Asset Preservation

Asset Preservation and Medicaid Requirements

One of the difficult end-of-life decisions couples need to make is about preserving assets and qualifying for Medicaid benefits. There are a great many solutions discussed over cups of coffee on the best way to go about this task. However, the focus should be on what is the best method for you and your family. In seeking a solution to this question, one of our first goals as an asset planning law firm is to educate our clients about Medicaid qualification requirements. Basically, Medicaid allows anyone confined to a nursing home or other nursing facility to retain $4,000 in resources, plus an additional $1,500 or the cash surrender value of a life insurance policy, which is specifically designated for burial purposes. The Medicaid law refers to those resources that are allowed to be retained by the “institutionalized person” as the “resource allowance.” The resource allowance also includes a “pre-need” burial fund account in an unlimited amount to be established with a funeral home of your choice for the payment of funeral expenses, provided that the “pre-need” account is “irrevocable.” People have fears about losing their home if they or their loved one becomes in need of skilled care in a nursing home facility. Although all resources held by either spouse will be considered available to be spent down for the confined spouse’s care before determining Medicaid eligibility, there are special rules pertaining to married couples in order to avoid impoverishing the spouse living in the community. For example, in the event the confined spouse is married and his/her spouse continues to live in the community, the community spouse will be allowed to keep the primary residence as long as he/she continues to reside in it, as well as the furniture, an automobile and a pre-need, irrevocable burial fund account. In addition, the community spouse will be allowed to possess, under current law, a minimum of up to $74,820 or one-half of the couple’s total resources, up to a maximum of $92,760. This allowance is called the “community spouse resource allowance” or “CSRA.” In addition, the community spouse is allowed, in the year 2005, to keep up to $2,378 per month in income. Medicaid law refers to this income allowance as the Minimum Monthly Maintenance Needs Allowance, “MMNA.” The community spouse is entitled to contribution from the confined spouse’s income in order to bring his/her income up to $2,378. Although the family home can be protected when owned by a couple, the same does not hold true if both spouses become in need of institutionalized care. Also, the same does not hold true if a single person is placed in a nursing home. The exempt status of the home will also be lost if the community spouse ceases to continue to live in the home.

An experienced elder law attorney can show you the options at your disposal to protect your assets while preparing to meet the requirements of the Medicaid qualification process. For example, although assets that are given away within three years from the time that an applicant needs to qualify for Medicaid will automatically impose a penalty period, there is no penalty period for transferring assets from a confined spouse to the community spouse. The community spouse can then spend down the assets to make improvements to the residence, purchase a new car, new furniture or appliances. In addition, Medicaid only imposes a penalty for eligibility for Medicaid benefits for money that is given away to someone other than the community spouse. The money can be used to pay-off any outstanding debts or mortgages on the residence. Assets given away within three years of the time an applicant needs to qualify for Medicaid will be subject to investigation by Medicaid. This is called the “look back period.” The look back period is increased to five years for gifts to or from a trust. Although a transfer penalty is imposed for the transfer of an asset by either spouse to someone other than the spouse, the duration of the transfer penalty is actually a calculation based upon the amount transferred divided by the average regional rate for the county where the nursing home is located. Therefore, although you may give assets away to make yourself eligible to receive Medicaid benefits, such transfers must be considered under a plan that is prepared by an experienced elder law attorney so that such transfers are properly timed with the application process for Medicaid benefits.

Estate tax planning considerations only become important if an estate is worth more than $1 million. One common misunderstanding is that only those assets that pass by probate are taxable. This is a serious misconception. All assets owned by a decedent at the time of death are considered in calculating estate tax liability, including life insurance, retirement, pension funds, IRA’s, joint bank accounts with right of survivorship, as well as antiques, jewelry, art work and coin collections that are worth more than $3,000. Our estate planning goal in asset protection is to educate our clients, provide them with legal options to address their concerns, help them feel comfortable with their decisions and then execute their choices. Everyone should have an estate plan regardless of whether their estate has tax issues. A simple plan consists of at least a Will, Health Care Proxy, and Durable Power of Attorney. Otherwise, if you die without a Will New York Law, not you, will determine those who will inherit your probate estate and in what amount. The size of your estate should not be the most important factor in determining whether or not you need a Will. A Will allows you to determine what assets will pass to your children and if they will be held in trust until the children reach a certain age so that the inheritance will not be dissipated due to a lack of maturity in financial management. Also, in a Will you can direct who will be the person in charge of administering your estate (executor) and if you have minor children, who will act as guardian of their person and property if both parents are deceased. If your estate is sufficient in size to be concerned with Federal and New York State estate taxes, the use of life-time or testamentary trusts can reduce estate tax liability and take advantage of both spouses’ unified credits to maximize the amount that will pass eventually to your heirs.

If you would like to speak one of our Medicaid planning lawyers, or discuss any legal issue with one of our attorneys, we urge you to call or contact our Latham, New York law office to schedule an appointment.