This guide will help you understand the Medicaid Long Term Care Program in New York State.
Table of Contents
What is Medicaid?
Medicaid is a joint federal and state program that can cover the cost of Nursing Home care as well as Community Based care (“home care”) for individuals who meet both the financial and health eligibility requirements.
The cost of care in New York can be financially burdensome on a family. The cost of care in a Nursing Home can cost upward of $190,000/year. The cost of Home Care, where an individual is in need of 24/7 care, the cost of care can be upwards of $210,000/year.
The type of Medicaid long-term care program for which you apply will have differing functional and financial eligibility requirements, as well as varying benefits. To determine financial eligibility, Medicaid looks at both the individual, and if married, the individual and the spouses, assets and income.
Medicaid is a “needs based” program which follows strict income and asset guidelines, which numbers can change annually. While there are limitations on the amount of income and assets an individual can have to qualify for Medicaid, with proper planning, almost anyone can be eligible.
By doing proper Medicaid Planning, you can ensure that your assets will be protected and remain within your family, rather than be depleted for the cost of care. The optimal time to do planning is well in advance of the emergent need for care.
Recommended reading: NYS Income and Resource Limits for Medicaid (2024)
Medicaid provides that there is a limit on the amount of assets an applicant, and when applicable, the spouse may have to qualify.
What are Assets?
Medicaid looks at the following as countable assets (also called resources): Cash, stocks, bonds, investments, vacation homes, and savings and checking accounts.
What are Exempt Assets?
For Medicaid eligibility, the following are considered exempt assets (non-countable): IRAs and 401Ks in payout status, personal belongings, household items, a vehicle, burial funds up to $1500, prepaid funeral arrangements, and one’s primary home, as long as the Medicaid applicant lives in the home, or intends to return to live in the home, and the equity value is under $1,033,000 (for 2023). Additionally, if the applicant is married, and the applicant’s spouse lives in the home, the house is exempt regardless of the equity value. It is important to note that while the individual’s personal residence is an exempt asset, if the asset is part of the applicant’s probate estate, Medicaid could place a lien and “claw-back”.
Limitations on Assets for Home Care and Nursing Home Care
In order to qualify for Medicaid coverage for long term care, a single applicant may only have $30,182 of total assets. If a couple is applying for long term care coverage, the couple may have total combined assets of $40,821.
What are the Lookback periods?
Medicaid has imposed a “look-back” period whereby an individual will be disqualified from obtaining Medicaid benefits, or penalized, as a result of improper transfers made.
Lookback for Nursing Home:
New York has a 5 year (60 month) look back period, that dates back from one’s Medicaid application date. Medicaid will audit the 60 prior months to determine if any transfers of assets were made from the applicant or the applicant spouse as a gift, or sold for less than fair market value (“uncompensated transfers”). If uncompensated transfers are found during the look-back period that do not fall within an exemption, the applicant will be penalized with a period of ineligibility for Medicaid.
Lookback for Home Care:
Pursuant to New York State law as of October 2020, but not yet implemented, New York has a look back period of two and half years (30 months) for Community based services such as home health care, adult day care, personal care assistance, and assisted living services. Once implemented, an applicant may be penalized for uncompensated and non-exempt transfers made for less than value. However, there has actually been a bill introduced to repeal the law. We will keep our eye on these developments.
What is Income?
For Medicaid eligibility purposes, all income that a person receives from any source is counted towards the income limit. This may include wages from employment, pension payments, Social Security Income, Social Security Disability, gifts and payments from annuities and IRAs.
Income rules for Nursing Home:
All of the applicant’s monthly income in excess of $50 must be paid to the Nursing Home to offset Medicaid payments towards care.
Community Spousal Resource Allowance (CSRA):
Where an applicant is married, in order to protect the non-applicant spouse of a Medicaid Nursing Home applicant from having too little resources, the spouse may retain a higher portion of the couples assets. For instance, in 2023, the non-applicant spouse can retain up to $148,620.
Income rules for Home Care:
Medicaid has limitations on the amount of income an applicant may have in order to receive Home Care. Medicaid has provided that a single applicant may only have income in the amount of $1,677/month. Where a couple is applying for Medicaid, they may only have $2,268/month. Where an applicant is married, the “well-spouse” may only have income in the amount of $3,715.50/month.
Pooled Income Trust (PIT):
Where the Medicaid applicant has income over the limitations, they would not be eligible for Medicaid. However, by setting up a Pooled Income Trust (“PIT”), they can qualify for Medicaid. The PIT is a type of trust that is operated by a non-profit organization. The PIT creates a separate account managed by the charitable organization. The excess income of the applicant is transferred to that separate account on a monthly basis. The individual can then direct the PIT to pay certain allowable expenses with the funds in that account, i.e. rent, utilities, food.
When dealing with married couples, when only one spouse is applying for Nursing Home, the income of the “well-spouse” is not counted, only the income of the applicant. However, for Community Based Medicaid, the income of both spouses is counted towards the income limit. For married couples with one spouse applying for Nursing Home, a portion of the applicant’s income can be transferred to the well-spouse.
In addition to the financial eligibility, Medicaid also evaluates a person’s need for long term care based on the assistance they need with their Activities of Daily Living, “ADLs” (i.e. mobility, dressing, eating, personal hygiene, and toileting). The hours that a Medicaid applicant is awarded is based on the level of assistance they are determined to need.
Trusts are a vehicle used by Elder Law attorneys to protect assets. There are many benefits of using a Trust, including long term care asset protection, providing for a child with disabilities, controlling how a beneficiary will receive his or her inheritance, and for all trusts, removing the assets from the individual’s probate estate.
Medicaid Asset Protection Trusts vs. Revocable Trusts
Not all trusts preserve assets in light of the costs of long term care, but may serve other beneficial purposes. For example, a revocable trust will not help qualify the applicant for Medicaid, but will remove trust assets from the applicant’s probate estate. So for example, an applicant may qualify for Medicaid while owning their personal residence (that is under the Medicaid allowable equity limit), but would choose to fund it in a revocable trust to avoid probate and protect the residence from potential Medicaid estate recovery.
What is Medicaid Asset Protection Trust?
A Medicaid Asset Protection Trust is an irrevocable Trust where the assets of the Medicaid applicant are placed into the trust. The Medicaid Asset Protection Trust allows all assets placed into the trust to be removed from the applicants name for Medicaid eligibility, both for Home Care and for Nursing Home care (subject to the differing look-back periods). The assets placed into the Medicaid Asset Protection Trust are not subject to a Medicaid Lien after the death of the Medicaid recipient.
What to put into the trust?
In order to qualify for Medicaid, the applicant must remove all non-exempt assets out of his individual name that is over the resource limits. Additionally, for individuals who have personal residence, they are advised to protect their home, not only for immediate qualification but also to insure that the personal residence will not be subject to a Medicaid Lien upon death or a permanent stay in a nursing home.
How Does the Trust work?
The person that owns the assets to be put in trust is called the “Grantor.” In order for these assets to not be considered belonging to the Medicaid applicant, the Grantor has to choose someone else to be the Trustee, to manage the assets in trust. The trustee can be the Grantor’s child or several children. The trust will specify that principal cannot be paid to or for the benefit of the Grantor. Sometimes, the trust is established providing income to the Grantor, and other times it is preferable to restrict the Grantor from income. The trust will give the Grantor the exclusive right to reside in the personal residence for his or her lifetime, while also maintaining the real estate tax benefits such as STAR exemption. The house can be sold, with the proceeds either being used to purchase another residence, or invested, or a combination of both. Assets from the trust can be distributed to the beneficiaries that the Grantor chooses, such as the Grantor’s children, so assets in the trust are not locked up for the Grantor’s life.
After lifetime, the trustee has the authority to immediately administer the trust assets, i.e. sell the property, and can distribute the trust assets according to the terms of the trust, without the cost and delay of probate or any other court proceeding.
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