Medicaid’s Five Year Look-Back Period

June 16, 2015

Anyone who has researched Medicaid planning has almost certainly heard of Medicaid’s dreaded five year look-back rule. I am not exactly sure why out of all the idiosyncrasies of New York’s Medicaid laws, the five year look-back is one of the most ubiquitous, but my guess is because it is one of the harshest. This article will attempt to explain how the 5 year look-back works and what seniors and their caretakers can do to plan around it.

The Rule:
If a New Yorker needs nursing home services and applies to Medicaid to pay for them, Medicaid looks back for 5 years to see whether he or his spouse made any gifts or uncompensated transfers of assets. If the individual or their spouse made any gifts within 5 years of the date of the Medicaid nursing home application, NY State imposes a penalty period based on the size of the uncompensated transfer, which is called a penalty period. The penalty period is calculated by combining all gifts made within the 60 months prior to the application divided by the average monthly cost of a nursing home which, in New York City, is $11,843 in 2015. The penalty period starts from the time the client is in the nursing home, is otherwise eligible for Medicaid, and has used up his “non-exempt resources”, which are liquid assets over $14,850. It is important to note that, currently, in New York, there is no penalty for these transfers if the senior requires “community Medicaid” which includes Medicaid home care services. Client are often surprised (and relieved) to learn this, but that doesn’t mean that they shouldn’t plan for two reasons: (1) we never know if and when nursing home care will be required and (2) New York may follow other states and change its laws to impose a penalty period even for community Medicaid.

The Application:
For example, Joe, 72 and single, owns $110,000 worth of stocks and a checking account worth $14,850 when he suddenly suffers a stroke and needs a skilled nursing facility to care for him. If Joe gifts away his money now, he will have a penalty period of approximately 9 months ($110,000 divided by $11,843), which means that Medicaid will not cover his care during that period and he will have to retrieve the gifts he made and pay for his own care. At this point, Joe has a couple of options: (1) he can spend $110,000 of his money on nursing home care or (2) with the help of an elder attorney, Joe can engage in “promissory note planning” which, while outside the scope of this article, can help him preserve roughly half of his assets if implemented properly.

The Exceptions:
There are exceptions to the transfer penalty rules, which should be discussed with a qualified Medicaid planning lawyer before any transfer of assets is undertaken. The most commonly used ones are the transfer of the applicant’s home to his spouse or to a caretaker child who resided in the home with the applicant two years before the application and provided care. Additionally, any assets transferred to a spouse are exempt from penalties, as are assets left in trust for the sole benefit of a disabled child or a disabled individual under 65. An exception can also be made if the transfers were made solely for a purpose other than to qualify for Medicaid.

The Misconception:
There is a common misconception that one can give $14,000 per year as a gift to anyone they want and that the gift won’t be subject to a Medicaid penalty period. The reason for this misconception is that clients confuse the annual gift tax exclusion, which is the amount they can gift someone per year without filing a gift tax return (currently up to $14,000 in 2015) with the amount they gift someone and still avoid a Medicaid penalty. Any transfer for less than fair market value is considered a penalized transfer for Medicaid purposes.

The Plan:
The best advice any elder attorney can give their client is to prepare in advance to avoid losing their assets to long term care bills. Armed with a comprehensive power of attorney and appropriate planning techniques which include irrevocable Medicaid trusts, clients can avoid the pitfalls of the five year look-back, preserve their assets for their loved ones, and gain peace of mind.

If you have any questions about Medicaid’s 5 year look-back, please contact the Law Offices Of Roman Aminov at (347) 766-2685

Spending Down Assets to Qualify for Medicaid Nursing Home Care

January 27, 2015

Medicaid nursing home care is a means-based program, which means that the government looks at your income and assets to determine eligibility. Since you can’t gift away your assets and qualify for nursing home care for up to 5 years, elder law attorneys need to find creative legal ways for over-resourced seniors to qualify for the care they need. In this article we will discuss a few common ways that New York seniors can qualify for nursing home care by legally spending their assets down. It is important to note that while married seniors have more planning options than single ones, these strategies work for either. It is also important to remember that it is far better to plan at least five years before you may need nursing care, and that these techniques are only last minute solutions which may not work in every situation. It is highly advisable to speak to an elder care attorney before undertaking any Medicaid planning on your own.

No Gifting
The first rule to remember is NOT to gift any money without speaking to an attorney. Many seniors are tempted to give away their money to qualify for care. Some erroneously think they can gift away $14,000 per year per person without a penalty. These actions may result in a penalty period which will delay coverage. Instead, speak with a Medicaid planning attorney to determine which gifts, if any, can be made without invoking a penalty.

Legitimate Debts and Mortgages
If you have medical bills, credit card debts, taxes, rent, utilities, a home equity loan, or a mortgage on your house, you can pay them off using your assets without incurring a penalty. Keep in mind that you will still need to protect your home from Medicaid liens and Medicaid estate recovery after your mortgage is paid off.

Purchasing Non Countable Assets
Need a new refrigerator? New home furnishings? A new roof? These purchases, along with other items you may need, including new clothes, a newer car, and vacations for yourself, may be purchased without incurring a Medicaid penalty.

Caregiver Agreements
New York Medicaid allows you to spend money on your care without incurring a penalty. This includes paying a child to provide care for you, thereby depleting your funds and helping you qualify. There are, however, a few important requirements. First, the agreement should be in writing and signed by both parties. The agreement must define the scope and cost of the services provided. The cost of the care must be reasonable. Daily time logs must be kept by the caretaker. If a lump-sum prepayment is made to the caretaker, the amount must be calculated using your reasonable life expectancy, and the contract should provide that any unearned funds shall be paid back to Medicaid when you pass away. All payments should be made with check or credit card, since cash payments are hard to prove. The money that you pay to the caretaker will be treated as income to them, subject to their paying income taxes on it. It is best to engage the services of an elder care attorney to prepare and oversee the caretaker agreement.

Prepaying Funerals
Medicaid allows you to use your funds to prepay your funeral, as long as the prepayment is irrevocable. In addition, you are allowed to pay for the funerals of your spouse, children, siblings, parents, and spouses of any of those individuals as long as the marriage is in effect. This can be a very effective way to make “gifts” to your family members while not having them count as a penalized transfer of assets.

To speak with a New York Medicaid Planning Lawyer, contact the Law Offices of Roman Aminov today at 347-766-2685.

Medicaid Planning with a Life Estate Deed

March 13, 2014

As we discussed in the previous Medicaid planningarticle, in order to avoid Medicaid liens and estate recovery, elder law clients would be well advised to learn about their rights to protect their homes. This is true whether they need Medicaid home care and wish to avoid estate recovery, or whether they are planning for nursing home care and wish to avoid liens and/or estate recovery. One strategy entails transferring the home into an irrevocable Medicaid trust which allows for the most flexibility. Another technique to protect the home involves transferring the home to loved one while retaining a life estate in the home. This article will discuss the benefits and drawbacks of a deed with retained life estate for the elder law client.

Life Estate Benefits:

  • A legal life estate allows the life estate holder the absolute and exclusive right to live in the property for the rest of their lives. Therefore, the senior can live in their home without worrying about the remainder owners (usually the children) kicking them out. This can also be accomplished with a Medicaid trust.
  • The life estate holder has the right to all the rents from the property if it is rented out during his/her life, similar to a Medicaid trust.
  • The property avoids probate after the death of the client since it passes by operation of law, similar to a Medicaid trust.
  • The life tenant retains their real property tax breaks including STAR, Enhanced STAR, SCRIE, SCHE, etc. which can also be accomplished with a Medicaid trust.
  • Under current (March 2014) Medicaid estate recovery laws, the home will not be available to Medicaid under an estate recovery action since the home avoids probate (see above).
  • The property receives a step-up in tax basis upon the death of the owner which saves the remainder beneficiaries capital gains tax if the property appreciated after it was purchased. This result is the same under a properly drafted Medicaid trust.
  • The transfer of the property with a retained life estate triggers Medicaid’s 5 year look-back period for nursing home care which means the earlier you transfer the home, the sooner you would be eligible for Medicaid nursing home care coverage. The same applies to transfer to a trust.
  • The transfer with a retained life estate will often result in a shorter penalty period than a transfer into a trust since the value of the life estate is subtracted from the amount gifted.
  • Life estates are cheaper and simpler to create than irrevocable Medicaid trusts.

With all these advantages, one may wonder why attorneys still recommend the use of irrevocable Medicaid trusts. The following disadvantages will highlight some of the reasons. A consultation with a Medicaid planning attorney is crucial before undertaking any course of action.

Life Estate Disadvantages

  • When you transfer property with a retained life estate to someone else, you can not sell the property without the remainder owners’ consent.
  • You also lose the right to change who the eventual owners will be; once the transfer occurs, you can’t take it back without consent. This contrasts with a trust which allows you to retain a limited power of appointment and change who the eventual beneficiaries will be at any time.
  • The property will become an asset of the remainder beneficiaries immediately upon the transfer and will also be available to the creditors and may prevent them from obtaining means tested governmental benefits such as Medicaid and SSI.
  • Although both a life estate and a trust transfer require the filing of gift taxes, the transfer of a property with a life estate is a completed gift for gift tax purposes and may therefore require the payment of gift taxes.
  • The sale of the home while you are in a nursing home will result in the life estate portion of that transfer (calculated using IRS tables) becoming an available resource.
  • If the home is sold, you would not qualify for the full $250,000 exclusion of capital gain tax ($500,000 if you are married filing jointly). Rather, you would be entitled to a partial qualification relative to the value of the life estate.

The decision of whether to use a life estate or an irrevocable Medicaid trust involves many different areas of law as well as individualized personal factors. Therefore, the decision to protect the home while qualifying for Medicaid should be followed up by a conversation with an elder lawyer to make sure that your plan comports with your wishes. Our estate planning/elder law office is available for a free consultation at 347-766-2685.

Medicaid Planning for the Home: Irrevocable Medicaid Trust

February 6, 2014

When it comes to long term care for seniors, our office recommends long term care insurance as the first choice. If that is not an option, planning for Medicaid becomes an important component of many families’ plans. While Medicaid allows seniors to own a home and still qualify for benefits, it is important to understand that Medicaid can impose a lien on the home if the senior is admitted to a nursing home. Additionally, Medicaid may collect against the estate after the senior passes away, regardless if they were receiving community or institutional Medicaid. It is therefore necessary to understand various planning strategies which allow seniors to obtain necessary benefits while protecting their assets for their heirs. One of the best techniques which attorneys use involves the transfer of the home into an irrevocable Medicaid trust, which will be discussed in this article.

Benefits During Life
The Medicaid trust involves transferring the home and other assets into an irrevocable trust which will then be managed by a trustee (or trustees) of your choice. The trustee can be a child, friend, sibling, or anyone you trust, excluding your spouse. A properly drafted trust entitles you to all of the benefits of ownership including:

1. The right to remain in the home as long as you and your spouse are alive.
2. The right to make the trust “income only” and collect any rent the property generates.
3. The ability to keep your existing STAR and Enhanced STAR property tax relief as long as you reside in the home.
4. The right to use the $250,000 (if single) or $500,000 (if married) capital gains tax exclusion if the home is sold during your life.

If the home is sold during your life, a new home can be purchased for your benefit. You can also allow the assets in the trust be used for the benefit of your children, grandchildren, or other beneficiaries. It is important to make sure that the trust does not allow the trustee to give the principal directly to you or your spouse. The trust can also allow you a limited right to change your trustee if you are not happy with how they are performing.

The trust also protects your beneficiaries from creditors. Instead of gifting your home outright, by placing it in trust, you are able to shelter it from the reach of your beneficiaries’ creditors. If one of your ultimate beneficiaries has a creditor which you wish to avoid, you can simply change your beneficiaries by using your limited power of appointment so that your assets don’t fall into unwanted hands.

From a planning standpoint, transfers into a trust should be done sooner rather than later since Medicaid imposes a 5 year look-back for nursing home care. By transferring your assets into a trust, you start the five year look-back clock running if you were to ever need nursing home care.

Benefits After Death
After you and your spouse both pass away, the trust will distribute the assets as per your wishes. During your life, you can retain the right to change your beneficiaries by retaining a limited power of appointment. This power allows you to change the beneficiaries either by writing a will or by executing any other writing during your life which makes reference to the trust. This means that the creation and funding of the trust doesn’t spell the end of your control of the ultimate disposition of your assets. It also means that the home will be included in your estate when you pass, and will receive a step-up in tax basis. The step-up in basis saves your heirs from paying capital gains tax upon the immediate sale of the home.

Additionally, the trust allows the home and other assets to avoid probate which saves unnecessary time and expense. By avoiding probate, you also avoid Medicaid estate recovery which is the government’s way of taking back the amount they paid for your care after you die. More about Medicaid estate recovery can be found here

We hope this article has shed some light on the Medicaid planning trust and highlighted the benefits of thinking about one with your elder care lawyer. Any specific questions or situations should be discussed with a competent attorney. We welcome you to contact our office for a free consultation at 347-766-2685.

Drafting Wills and Trusts for Beneficiaries with Special Needs in New York

September 25, 2013

Michael and Joan came in to my Queens estate planning office to re-draft estate planning documents that they had prepared over a decade ago. Their wills, like those of many married couples, left everything to each other. If one of them passed away first, the wills had mirroring provisions which left 10% of the estate to Joan’s brother, Tom, with the remainder, 90%, split evenly between their three children. From the face of it, their wills looked alright, but their accountant advised them to see me about updating their plans. We were all glad that he did, since much had changed since they had their estate plan prepared. Joan’s brother’s medical situation worsened and he was receiving Supplemental Security Income, also known as SSI. Additionally, their third child, David, who was only 6 months old when their prior wills were prepared, was determined to be developmentally disabled and would need Medicaid as he got older.

Had Michael and Joan kept their wills the way they were, their bequests would have disqualified Tom from SSI and David from Medicaid until their portion of the inheritance was spent down. I advised the couple that they should prepare a new estate plan which does not give any outright bequest to a beneficiary who is receiving means tested government programs such as Medicaid and SSI. As a Queens elder law attorney, I understand how important it is to preserve assets while receiving benefits.  Instead, I explained the benefits of incorporating a testamentary Supplemental Needs Trust (SNT) into their wills (the same concept can be applied to living trusts).

A supplemental needs trust, sometimes referred to as a special needs trust, allows a person to leave a bequest to a beneficiary in trust instead of outright. The trust, which is authorized in New York under EPTL 7-1.12, would allow the beneficiaries to qualify for government benefits while receiving distributions from the trust if the following conditions are met: (1) the beneficiary suffers from a severe and chronic or persistent disability; (2) the trust document clearly states that the bequest should be used to supplement, not supplant, government benefits; (3) the trust prohibits the trustee from using the assets in a way that may impair or diminish the beneficiary’s entitlement to government benefits or assistance; (4) the beneficiary does not have the power to assign, encumber, direct, distribute or authorize distribution of trust assets; (5) the distributions are at the sole discretion of the trustee(s) and are not mandatory.

If Joan and Michael give Tom and David their inheritance in trust, the assets in the trust will not be considered the beneficiaries’ assets for purposes of eligibility for SSI or Medicaid, thereby letting them keep their benefits along with their inheritance. The trustee(s) of the trust will be able to use the principal and/or income to provide Tom and David with their needs, beyond what Medicaid or SSI provides. They will be able to purchase necessary medical equipment and pay for additional care. They could also purchase a car, home, or even a vacation. It is important to note that, for SSI purposes, payments made for food, clothing or shelter are considered “unearned income” and will reduce SSI benefits by up to one-third. The SNT may own a residence where the beneficiary can live without a reduction to his or her SSI. Unlike SSI, Medicaid does not impose this penalty. If the beneficiary is a Medicaid recipient, payments can be made for various needs including food, clothing, or shelter with no reduction in benefits or eligibility.

Michael and Joan can were advised that they can use the SNT to provide for a disabled child and sibling for life. As long as the trust was funded after their legal duty to support beneficiary ended, the couple is free to direct how any unused trust property will be distributed upon the beneficiaries’ deaths. They could direct that the funds be given to their other children or grandchildren if it was not used up during the beneficiaries’ life. This is an ideal and statutorily authorized tool to allow a disabled person to get the care they need, while allowing their family to provide them with benefits that government programs don’t pay for.

To discuss your particular situation with a New York estate planning attorney, contact our office at 347-766-2685 today.

Pooled Trusts: Medicaid Home Care While Preserving Income

July 30, 2013

Many New York City residents who are in need of community Medicaid services such as home care, adult day care, or prescription drugs find that they exceed New York Medicaid’s income allowance, of $800 a month (plus a $20 personal needs allowance) in 2013. Many seniors receive social security, pension, and investment income which easily surpass this meager allowance and disqualify them from receiving much needed health services. Although Medicaid does give an otherwise qualified person the option to “spend down” their income by paying the difference to their health care providers and still receiving benefits; that option leaves a single person with only $820 to pay for rent, groceries, clothing, and other essential expenses. The amount for married couples, $1175 (plus $40) is even stingier. Who among us, especially in New York City, can afford to live on $820 a month? The solution for many New York residents, regardless of whether they are under 65 or over, is the use of Pooled Income Trusts, also known as Pooled Supplemental Needs Trusts, which are unique trusts permissible under both New York and Federal Law. In Queens and Brooklyn, the areas in which The Law Offices of Roman Aminov practices, these pooled income trusts are widely used.

Let us take an example to illustrate how a pooled income trust works: Harry is a single 72 year old man living in Flushing, Queens, who recently suffered a stroke and needs assistance with his basic daily activities. He currently receives $1100 a month from Social Security, $500 a month from his pension plan, and $400 a month from an annuity for a total of $2000 a month. His basic living expenses are $1800 a month. If Harry applied for Medicaid to assist him with home care, he would be allowed to keep $820, and the rest would need to be spent on his home health care service. Medicaid would then pay the difference.  In effect, there would be no way for Harry to maintain his current lifestyle. There is another option, described below, which many Medicaid recipients are using to help them maintain their lifestyles while receiving the care they so desperately need.

If Harry is determined by Medicaid to be disabled, or if he was already classified by Social Security as being disabled, he would be eligible to participate in a pooled income trust. Pooled income trusts are administered by not for profit organizations, such as the United Jewish Appeal or NYSARC, and are available to New York residents, including clients residing in Queens, Brooklyn, or Long Island. In Queens, estate lawyers routinely use pooled trusts to meet the needs of their clients. Instead of having to pay his health care bills until he only has $820 left each month, Harry would send his “excess” income to the non-profit instead of his Medicaid Long Term Care Plan (MLTC) which administers his care. The non-profit would then be able to pay for any services not covered by Medicaid including rent, mortgage payments, clothes, recreational activities, etc. Harry would simply send the bills to the organization which would use the “excess” income to pay the bills on his behalf. The assets in the Harry’s trust carry over from month to month, but any money which is left after Harry passes away belongs to the non-profit organization to continue their charitable work. There are fees associated with setting up and continuously managing pooled income trusts, but they pale in comparison to the amount which a client can save. In addition, if Harry was disqualified from Medicaid because he had assets over the allowable limit of $14,400 in 2013, he would be able to transfer the excess in the pooled supplemental needs trust as well.

Pooled trusts have certain drawbacks, although not nearly enough to avoid them in most cases. In addition to the initial setup and monthly fees, any assets which are transferred by an individual over the age of 65 will be subject to a five year look back period for institutional Medicaid services such as nursing home coverage. Secondly, Harry will not be able to directly withdraw the money from his trust; instead, he must submit his bills to be paid by the trust. Additionally, if Harry does not fully use his excess funds, they will be turned over to the non-profit organization when he passes away, and his heirs will not inherit them.

It is always recommended that a potential applicant, especially one with income over $820, consult an elder law attorney prior to applying for Medicaid. Working with an attorney can potentially save the client months of waiting for much needed care. For a free consultation with a Queens and Brooklyn based elder law attorney, contact the Law Offices of Roman Aminov today at 347-766-2685.

Protecting Your Home and Assets From Medicaid

December 21, 2012

I often see clients who are Medicaid recipients and are concerned that Medicaid may try to take their home or other property after their death. It is also a real concern to many elderly clients who are thinking about applying for Medicaid in New York. If you are one of the many people who are unsure of what can happen to your assets after your passing, then please read on. If you are interested in qualifying for New York Medicaid, please read my previous article here.

As I sit with clients to understand their situation, I advise them that the answer to this question is quite complex and depends on many factors including their age, familial situation, and the type of care that Medicaid is providing them. Medicaid is divided into two general categories: (1) Institutional, which includes nursing home and intermediate care facilities, and (2) Community-based which includes all the other services Medicaid provides including home care and insurance. Let us look at what Medicaid can do with your property in each situation:

If you (1) are receiving nursing home care, (2) are deemed a “permanently institutionalized individual (PII)” (meaning you are deemed not to have an intent to return home) , (3) and own your home, Medicaid must place a lien on your home for the amount that they pay out. When the property is eventually sold, the lien must be satisfied before your heirs get the remaining proceeds. There are a few exceptions. First, a lien may not be placed upon your home if certain people are lawfully residing in the home, including a spouse, a child under 18, or a child of any age who is certified blind or certified disabled. Second, if you return home after being a PII, Medicaid must remove the lien. Third, prior to imposing a lien against your home, Medicaid must allow you to transfer the home to the aforementioned individuals, assuming you are able to.

Regardless of whether you are receiving institutional or community-based Medicaid, Medicaid can seek “estate recovery”. Estate recovery is when Medicaid tries to recover the amount it paid for your care from your probate estate. Your probate estate only includes assets which you held in your own name and which do not pass by operation of law or through a beneficiary designation. If Medicaid is providing you with either nursing home care, home care aid services, doctor’s visits, prescription coverage, or hospital visit coverage, they may go after your probate estate to recover their outlay. The operative words here are “probate estate” and much can be done, relatively simply and inexpensively, to remove your home from your probate estate. There are a few caveats and exceptions to estate recovery. First of all, for community-based care, Medicaid can only collect services provided to you since your 55th birthday. Secondly, for either community or institutional care, Medicaid can only recover up to 10 years worth of benefits counting back from the date of death. Third, no recovery may be made during your spouse’s life, or at a time when you have a surviving child who is less than 21 years of age or who is certified blind or certified disabled.

Assuming that the Medicaid agency in New York has not placed a lien on your property, you have the opportunity, with some careful planning, to prevent this from happening sometime in the future. A knowledgeable elder law attorney can utilize different methods such as deed transfers with retained life estates and income only Medicaid trusts along with properly drafted powers of attorney to shelter your home from Medicaid claims. An elder care attorney can also help you prepare a proper estate plan consisting of a will, power of attorney, health care proxy, and a living will. The important thing to know is that the sooner you speak with an estate planning/elder law lawyer, the more likely it is that you can receive the care you need while protecting your home for your heirs.

For a free consultation with a New York estate planning/elder law attorney, contact us by calling (347)766-2685 today.

Do You Qualify for Medicaid In New York?

August 17, 2012

When a client asks me if they can qualify for Medicaid in New York, I ask about their assets, income, living situation, and health. Some clients they may be able to qualify rather easily. Others may need to engage in some planning in order to qualify for Medicaid. Yet others automatically assume that they can not qualify for Medicaid and unnecessarily spend much of their own money on their medical care.

This article explains the requirements necessary for qualifying for Medicaid and offers some basic Medicaid planning options. Subsequent articles will deal with Medicaid planning options in more detail. If you are on Medicaid, or thinking of applying for Medicaid, read our Medicaid asset protection article to learn how to protect your home and assets from liens and estate recovery from New York Medicaid. Be sure to read our Medicaid special needs trust article to learn how to protect your income while receiving Medicaid.

What is Medicaid?

Medicaid is a joint program with New York State and the federal government for New Yorkers who can not afford to pay for medical care, home care, or nursing home care. There are two main types of Medicaid benefits, generally classified as Community Medicaid and Institutional Medicaid. Community Medicaid covers things such as doctors’ visits, medications, hospital inpatient and outpatient services, and care through home health agencies . Institutional Medicaid covers nursing home care. In order for a person to qualify for Medicaid, they have to be a resident of New York and meet certain financial guidelines.

Medicaid’s Financial Guidelines

Medicaid has different financial requirements based on an individual’s living situation, familial status, and health. All Medicaid recipients have to meet a certain income requirement, described below. Additionally, disabled individuals and those over 65 have to meet a resource requirement.

Here is a sampling of the financial requirements:

  • A single person can earn $1354 and qualify for Medicaid.
  • For non-disabled individuals under 65 who don’t receive nursing home care, there is no limit to the amount of assets they can own; Medicaid simply looks at their income. For individuals 65 and over, as well as certain disabled or blind people of any age, there is an additional resource test which needs to be met. For example, a single person in the latter category can have up to $14,850 in resources and still qualify for Medicaid. A family of two can have up to $21,750.

Resources include cash, savings, life insurance, stocks, bonds, IRAs, and other property, liquid and non-liquid. One car per household, regardless of value, will be excluded from the resource limit. A second car will be excluded from the resource limit if there is a medical need for it. In all scenarios, the more people in the household, the higher the income and resource levels will be.

What if my income exceeds Medicaid thresholds?

If someone is under 21, age 65 or older, certified blind or certified disabled, pregnant, or a parent of a child under age 21, they may be eligible for the Medicaid Excess Income program, better known as the Spenddown program.

A client who falls into this classification, but who still has income over Medicaid’s allowance amount, is said to have “excess income.” If the client’s medical bills for that month exceed his “excess income”, Medicaid will pay their medical bills beyond the excess.

Additionally, special needs and pooled income trusts can be utilized by disabled Medicaid recipients who would otherwise have to give their excess income to Medicaid. For example, if an individual receives Social Security, SSI, pension, or other income which exceeds $792 a month, he can place the excess income into a pooled income trust which would allow him to qualify for Medicaid while allowing the trust to use the remaining income to pay the individual’s bills such as rent. These options are discussed in further detail here.

What if my resources exceed Medicaid thresholds?

There are certain exemptions which allow a person in need of Medicaid to keep certain assets. The most important is the homestead exemption. An individual’s homestead is an exempt resource if it is “essential and appropriate to the needs of the household” and has equity up to $786,000. If the equity in the home is greater than this amount, a home equity loan or a reverse mortgage can be used to reduce the equity in the homestead.

Additionally, the equity cap may be waived in the case of hardship. It is important to note that the equity cap does not apply if the spouse or the intended Medicaid beneficiary’s child who is under 21 or is blind or disabled, resides in the home.

The homestead is only exempt if the owner intends to return and no spouse, child under 21, or a child who is certified blind or certified disabled, or a dependent relative is living in the home. If the Medicaid beneficiary resides in a nursing home, the house is exempt as long as he has a subjective intent to return to the home.

If the homestead exemption does not assist the intended Medicaid beneficiary in qualifying, there are other options. For example, to qualify for community Medicaid, one can give away his “excess” assets in one month and qualify for Medicaid the next month. Depending on his situation, one can give away his assets to his loved ones, including adult children, or place them into an irrevocable income only Medicaid trust, which will be discussed in future articles.

Qualifying for institutional Medicaid is not as simple because Medicaid applies a 5 year look-back to all transfers made for less than their full value. This means that if you gift away your assets, even by using the annual $14,000 gift tax exclusion, Medicaid will count them as part of your resources for five years.

Certain exceptions to this five year look-back apply, including transfers of the homestead to a:

  1. spouse
  2. child who is blind, disabled or under the age of 21
  3. sibling who has an equity interest in the home and who resided in the home for at least one year before the person was institutionalized; or
  4. child who resided in the home for at least two years before the person was institutionalized and provided care to maintain the person at home.

The best advice an attorney can give a client who is interested in qualifying for institutional Medicaid is to plan at least 5 years in advance of needing it.

Feel free to contact the Queens Medicaid and elder law Law Offices of Roman Aminov to discuss any questions you may have on qualifying for Medicaid while preserving your assets by calling (347)766-2685*.

*Our Medicaid practice is limited to those over 65 or disabled.