As you move into your retirement years, the potential need for long-term care may become a significant concern given the exorbitant cost of that care. For many seniors, Medicaid is a crucial resource for covering the cost of long-term care; however, you may worry about the impact the need to qualify for Medicaid could have on your hard-earned assets. To help you better understand and plan accordingly, the Long Island attorneys at Eghrari Law Firm discuss whether your assets are at risk if you need to qualify for Medicaid as a senior in New York.
Understanding Medicaid Eligibility Asset Limits
Medicaid is a joint federal and state program designed to help individuals with low income and limited resources cover healthcare expenses. Eligibility for Medicaid is determined, in part, based on an applicant’s income and the value of their “countable resources.”
In New York, as of 2024, the income limit for a single applicant for Medicaid nursing home benefits is $1,732 per month and the applicant cannot own countable resources valued at more than $31,175. Hearing that the asset limit is a mere $31,175 can be cause for alarm if you anticipate the need to qualify for Medicaid. After a lifetime of working and saving, many retirees have accumulated assets valued over that threshold. This is why many seniors worry that the need to qualify for Medicaid will threaten their assets by causing them to need to diminish their own hard-earned assets before Medicaid will help cover the costs associated with LTC. Fortunately, however, not all assets are counted when determining the value of your “countable resources.” Examples of assets that are considered exempt by Medicaid in New York include:
- Primary residence (if the applicant or spouse lives in the home and only to an equity limit of $1,071,000 as of 2024)
- One vehicle
- Personal belongings and household items
- Burial funds up to $1,500
- Life insurance policy with a cash value up to $1,500
- Non-refundable pre-paid funeral agreements
- IRAs and 401Ks in payout status
For married couples, if one spouse needs Medicaid for nursing home care while the other remains at home, the community spouse (the one not receiving care) is allowed to retain more income and assets. In 2024, the Community Spouse Monthly Income Allowance (CSMIA) is $3,853.50 and the Community Spouse Resource Allowance (CSRA), which allows the community spouse to retain up to 50 percent of the couple’s assets is capped at $154,140. This means that the spouse at home can keep a significant portion of the couple’s assets while still enabling the other spouse to qualify for Medicaid.
The New York Medicaid Asset Transfer Rules: Understanding the Five-Year Look-Back Rule
One critical aspect of Medicaid eligibility is the five-year look-back period. When an individual applies for Medicaid, the state reviews all financial transactions from the past five years to ensure no asset transfers for less than fair market value occurred. Any such transfers can result in a period of ineligibility for Medicaid benefits, known as a penalty period, which is calculated by dividing the value of the transferred assets by the average cost of a month in LTC in the applicant’s area.
How Can I Protect Assets If I Need Help from Medicaid?
The good news is that there are numerous legal tools and strategies that can help protect your assets while still ensuring that you will be eligible for Medicaid if you need it down the road. The key is to incorporate a Medicaid planning component into your estate plan as far ahead of your need to qualify as possible. Examples of tools and strategies that you might utilize within your Medicaid planning component include:
- Medicaid Asset Protection Trusts (MAPTs): A Medicaid Asset Protection Trust is an irrevocable trust that allows you to protect your assets from Medicaid’s asset limits and the look-back period. Assets placed into the trust more than five years before applying for Medicaid are not counted towards the asset limit.
- Spousal Refusal: In New York, the community spouse can refuse to use their own assets to pay for the institutionalized spouse’s care. This strategy, known as “spousal refusal,” allows the community spouse to retain their assets, although it may lead to the state seeking reimbursement from the community spouse which is why it is important to talk to your estate planning attorney before invoking this right.
- Caregiver Agreements: You can enter into a formal agreement to pay family members for care provided, thereby lowering your monthly income/resources. This must be a formalized, written contract with fair market compensation to avoid penalties.
- Converting non-exempt assets to exempt assets: Purchasing a Medicaid-compliant annuity can convert a countable asset into a stream of income for the community spouse. This can help reduce countable assets to meet Medicaid eligibility requirements while providing financial support for the spouse at home. You may also be able to use cash or other non-exempt assets to pay down a mortgage on your home, turning a non-exempt asset into an exempt asset.
Can We Help You Protect Your Assets If You Need to Qualify for Medicaid in New York?
For more information, please join us for a FREE estate planning seminar. If you need to protect assets from the Medicaid asset limit rules, contact the Long Island estate planning attorneys at Eghrari Law Firm by calling us at 631-265-0599 to schedule your appointment.
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