As we get older, we begin to worry about the possibility that we may get sick and end up in a nursing a home. Paying for a nursing home can drastically reduce a person’s savings. In New York, the average cost of nursing home care is a little more than $75,000 per year, with the better nursing home care costing upwards of $170,000 a year.
Most Americans will drain out their savings while paying for nursing home care until they qualify for Medicaid. But with proper planning, this unfortunate result can easily be avoided and people can go to a nursing home and still leave some inheritance to their children.
A Medicaid trust is a way to transfer money to someone you trust with restrictions so that they cannot just keep the money. If you no longer qualify for long-term care insurance, a Medicaid trust is a great way to secure your future eligibility for Medicaid. The key word here is “future,” because a Medicaid trust will not qualify you for Medicaid immediately - there will be a penalty period, which can be up to five years but is often less. If you have an immediate need for Medicaid, there is a number of other techniques we can use, such as a Gift and Loan or a spousal refusal.
As a part of creating a New York Medicaid trust, you will have to transfer your assets in the name of the trust, i.e. transfer your money and stocks to your trust’s account and re-title your property to the trust.
Peter creates a Medicaid Trust. For it to work, he has to transfer most of his money and stock to an account belonging to “Doe Trust 0945” and deed his house to “Doe Trust 0945”. This is the only way Medicaid will accept the premise that Peter no longer has the money.
Once assets are put into a Medicaid trust, it is impossible to take them out. It goes without saying that once you take the assets back from the trust, you lose the Medicaid eligibility. It is this inability to revoke or amend the trust is what makes the trust untouchable by Medicaid—because you no longer own the property, you prevent Medicaid from asserting you don’t meet the Medicaid resource limit. The trustee of your choosing will manage the trust. This is usually the person who is very close to you, such as a son or daughter, although some trusts are managed by an attorney or a bank. Some people opt to have more then one trustee, for example, two children and an attorney or a banker.
Once again, planning in advance is key. A proper Medicaid trust which is more then 5 years old will qualify you for Medicaid bar none, but a "younger" trust may incur a period of ineligibilty (the waiting period), as will be discussed.
You can receive income from the trust, as long as the income is below the Medicaid eligibility limit. Medicaid will count the income, but “ignore” the principal of the trust. Any income over the Medicaid limit will have to be put back into the trust.
When the Medicaid Trust is more then five (5) years old, you will qualify for Medicaid without a waiting period. Otherwise, a period of ineligibility is calculated by taking the dollar value of the transfer divided by average monthly cost for nursing care, which equals the number of months you will be ineligible for Medicaid.
Example: Dad gives Son a gift of $100,000.00. Medicaid will consider the $100,000.00 figure and divide it by the average monthly cost of nursing care, let’s say, $10,000 which totals 10. Therefore, Dad will be ineligible for Medicaid for 10 months.
The New York Department of Social Services would use the following figures to calculate the ineligibility period in 2011:
Region |
Monthly Nursing Home Rate |
Central New York |
$7,688 |
Long Island |
$11,445 |
New York City |
$10,679 |
Northern Metropolitan |
$10,105 |
Northeastern |
$8,323 |
Rochester |
$8,942 |
Western |
$7,863 |
Additionally, you may be able to have a Medicaid Trust without the imposition of a penalty period if the transfer is made to a qualifying relative: (1) your spouse, (2) your child who is under 21, blind or permanently disabled, (3) your sibling if he or she has an equity interest in the house and was living there for at least one year before you went into nursing care, or (4) an adult child who has lived in the home at least 2 years preceding institutionalization and that child was taking care of you.
Speaking with an experienced estate attorney will be useful to you because the attorney will advise you on the options available to you which will allow you to use Medicaid to cover the cost of medical care without depleting your assets. In addition, planning in advance is a good option because the penalty period will likely expire before you have the need to become institutionalized.
The main advantage of the New York Medicaid trust is that it allows you to receive Medicaid in the future. This allows you to protect the family’s assets from being used to pay for your medical and nursing home care. Medicaid trust also includes the usual lifetime trust benefits. It can help you save money on estate taxes, keeps assets out of the probate court, maintains privacy, avoids the hassle of multi-state probate proceedings, avoids interruption of income and use of assets after your death, and provides planning for mental disability. More information about the benefits of trusts
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Albert Gurevich, Esq.