If you own property in New York and you're thinking about long-term care, you've probably heard about the Transfer on Death deed. This relatively new tool, available in the state since mid-2024, lets homeowners name a beneficiary who will inherit the property automatically when the owner passes away. No probate court, no drawn-out legal process. Sounds ideal, right?
Not so fast. While TOD deeds solve one narrow problem, they leave a much bigger one wide open. For anyone concerned about Medicaid eligibility, nursing home costs, or protecting a family home from government liens, a TOD deed is almost useless. And in some cases, it can create problems families never saw coming.
Your Home Still Counts as a Medicaid Asset
Here is the most important thing to understand. A TOD deed does not transfer anything during your lifetime. You remain the full legal owner of the property until you die, which means the home stays on your personal balance sheet the entire time. When you apply for Medicaid, the state looks at what you own. A home with a TOD deed attached to it is still your home in the eyes of the Department of Social Services.
For nursing home Medicaid in New York, applicants in 2026 can generally hold only about $31,175 in countable assets. Your primary residence is typically exempt from that limit while you're living in it, or if a spouse or minor child resides there. But that exemption is conditional, and it can disappear faster than most people realize.
- Equity Cap Disqualification: If the equity in your home exceeds approximately $1,071,000, the property is no longer exempt. It becomes a countable resource, and owning it can disqualify you from Medicaid entirely. A TOD deed does nothing to reduce your equity or move the home off your balance sheet.
- Sale Converts the Asset: If you sell the home while alive, you've just turned an exempt resource into cash, which is fully countable. That sale proceeds could push you well over Medicaid's asset limit and force you to spend down before you qualify for benefits.
- Moving Out Ends the Exemption: The home is only exempt while it's your primary residence. If you move into a nursing facility permanently or relocate for any reason without a qualifying family member still living there, the property loses its protected status. It becomes a countable asset sitting in your name, with a TOD deed that offers zero protection.
Medicaid Can Place a Lien on Your Home While You're Alive
Many families assume Medicaid only comes after assets once someone has passed away. That is not the case. New York allows Medicaid to place a lien on real property owned by a recipient who is permanently institutionalized in a nursing home. This means the state can attach a legal claim to your home while you are still living.
Here's how it works. Once Medicaid determines that you are unlikely to return home from a nursing facility, the state can file a lien against the property to secure repayment of the care costs it has covered on your behalf. That lien stays attached to the home. If the property is ever sold, Medicaid collects what it is owed from the proceeds before your family sees a dollar.
A TOD deed does absolutely nothing to prevent this. Because you still own the home, the state's authority to place a lien remains fully intact. The beneficiary you named on the TOD deed may eventually inherit the property, but they could inherit it with Medicaid's claim already attached. The result is a family home burdened by debt before your loved ones ever take possession.
- Lien During Institutionalization: Medicaid can file against the property once a recipient is permanently placed in a nursing home, even while the recipient is still alive
- No Barrier From the TOD Deed: Because the deed doesn't transfer ownership until death, it creates no legal obstacle to the state's lien authority
- Family Inheritance at Risk: Beneficiaries may receive a property encumbered by tens or even hundreds of thousands of dollars in Medicaid claims
How an Irrevocable Trust Actually Protects You
The gold standard for Medicaid asset protection in New York is the Medicaid Asset Protection Trust, commonly called a MAPT. This is a specific type of irrevocable trust built to move your home and other qualifying assets out of your name permanently. Once those assets are inside the trust, Medicaid does not consider them yours. The state cannot place a lien on property you don't own, and it cannot count assets that belong to the trust when calculating your eligibility.
The critical difference is timing. New York enforces a 60-month lookback period for nursing home Medicaid. Any asset transfers made within five years of your application date will be scrutinized, and transfers for less than fair market value will trigger a penalty period during which Medicaid refuses to pay for your care. That penalty is calculated by dividing the value of the transferred assets by the regional rate, which in New York City runs approximately $14,000 to $15,000 per month in 2026.
What this means in practice is simple. If you fund an irrevocable trust today and don't need nursing home care for at least five years, those assets are fully protected. Medicaid cannot count them, cannot place a lien on them, and cannot recover them after your death. A TOD deed accomplishes none of this.
- Asset Removal: Property inside an irrevocable trust is no longer yours for Medicaid purposes, reducing your countable resources below the eligibility threshold
- Lien Prevention: Because the trust, not you, holds title to the home, Medicaid has no legal basis to attach a lien to the property
- Continued Benefit: A well-drafted MAPT lets you continue living in the home and may allow you to receive income generated by trust assets as part of a broader Medicaid eligibility strategy
The Community Medicaid Window That Won't Last Forever
There's an additional reason to act now. New York currently has no lookback period for Community Medicaid, which covers home care and certain assisted living services. The state passed a law in 2020 creating a 30-month lookback for these benefits, but implementation has been delayed repeatedly due to federal compliance requirements and administrative hurdles. As of early 2026, the rule still hasn't taken effect.
This means families applying for home care Medicaid right now face far less scrutiny around past asset transfers. But that window could close at any point. Once the 30-month lookback becomes active, anyone who transferred assets within that period before applying for home care will face the same penalty calculations that nursing home applicants already deal with. Establishing a trust sooner rather than later gives you the best chance of clearing both lookback periods before you ever need to file an application.
Taking the Right Step for Your Family's Future
A TOD deed might look like a convenient shortcut, but it was never designed to handle the weight of Medicaid planning. It won't reduce your countable assets, it won't prevent a lien on your home, and it won't protect your equity if you move out, sell, or exceed the equity cap. For New York homeowners serious about protecting what they've built, an irrevocable trust remains the most reliable path forward.
Contributed by Roman Aminov, A Senior Elder Law and Medicaid Planning Attorney.
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