They can help you explore legal and ethical strategies that align with your specific situation and state laws. Remember, the goal is to find a solution that not only protects your financial well-being but also preserves your dignity and family relationships.