Protect Your Assets, Qualify for Care

Medicaid planning is the legal practice of organizing your income and assets so that you qualify for Medicaid long-term care benefits while preserving as much as possible for your spouse and family. It is entirely lawful — Congress wrote the rules that permit asset protection trusts, spousal protections, and exempt spend-downs, and courts have repeatedly affirmed a family’s right to plan. What matters is doing it correctly and within the timing rules, which is where experienced counsel makes the difference.

Under Social Services Law § 366, when a New Yorker applies for institutional (nursing-home) Medicaid, the agency reviews the 60 months — five years — immediately before the application. Any uncompensated transfer in that window, such as a gift to a child or a transfer into a trust, creates a transfer penalty. The penalty is calculated by dividing the value of the transferred asset by the regional monthly cost of care to determine the number of months of ineligibility.

New York enacted a 30-month lookback for community Medicaid — home care, CDPAP, and certified home health services — in 2020, but its enforcement has been delayed repeatedly through the state budget process. As of now it is still not being enforced, but that is a moving target decided each budget cycle. Plan as if it will be enforced, and confirm the current enforcement status before making any final transfer.

In the New York City region, skilled-nursing-facility care commonly runs $15,000 or more per month. At that rate, even a substantial nest egg can be exhausted in just a few years of private pay. That single number is why Medicaid planning exists — without it, the cost of long-term care can consume nearly everything a family has built.

A MAPT is an irrevocable trust into which you transfer the family home and liquid assets, with the goal of removing those assets from the Medicaid eligibility calculation after the 60-month lookback. The grantor cannot serve as trustee or reach the principal, but typically keeps the right to trust income and the right to live in the home. Children commonly serve as trustees, and at the grantor’s death the assets pass to beneficiaries with a stepped-up basis under IRC § 1014.

Often, yes. The primary residence is an exempt asset for Medicaid eligibility up to a home-equity limit while you or a spouse live there, but it remains exposed to estate recovery after death. The more durable protection is to transfer the home into a properly drafted MAPT, which lets you continue living there, keep the STAR/Enhanced STAR exemption in most cases, and pass the home outside probate to your children, beyond the reach of estate recovery.

When one spouse needs institutional Medicaid and the other does not, the community spouse can formally refuse to contribute resources or income beyond the protected allowances to the institutionalized spouse’s care. New York recognizes spousal refusal, although DSS routinely files a recovery action against the refusing spouse. We prepare and file the refusal letter and defend the recovery action so the community spouse keeps the protection the law allows.

Income above the limit is not fatal. A pooled income trust operated by a New York nonprofit captures the excess income each month and applies it to your living expenses, preserving community Medicaid eligibility without forcing you to spend down to the income cap. There is no lookback on contributions to a pooled income trust, so excess income can be diverted immediately at application without penalty.

It depends on when and to whom. Transfers made more than 60 months before an institutional application fall outside the lookback and create no penalty. Transfers within the lookback generally create a penalty, but several exceptions exist — transfers to a spouse, to a disabled child, or to a caregiver child who lived in and cared for the parent in the home for at least two years. We analyze every past transfer and disclose it correctly.

Crisis planning still has real tools. A spousal refusal letter can immediately protect the community spouse. A gift to children combined with a promissory note can convert part of the assets into a tolerable, time-limited penalty. Converting countable resources into exempt assets — paying off a mortgage, prepaying a funeral — reduces what counts without triggering a transfer penalty. The toolkit is narrower than pre-planning, but it is not empty.

Generally yes. New York Medicaid estate recovery targets the deceased recipient’s probate estate. Assets held in a properly drafted MAPT pass outside probate to the named beneficiaries, beyond the reach of estate recovery — as do assets passing by beneficiary designation, joint title with right of survivorship, or transfer-on-death designation. This is one of the most important reasons to plan with a trust well in advance.

As early as possible. Because the institutional lookback is 60 months, the assets you transfer into a MAPT are best protected when the transfer is made at least five years before care is needed — which is why many clients begin in their early-to-mid sixties. That said, it is rarely too late: even in crisis, the spousal and exempt-asset tools can protect a meaningful portion of what you own.