Medicaid

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.

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If you’re looking to help out your grandchildren financially, or simply wish to be generous, you may be wondering how gifting money could affect your eligibility for Medicaid long-term care benefits down the road. The short answer is that gifting can make you ineligible for Medicaid for a period of time due to the program’s asset transfer rules. However, there are certain allowances and strategies to be aware of.

The Medicaid Look-Back Period

To receive Medicaid coverage for nursing home care, assisted living, or in-home care, there are strict limits on the amount of assets you can have. This is because Medicaid is a needs-based program intended for those with limited resources.

Any gifts or asset transfers made within a specified “look-back” period before applying for Medicaid can trigger a penalty period of ineligibility. The federal look-back is 60 months (5 years).

*Side note: Although Medicaid is a federal program, the rules in each state vary. While all states implement the 60 month look-back for nursing home Medicaid eligibility, and most for community based services (including home care and assisted living care) as well, historically, New York did not have a look-back for community-based services. In 2020, New York State enacted a 30 month look-back but has delayed implementation and as of this writing, there is no definite date of its implementation for community based services.

So if you gift cash to your grandchildren, that amount gets totaled along with any other assets you’ve transferred during the look-back. Medicaid then determines how long you’ll be ineligible based on the transfer amount.

For example, let’s say you gift $112,000 to your grandkids, and the Medicaid nursing home regional rate in your county is $14,000. Your ineligibility period, the “penalty period,” would be around 8 months ($112,000 / $14,000 per month). Medicaid will not seek the penalty from your grandchildren, but you will have to figure out a way to come up with paying the nursing home privately during the penalty period before Medicaid begins to cover your bill.

There is a misconception that gifts under the federal annual gift exclusion amount would not be penalized by Medicaid. For 2024, the amount of the federal annual gift tax exclusion amount is $18,000. For example, some people believe that if they give $54,000 to three grandchildren this year, it won’t affect their Medicaid eligibility. That is not true. The IRS federal gifting rules are very different than the Medicaid penalty rules. Read more here.

Careful Planning is Key

While gifting to grandkids can be penalized for Medicaid purposes, if it is your wish to continue gifting while protecting your assets for Medicaid eligibility, there are strategies that an elder law attorney can develop for you.

Getting advice from an experienced elder law attorney is highly recommended to understand the complex rules and protect your eligibility.

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As we age, the prospect of needing long-term care can be daunting. Whether it’s for yourself or a loved one, navigating the complex world of Medicaid and securing coverage for long-term care can be a overwhelming task. This is where the experience and care of an elder law attorney becomes invaluable.

Applying for Medicaid long-term care coverage is a delicate and intricate process. The eligibility requirements are stringent, and a single mistake can result in a denied application or delay in benefits. An elder law attorney understands the nuances of Medicaid regulations and can guide you through the process, ensuring that your application is complete, accurate, and submitted in a timely manner.

One of the critical roles an elder law attorney plays is in asset protection. Medicaid has strict asset and income limits, and if you exceed these limits, you may not qualify for coverage. An elder law attorney can help you structure your assets in a way that meets Medicaid’s requirements, allowing you to preserve your savings and protect your financial future.

But getting the Medicaid approval is not where a lawyer’s assistance ends.

If you are using the assistance of a nursing home, home care agency, or expeditor service to assist with your application, they have one goal only: to get you approved for services. They are not concerned about future liens or penalties that you may be subject to.

Consider Beth, who needed nursing home care. She used a service recommended by the nursing home to assist with her Medicaid application. She owned her home in New York and only had $25,000 in her checking and savings accounts. A home is exempt if it is below the home equity limit (in 2024, $1,071,000). An “intent to return home” was filed with her application and her application was approved. No one advised her that Medicaid has the right to “estate recovery” and before her family could inherit, Medicaid will get paid back for the total financial cost of care provided to her from the equity in the home. After her death, her children were faced with a $300,000 bill that had to be settled before they could distribute the remaining proceeds from the sale of Beth’s home. With the assistance of an elder law attorney, she could have done planning during her lifetime to protect her home.

Consider Paul, who needed assistance at home. The home care agency prepared the Medicaid application, free of charge. Paul had $100,000, which was more than the resource allowance, (in 2024, $31,175), so they told him to simply “transfer it to his daughter.” His daughter was very honest and made sure to only spend that money on Paul’s needs. Fast forward one year later. Paul was not doing well and needed nursing home care. A nursing home Medicaid application requires a 5 year look back where Medicaid would flag an uncompensated transfer of $70,000, resulting in a penalty, essentially requiring Paul to pay approximately $70,000 worth of his nursing home bill out of pocket. Sadly, his daughter no longer had this money to pay during the penalty period and they faced a tremendous problem. With better advice from an elder law attorney from the onset, this situation could have been avoided.

In the end, having an elder law attorney by your side can make all the difference when it comes to securing Medicaid long-term care coverage. Their knowledge, experience and guidance can help you navigate the complexities of the system, protect your assets, and ensure that you or your loved one receive the care you need.

Medicaid is a means tested government program. A person is only entitled to Medicaid if they meet certain strict income and asset requirements. The income and asset requirements vary by state, and further vary by program. The following will discuss how retirement accounts are treated when a New York State resident is receiving Medicaid long term care benefits (home health aides, assisted living, or nursing home care).

Currently, in 2023, an individual can have no more than $30,182 in countable resources in his name to qualify for Medicaid long term care services in New York State. Countable resources include assets such as cash, stocks, real property (excluding a primary residence valued under $1,033,000), non-qualified annuities, and cash value of life insurance. A retirement account, such as an IRA or 401(k) is excluded as a countable resource, regardless of the value of the principal balance, if it is in “payout status.” For Medicaid purposes, payout status is taking the monthly minimum required distribution (calculated as per a life expectancy table based on the account owner’s age and the value of the principal balance in the account).

The monthly distributions are treated as the individual’s income.

In 2023, an individual can keep $1,677 per month of his income if he is receiving home care services. Above that amount, Medicare and other health insurance premiums can be paid, but then any remaining amount either has to be paid to Medicaid as a “co-pay,” or can be mostly preserved by joining a pooled income trust. The income will consist of the individual’s social security, monthly pension, required distributions from retirement accounts, and any other regular income payments to the individual.

If the individual is receiving Medicaid in a nursing home, then the applicant can only keep $50 a month of his income, and the remainder of his income (social security, pension, retirement distributions) all must be paid to the nursing home as a “co-pay” for Medicaid.

In both of the above scenarios, Medicaid is only counting the retirement distributions, and not the principal amount in the accounts.

To fully protect the retirement accounts, it is critical for the Medicaid recipient to confirm that the beneficiaries are up to date on the retirement accounts. If there is no beneficiary designated, or the beneficiary is deceased, then the retirement account will need to be probated and Medicaid can recover the cost of care through the probate assets.

If planned right, a person can receive needed long term care services from Medicaid, while preserving their hard earned retirement accounts. Call us for more information and to help you through this process.

Medicaid’s temporary pandemic rules have ended as of April 1 which will mean termination of coverage for millions of Americans in the coming months.

Medicaid, the government-provided health insurance that an estimated 85 million Americans are on, is a means-tested program. In order to qualify for Medicaid, there are specific resource and income rules that determine eligibility (which vary depending on the category an applicant falls under). Generally, for a Medicaid recipient under 65 years old, if he or she begins to earn more than the income limit, Medicaid would cut coverage. If a Medicaid recipient over 65 years old or disabled acquires more resources than the Medicaid limit, he or she would also see their coverage cut. These rules were suspended during the coronavirus pandemic, and coverage was prohibited from being cut for any Medicaid recipient that had Medicaid prior to March 2020 regardless of a change in income or resources. In addition, during the pandemic, a new Medicaid applicant was allowed to “attest” to their resources or income without necessarily providing supporting documentation, which made it much easier, and sometimes, incorrectly, adding such applicants to the Medicaid rolls.

States are not all starting the disenrollment process at the same time but if you believe you or a loved one are at risk of getting cut, it is best to seek advice immediately to ensure that you are not left without coverage.

This may be particularly devastating for those with health conditions, and seniors who are receiving home health care or residing in nursing homes with Medicaid coverage.

It is crucial that Medicaid recipients update their contact information on record with Medicaid to ensure that they receive notices regarding their Medicaid coverage and have ample opportunity to either recertify their Medicaid or make other health insurance arrangements without a surprise drop in coverage.

If you or a loved one are a Medicaid recipient receiving long-term care, (Community Care or Nursing Home care), and believe you may be at risk of losing your coverage, you should seek a consultation with an elder law attorney to review your situation and determine the best strategy to ensure no disruption in coverage.

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Some people are aware of the concept of Medicaid planning but are very reluctant because they are not ready to transfer their assets into a trust or as some put it, “give all their assets over to their children.”

Medicaid planning is not all or nothing.

A Medicaid Asset Protection Trust is an irrevocable trust that is utilized to preserve the assets funded in the trust so that those assets are not countable resources for Medicaid long term care eligibility purposes.

You do not have to transfer all of your assets into this trust. The main rule is that assets transferred into the trust will not be counted as your resources for Medicaid purposes and will be sheltered (after the applicable lookback period). The assets that remain out of trust will not be protected and may be countable resources when you need long term care.

If you are not in need of long term care services now, but wish to plan for a potential future need to access Medicaid long term care benefits, it is advisable to transfer some of your assets into the trust, while leaving out of the trust whatever you expect to need for your living expenses, and an additional cushion for an unexpected event, calculated at least for the next five years.

Contrary to erroneous belief, you do not have to be at the very low Medicaid eligibility limits during the full lookback period. Your assets only need to be below the Medicaid eligibility resource limits when you apply for Medicaid.

A very common and straightforward asset to fund in a Medicaid Asset Protection Trust is your home and other real property. In most situations, funding your home in your trust will not change your quality of life, but will begin the protection of what is likely your most valuable asset. Many people choose to fund their home in the trust, while leaving their money out of the trust. Your home, and its equity, will be fully protected five years from the funding. You will continue to have complete access, control and ownership of the money that you leave in your own name, with the risk that this money out of trust will not be protected should you need Medicaid. If Medicaid is needed while you still have the money in your name, you may not be able to preserve the full amount, it may need to be spent down on your long term care expenses, or you may be able to implement certain crisis strategies to preserve all or some of the money at the time. But at least your home, and other valuable assets that you transferred to your trust will be preserved.

Case Study: Charlie owns his home valued at $900,000 and has $500,000 in his combined checking, savings, and investment accounts. In July of 2016, Charlie established a Medicaid Asset Protection Trust and transferred his home to the trust. He left his liquid funds in his own name. Since then, Charlie continued to live at home, and spent his money on his regular expenses and some nice vacations. In December of 2022, due to a sudden medical event, Charlie becomes a resident of a nursing home. He is interested in applying for institutional Medicaid. His home is fully protected in the trust, but he has $300,000 left in his combined accounts. In 2023, New York Medicaid resource limit is $28,133. He can’t transfer the rest of the money to his trust or a child because of the lookback period penalty. He consults with his elder law attorney, who confirms that the house is completely protected, and explores the best way to salvage the remaining funds and become Medicaid eligible. (If he was married or had a disabled child, he may have been able to preserve the full amount, but ultimately, a promissory note gift plan is used, also known as a “half loaf” plan, and he is able to preserve about half of his money while the remaining amount is spent on his long term care expenses.)

While he did have to spend some of his money on his care before he became completely Medicaid eligible, with the advance trust planning, Charlie was able to protect his valuable home, and enjoy his money while he was healthy.

With Medicaid planning, there is so much to consider, and the earlier you do, the more available options you will have to achieve more optimal results. As you head into your sunset years, the earlier you talk to an elder law attorney, the better off you will be.

October 2022 Update

Update on the Community Medicaid Lookback!

New York State Department of Health has announced that it will not be implementing the Community Medicaid 30-month lookback earlier than March 31, 2024. In alignment with the requirements under the American Rescue Plan Act relating to Home and Community Based Services, as well as the Maintenance of Effort requirements under Section 6008(b)(1) of the federal FFCRA (Families First Coronavirus Response Act), the state has further delayed implementation. This means that those seeking community-based Medicaid services, such as home care health aides or an assisted living, can still apply for Medicaid long term care and be granted Community Based services without a lookback at transfers of assets. To further break this down, you can still transfer and protect assets and obtain Medicaid community care without being subject to transfer penalties.

May 2022 Update

As you may have heard, New York State intends to implement a new lookback and related transfer penalty that will apply to Medicaid applicants seeking community based long term care services, such as home care or assisted living care. While the new rule was in place since October 1, 2020, the implementation has been delayed several times during the Coronavirus Pandemic. It has now been further postponed due to protections enacted under the Families First Cares Act (FFCRA). The federal act prohibits states from restricting eligibility during the Public Health Emergency (PHE). Further, the New York State Department of Health has not yet issued guidance on the specifics of how the lookback will be implemented. At this point, the lookback will not begin before October 1, 2022, and may even be delayed further. That is good news for you. It means that while the PHE is ongoing, you still have time to preserve and protect your assets and become eligible for Medicaid home care services. Be sure to do so immediately but certainly before October 1, 2022. If you wait and need home care or assisted living Medicaid services once the lookback has been implemented, then uncompensated transfers of your assets that were made within 30 months of your application (only going back to October 1, 2020) may result in a transfer penalty. If you haven’t yet consulted with an elder law attorney, now is the most opportune time to do so before the new law is implemented. Call us today and we can help you get started.

Read more about the new lookback here.

Medicaid has strict limits on the amount of money a Medicaid applicant and his or her spouse can have (resource limit) in order to qualify for Medicaid long term care benefits, as well as specific income limits while receiving services. (See Medicaid Eligibility Limits for specific figures.)

In New York State, Medicaid Asset Protection Trusts and a Pooled Income Trusts are both tools utilized in asset preservation planning in connection with Medicaid long term care benefits. Medicaid is a federal program that is administered separately in each state. Therefore, the rules vary by state. The following will explain and compare a Medicaid Asset Protection Trust and a Pooled Income Trust as per New York State law.

Trust to Protect your Assets

A Medicaid Asset Protection Trust is set up to preserve a person’s assets in order to qualify for Medicaid long term care services without having to spend down those assets first. The person who creates and funds the trust is called the Grantor. The Grantor, or his spouse, would also be the future recipient of Medicaid services so in order to protect these assets, trust assets can no longer be available to the Grantor once funded into the trust. The strict rule of this asset trust is that distributions of trust principal can NEVER be made to the Grantor and his spouse, or to a third party for either the Grantor or his spouse’s benefits. This makes sense: if the assets were available to the Grantor, Medicaid would say “You don’t need our services, you have all this trust money available, go pay for yourself!”

It is recommended to set up a Medicaid Asset Protection Trust and fund it with a portion of your assets far in advance of your possible need for long term care because there is a “look-back” period and you want to be well past the “look-back” period by the time you may need care. (Read more about Medicaid Planning here.) You should always leave out of the trust enough funds to cover your expected expenses for the next five years (combined with your income).

A house is a very common asset to fund into this trust because it is usually a person’s greatest asset and it can be protected while still continuing to live in the house. But funding the trust with financial accounts should be considered preservation of the next generation’s inheritance. You should not plan to tap into any equity funded into the trust. Of course, we cannot 100% predict the future, so if access to the trust funds are needed in the future, there is a carve out in the trust to do so and it is possible to access the trust assets if needed.

Trust to Preserve Your Income

While it is advisable to set up and fund a Medicaid Asset Protection far in advance of your need for long term care, a Pooled Income Trust is applicable only once you require Community Medicaid benefits. When a person is budgeted for Medicaid home care services, they are allowed to keep some of their income, but if their income is over the allowable limit (Medicaid Eligibility Limits) they either have to contribute the excess income as a Medicaid “co-pay” or they can preserve it by depositing it into a Pooled Income Trust account. The money deposited into the account can then be used for the Medicaid recipient’s expenses. The Pooled Income Trust enables a Medicaid Community Care recipient to preserve his or her income while receiving Medicaid services.

The strict rule of the income trust is the opposite of the asset trust: Distributions from this trust can ONLY be made for the Medicaid recipient’s expenses.

The company that administers the pooled income trust is a non-profit and operates for charitable purposes. They get a small management fee each month for managing the trust accounts and paying bills on behalf of the Medicaid recipient. Any balance remaining in the trust upon the death of the Medicaid recipient remains with the charity.

Below is a chart that compares the differences between the two types of trusts.

Whether you won’t need long term care for several years or are already in need of care, our office can guide you through your options and optimal long term care planning strategies.

Schedule your consultation today.

When the higher income earning spouse needs nursing home care, the spouse that remains home is often concerned how they will pay his or her expenses. While not very robust in today’s economy, Medicaid does have some protections of income for the healthy spouse or what is known in Medicaid parlance as the “community spouse.”

Medicaid has specific limits on the assets that a community spouse can retain, but the income of the spouse of the Medicaid applicant is not counted when determining the Medicaid applicant’s eligibility. Medicaid only counts the income that is earned or received by the applicant alone to determine eligibility. However, in states such as New York, if the community spouse’s income is more than certain levels, he or she may be required to contribute toward the cost of the nursing home spouse’s care.

But what if the community spouse’s income is very low and the couple’s income is mostly in the name of the spouse that is in the nursing home? The community spouse’s income alone would not be enough to live on.

In such cases, Medicaid provides that the community spouse would be able to retain some or all of the institutionalized spouse’s income. The amount the community spouse is entitled to is known as the minimum monthly maintenance needs allowance or MMMNA, which figure varies by state and may range from a low of $2,288.75 to a high of $3,715.50 a month (in 2023). In New York State, the 2023 community spouse Minimum Monthly Maintenance Needs Allowance (MMMNA) is $3,715.50

If the community spouse’s income is below the state MMMNA, the difference between the MMMNA and his or her income is made up from the nursing home spouse’s income. If the community spouse’s income is at or above the MMMNA, he or she will not be entitled to any of the nursing home spouse’s income, (and may even need to contribute a portion of his or her income to Medicaid).

Example #1: Josh and Naomi Parker, NYS residents, have a joint income of $2,600 a month, $1,900 of which is in Josh’ s name and $700 is in Naomi’s name. Josh enters a nursing home and applies for Medicaid. Naomi is entitled to a MMMNA of $3,715.50 and therefore she may retain all of Josh’s income, which combined income is still below the MMMNA of $3,715.50.

Example #2: Mark and Sue Jones have a joint income of $4,000 a month, $2,800 of Mark’s income and $1,200 of Sue’s income. Mark enters a nursing home and applies for Medicaid. The Medicaid agency allocates $2,515.50 of Mark’s income to Sue’s support to meet the MMMNA ($3,715.50 = $1,200 + $2,515.50).

Example #3: Brian and Barbara White have a joint income of $9,000 a month, $1,200 of which is Brian’s social security and $7,800 is collected by Barbara from her social security and pension. Brian enters a nursing home and applies for Medicaid. Because Barbara’s income is above the MMMNA, the Medicaid agency does not allocate any of Brian’s income to her, and Medicaid budgets his income to be paid to the nursing home (after his $50 Medicaid personal needs allowance and Medicare and supplemental insurance costs are deducted).  Further, Barbara may need to contribute a portion of her income to Medicaid.

There are exceptions to the MMMNA as well as many other Medicaid rules, and it is best to contact our office to find out about the best options for your particular situation.