Cona Elder Law Legal Alert – NY Passes Budget Bill: Good for Seniors

​New York State Passes Budget Bill:
Good News for Seniors

Governor Andrew Cuomo, again this year, was successful in getting the state budget bill passed on time by the April 1st deadline.  The budget contains good news for seniors:  the expanded estate recovery law has been repealed.

Last April, the New York State Legislature passed a law which enlarged the State's right to make a claim against a Medicaid recipient's estate for monies expended by the Medicaid program on that person's behalf.  The law expanded the definition of assets subject to recovery to include life estates, annuities, joint accounts and trusts, to the extent of the Medicaid recipient's interest in such assets at the time of death.

With the repeal of this law, seniors can rest assured that their life estates, trusts and IRAs are, once again, safe from attachment by Medicaid.

Now is a great time to engage in asset protection planning if you have not already done so.  Even if expanded estate recovery were to be voted on again in the future, based on its current repeal, it is very likely that any new proposal would contain a grandfathering provision, allowing any planning done now to be safe from future changes in the law.

For many people in the New York metropolitan area, their home is their largest asset.  Most families seek to protect the value of their home but do not want to give up any ownership rights.  The life estate, typically within a trust, can be one way to accomplish this goal. 

By transferring title to your house with a retained life estate, you keep all rights and obligations regarding the property during your lifetime.  For example, you have the right to reside in the home for life.  You will also be responsible for all up-keep and taxes but you will keep all real estate tax exemptions (such as enhanced STAR or Veterans exemptions). Upon your death, the property will pass to your designated beneficiaries automatically (without the probate of your Will).  The transfer of the home with a life estate protects the home from Medicaid as a lien cannot be asserted against the home.

In many cases, it is best to transfer the home to a living trust while keeping a life estate within the trust.  An irrevocable trust will protect the home from Medicaid after the five year look-back has passed.  As with the life estate, you will keep your real estate tax exemptions.  Your heirs will get certain tax advantages, such as a step-up in basis, and will inherit the home without the need for probate.  Unlike the life estate transfer, the home may be sold during your lifetime without losing any capital gains exclusions.  The trust can then hold the cash or title to a new home.  Either way, the value of your home continues to be protected.

Each method of transfer has tax consequences and Medicaid consequences.  Cona Elder Law attorneys are always available to meet with you or speak with you as to your particular situation.