ASSET PROTECTION

Asset Protection Trusts

Protecting assets is important to everyone. No one wants to needlessly spend down all of their assets to pay for nursing home care or other long-term care. The goal is to become eligible for Medicaid if and when the need arises, whether that is Medicaid nursing home benefits, home care benefits or assisted living benefits. By planning ahead with an Asset Protection Trust, you can ensure that you will qualify when you submit a Medicaid application without spending down your family’s assets.

Special Needs Trusts

The law entitles disabled individuals to protect assets in a Special Needs Trust so that they can keep an unlimited amount of money in this special asset protection trust without reducing or eliminating government benefits, such as Medicaid and SSI benefits. There are two types of Special Needs Trusts: first-party trusts where the disabled individual funds the trust with their own assets, such as the proceeds from a lawsuit or an inheritance, and third-party trusts funded with the assets of another person, such as a parent or grandparent.

Spousal Transfers

Under New York’s Medicaid laws, spouses are protected by a special exemption that allows them to transfer money from one spouse to the other without incurring any Medicaid penalty or waiting period. This allows the spouse who needs long-term care to become Medicaid eligible right away without leaving the spouse in the community destitute.  However, if the spouse in the community has assets over the resource limit once all assets are in his/her name, he/she will be required to sign a spousal refusal. The Medicaid agency then has the right at any point in the future to initiate a lawsuit against the spouse with the assets for reimbursement of monies expended on the costs of the spouse’s care.  

Irrevocable Trusts

In order to protect assets, the Asset Protection Trust must be irrevocable. This means that the living trust cannot be revoked, amended or terminated by you alone, but can be with the consent of the trust beneficiaries.

An irrevocable trust set up for asset protection purposes can hold almost any type of asset, including your home, bank accounts, and investments. You cannot have access to the principal of the trust, but you can retain the right to receive the income (dividends and interest). After five years have passed, the assets held in the trust are protected with respect to Medicaid. You would not have to spend down those assets on the cost of care, and instead the assets are protected and will be inherited by your beneficiaries.

Homestead and Other Statutory Exemptions

There are special rules for transferring and protecting a home. Title to the home may be transferred to certain qualified individuals without incurring a Medicaid penalty period, including:

• Spouse;
• Minor Child;
• Disabled or blind child (of any age)

A Caretaker Child defined as a child who has resided with his/her parent in the homestead for at least two years prior to their parent’s admission to a nursing home and the Sibling of the Medicaid applicant who has resided in the home for at least one year prior to institutionalization and who has an equity interest in the home can also be considered qualified.