Medicaid Eligibility and Planning Information

A. No. Medicare (Part A) provides only for a maximum of 100 days in a skilled nursing facility. Most nursing home patients do not require or qualify for skilled nursing care.

Medicare does not provide protection for the expenses of long-term health care such as (1) custodial nursing home care; (2) adult day care; or (3) home care provided by relatives or employed caretakers.

A. The only government program that will pay for long-term care is Medicaid, which is a jointly financed federal and state medical welfare program for the poor. The Medicaid program in New York is administered by the New York Department of Social Services.

A. The strategy most frequently used to protect and save the senior’s assets is called the “impoverishment” or “planned poverty” strategy. Simply stated, the senior gives away all or nearly all of his or her assets for the purpose of qualifying for Medicaid. The assets are transferred at such time, and in such manner, as to put them beyond the reach of the Medicaid program. The other way is to obtain a long term care insurance policy.

A. If you are married and only one spouse needs nursing home care, the spouse remaining home (known as the “community spouse”) can keep the house (if worth less than $878,000), personal property, car, burial funds and up to $74,820 in cash, deposits and/or stock.

If you are single, you are limited to $15,450 plus a burial fund of up to $1,500 and an irrevocable burial trust and a cemetery plot or niche. You also may own a life insurance policy with a death benefit of $1,500.

Assets in excess of the above limits would have to be applied to the cost of care (known as “spending down”) before Medicaid begins coverage.

A. If you are married, the community spouse can retain up to $3,160.50 in monthly income. Some portion of monthly income in excess of $3,160.50 may have to be applied to the “institutionalized” spouse’s cost of care. The term “income” includes Social Security Retirement, pension, interest, dividends, rental income, IRA distributions and the like.

If you are single, all but $50 of your monthly income will be required to be applied to the cost of your care. The $50 is your “personal needs allowance” to be spent as you see fit.

A. Under the Sixty Month Rule (applicable to outright transfers or transfers to a trust) eligibility for Medicaid is denied for a period of time if the person going into the nursing home transferred assets for less than fair market value within sixty months before his application for Medicaid benefits.

The period of ineligibility begins with the month after application for Medicaid and will last for the number of months equal to the total value of the transferred property divided by the monthly cost of nursing home care in your region.

A. The options available in this scenario are very limited. You need to contact your attorney immediately.

A. Not likely. There are two types of trust that you can establish while alive (“living trusts”): revocable and irrevocable. A revocable trust is one that you can always make changes to and even revoke at will. For Medicaid purposes, this trust affords no protection.

The irrevocable trust can provide asset protection. However, as the name implies, once created it cannot be altered or revoked. Therefore, any assets you put in an irrevocable trust will never again be “yours” or subject to your control. Also, a transfer of assets to an irrevocable trust extends the “look back period” by invoking the Sixty Month Rule (see, #6 above). Unless you have a significant amount of money that you will never miss losing control of, an irrevocable trust is not a viable option.

A. The Trustee must not be given discretion to distribute principal to the grantor Medicaid applicant: If the Trustee has the discretion to distribute income, then all income will be available for Nursing Home care, but the principal would be protected.

a) Under prior law, Section 1902 of the Social Security Act and corresponding state law regulations provide that for purposes of meeting the Medicaid eligibility requirements, the maximum amount which could be distributed from a trust to its grantor under the terms of the trust, assuming full exercise of discretion by the Trustees, will be considered available as a resource to the grantor regardless of whether:

1. The discretion is actually exercised;

2. The trust is irrevocable;

3. The trust is established for purposes of permitting the grantor to qualify for Medicaid assistance.

b) Under recent federal legislation (DRA 2005), if you have access to the principal of a trust, it is considered a resource and, therefore, available to pay the cost of your care.

c) Please note that Estate, Powers and Trusts Law 7-3.1 and decisions of New York State courts similarly prohibit access to principal.

d) The trust must be drafted to preclude statutory authority (EPTL 7-1.6(b)) for invasion of corpus for your benefit. This is possible, though, for trusts created by your Will (known as “testamentary trusts”).

A. Transfer of residence – if the Medicaid applicant is married, he or she may retain a principal residence in which a spouse resides. The house is exempt property regardless of value. However, if the applicant does not have a spouse or the spouse dies, the house may (1) no longer be exempt property, (2) may be subject to nursing home costs, and (3) may preclude Medicaid qualification.

A transfer of the residence to the children with the parent preserving a life estate is sometimes advisable. Although the value of the life estate might still be at risk during the applicant’s life, there are certain planning possibilities available to protect the life estate.

Note: The retained life estate as stated under Section 2036 of the Internal Revenue Code insures that the full value of the home will be includable in the parent’s estate to insure “stepped-up” basis on the parent’s death which enables the children to sell the house free of capital gains tax on the parent’s death.

A. It depends. The most important reason not to transfer assets is that once you give an asset away it is no longer yours. If you have a great deal of assets, giving away a portion may not be a problem. But, for most people, transferring assets usually means giving money to children who will “certainly” give it back to you later if you really need it.

Unfortunately, life does not often unfold according to one’s expectations. For example, children can get married, divorced, die, be sued, go bankrupt, or become estranged. Any of these events can diminish, if not entirely eliminate, any chance of getting your money back.

Also, seeking nursing home care as a Medicaid patient – as opposed to a “private pay” patient converted to Medicaid – offers far fewer choices. For example, Social Services has a “fifty mile rule” which allows for placement in any available facility within a 50 mile radius of the patient’s home.

Remember, the $15,000 gift tax exemption set by the IRS is for tax imposed on gifts you make – it has nothing to do with Medicaid gifts. Medicaid does not allow any gifts during the 60 month period before you apply for Medicaid benefits, even if the IRS does. Do not confuse them.

A. Yes. Nursing home or long-term care insurance is available from several major insurance companies. The cost for this insurance varies according to the age and health of the applicant. In New York – one of the four participating states – the insured under a certified policy can establish Medicaid eligibility at the expiration of the policy benefit period (usually 36 months) and shelter an unlimited amount of assets while receiving Medicaid benefits. However, the insured’s income, beyond the limits outlined above, must be applied toward the costs of care.