How to Shield Assets from Medicaid Recovery

Medicaid and Protecting Your Home

How to Shield Assets from Medicaid Recovery

The median cost for an assisted living facility is $5,350 per month nationwide, per Genworth’s Cost of Care Survey. The Survey adds that the median cost for chronic care at a nursing home nationwide is approximately $8,669 per month for a semi-private room, and $9,733 per month for a private room.  In New York, these numbers are exponentially higher, with the monthly cost in some areas of New York costing $13,976 to $14,813 per month.

About 50% of older adults use Medicaid to help cover assisted living expenses. Long-term care expenses account for 70% of the total Medicaid payouts nationwide.

Medicaid eligibility is subject to strict income and asset limits. This raises concerns for people who worry about the potential loss of assets, including their home, to cover assisted living or long-term care costs.

This article explains the Medicaid rules relating to home ownership and eligibility for Medicaid benefits. It also discusses several effective estate planning strategies you should consider to protect your home and assets from Medicaid recovery.

Ely J. Rosenzveig & Associates has extensive experience helping New Yorkers protect their assets while also qualifying for Medicaid’s long-term care benefits. If you want to protect your home and preserve assets for loved ones without needing to pay the full cost of your own long-term care, call us today.

One of the concerns many people have when applying for Medicaid is the possibility of losing their home or other assets to Medicaid estate recovery. Medicaid’s Estate Recovery Program allows the state to recover the value of Medicaid benefits paid for a person’s long-term care during their life from their estates after their death. Medicaid recovery can also be taken from the value of one’s home. Medicaid does not seek to recover other costs for doctors or hospitals. 

Medicaid’s Estate Recovery Program (MERP)

Medicaid is a joint federal and state program designed to provide healthcare coverage for low-income individuals, including seniors, children, and people with disabilities. While Medicaid is primarily associated with healthcare coverage, it also plays a significant role in covering long-term care costs, such as those associated with nursing homes or assisted living facilities.

Medicaid eligibility depends on whether the applicant’s income or available assets exceed the eligibility caps set by the government. These limits are in place to ensure that the program primarily benefits individuals with limited financial resources. If a Medicaid applicant owns a home or assets exceeding the cap set by the government, the program will require that the person “spend down” their own assets before Medicaid will begin to pay for the applicant’s long-term care expenses.

If an applicant is at least 55 years old and their only substantial asset is their home, the Medicaid Estate Recovery Program (MERP) may place a lien on the home, so that after the homeowner’s death, it can recover the money Medicaid paid for their long-term care.

However, Medicaid may not file such a lien on a Medicaid recipient’s home if any of the following circumstances apply:

Medicaid and Protecting Your Home2
Transferring your home into an irrevocable trust at least five years before you apply for Medicaid benefits will protect the home from Medicaid’s Estate Recovery Program. When the home is transferred into the trust, the trust becomes the legal owner of the property and the grantor (the homeowner) retains no ownership interest or control over the property.
  • If the home continues to be the benefit recipient’s primary residence. The home may cease to be the primary residence if the person is permanently admitted to a nursing home. Any second homes or vacation homes the person owns are not exempt from Medicaid’s recovery / reimbursement claims.
  • If any of the following persons reside in the home:
    • The spouse of the person for whom Medicaid is paying long-term care costs,
    • A child under the age of 21 or a child with permanent disability,
    • A relative of the homeowner who has resided there for at least two years prior to Medicaid paying for long-term care and who has provided care for the homeowner during that time.
  • If the homeowner qualifies for Medicare under one of the following programs:
    • Qualified Medicare Beneficiary (QMB)
    • Specified Low-Income Beneficiary (SLMB)
    • Qualifying Individual (QI)
    • Qualified Working Disabled Individual (QDWI)

Strategies to Protect Your Home and Assets from Medicaid Recovery

An experienced estate planning and elder law attorney can help you protect your home and other valuable assets from Medicaid’s claim for reimbursement. In addition, Medicaid looks back five years to determine if you sold or gave away any assets for less than fair value during that time. That’s why it is essential that you consult with an estate planning lawyer as early as possible. Do not wait until your need for Medicaid subsidized care is on the near horizon.

There are several strategies knowledgeable elder lawyers use to protect their clients’ assets from the Medicaid Estate Recovery Program’s liens. Some of them are listed here:

Establish an Irrevocable Medicaid Asset Protection Trust (MAPT)

Transferring your home into an irrevocable trust at least five years before you apply for Medicaid benefits will protect the home from Medicaid’s Estate Recovery Program. When the home is transferred into the trust, the trust becomes the legal owner of the property and the grantor (the homeowner) retains no ownership interest or control over the property.

However, the terms of the trust will guarantee the grantor a full life estate in the home, meaning the grantor may live there for the rest of their life. After their death, ownership of the home will be transferred to whomever the grantor of the trust designated to be the beneficiary of the trust.

Purchase a Life Estate

A life estate allows you to transfer your primary residence to your heirs while retaining the right to live in it for the rest of your life. This approach ensures that your home is protected from Medicaid Estate Recovery because you technically no longer own the property. Be aware that this strategy also has a Medicaid look-back period of five years.

Spend-Down Strategies

If you are unfortunate enough to need Medicaid funds to help pay for long-term care and you did not take steps to protect your assets five years in advance of such a need, there are still asset protection options available. Your estate planning attorney can explain several ways in which you can spend down assets without being penalized by Medicaid with a period of ineligibility by Medicaid.

For example, you may pay down your debts without incurring a Medicaid penalty. You may also pay for home remodeling related to making your home more accessible or to accommodate your limited mobility. This could include wider doors for a wheelchair to pass through, ramps, bathroom modifications like walk-in or roll-in showers, adding handrails, and similar changes. Another option is to prepay for a funeral plan or cemetery plot. Properly documenting your expenditures is crucial when using this approach..

There are also other legitimate strategies (promissory notes, etc.) by which you may be able to  shield / protect assets from Medicaid imposition.

Speaking with a knowledgeable elder law attorney is critical to ensure that you understand precisely what spend-down expenses qualify for exemption from Medicaid penalties, and what other strategies may be employed to protect or preserve assets in the event that you or your loved one may need Medicaid support services.

Seek Experienced Elder Law Advice

Consulting with an attorney who focuses on Medicaid planning and elder law is essential when considering strategies to protect your home and assets. Ely J. Rosenzveig & Associates can help you navigate New York’s specific rules and regulations and ensure that your plan aligns with your unique circumstances and goals.

Call Ely J. Rosenzveig & Associates
Call 1.914.816.2900 or email us at: [email protected]

Ely J Rosenzveig
Ely Rosenzveig

Ely J. Rosenzveig practices principally in the fields of elder law, trusts & estates, tax planning, employment law, and mediation. He has extensive experience in federal and New York State tax law, and has successfully represented a wide range of clients on FBAR & FATCA compliance issues. Ely also practices employment law, with a particular emphasis on age and disability discrimination, negotiating compensation agreements, and severance issues. With his extensive background in the law, his experience as a congregational rabbi, and his specialized training in Mediation at Harvard Law School, Ely is also available as a professional mediator to help facilitate optimal solutions in matters ranging from family and estate disputes to multi-party commercial issues.

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