Qualifying for Medicaid
Medicaid is a state-run program, and New York’s qualification rules are quite favorable. As of 2020, individuals must have less than $15,750 in countable assets. Married couples must have less than $22,800 in assets. A primary residence does not count. Neither do life insurance policies and some other assets. Some other assets, such as pension plans and IRAs, are in a grey area. In some cases, individuals or couples can retain some money as a personal allowance or to pay home health care costs.
To reach these financial levels, individuals cannot simply give away their property before they enter a nursing home. Medicaid has a five-year lookback period. Most transfers made within that time frame, including sales below market value, are presumed fraudulent. And, Medicaid fraud is a very serious felony.
These rules vary in different states. And, much like the gift tax rules, these eligibility requirements change constantly.
Medicaid Asset Protection Trusts
In many cases, a MAPT is an ideal Medicaid planning vehicle. That’s especially true if long-term care insurance is not an option, for whatever reason.
MAPTs are income-only trusts. Someone other than the settlor (person who creates the trust) or the settlor’s spouse must be the trustee. Bank accounts, retirement accounts, investments, and other such property goes into the trust, and the settlor only has access to the income. Even though the settlor is not the trustee, the settlor can replace the trustee for good cause.
These trusts are subject to the aforementioned lookback period. However, it is never too late to create a MAPT and at least reduce your long-term care payments.
For all intents and purposes, a MAPT is a person. So, the trust can do things like downsize from a house to a condominium or buy and sell stocks.
Transferring property, specifically cash, to an exempt asset is often a good idea. For example, instead of downsizing to a condominium, the couple could upsize to a larger home.
Another option, the Medicaid annuity, is available because of an obscure provision in the Deficit Reduction Act of 2005. The community spouse, who is the spouse remaining at home, purchases an annuity with excess funds. The annuity must be repaid according to the community spouse’s actuarial life expectancy. In the meantime, the other spouse is instantly eligible for Medicaid.
Other alternatives include spousal refusal and a gift/loan strategy. Spousal refusal involves an asset transfer to the community spouse and that person’s refusal to contribute to long-term care costs. A gift/loan transfer, like a spousal refusal, typically reduces, but does not eliminate, long-term care payments.
Medicaid planning preserves your assets and gives you additional peace of mind. For a confidential consultation with an experienced estate planning lawyer in New York, contact Dilendorf Law Firm, PLLC.
New York Medicaid Planning Attorneys
Dilendorf Law Firm
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Much of estate planning focuses on minimization, as in minimizing, tax payments, probate court burdens, and the time required to prepare an effective will. However, solid estate planning also includes maximization. At the Dilendorf Law Firm, our New York estate planning lawyers provide support in both these areas.