Medicaid Asset Protection

On Behalf of | Feb 1, 2022 | Medicaid eligibility |

In New York, as in other states, long-term care is a looming financial crisis for many people that they have not adequately prepared for. The primary provider for long-term care for most people is Medicaid, but Medicaid forces people to sell off all their assets and reduce income unless they find a way to protect those assets.

Protecting Assets

Medicaid, like some other government programs, requires people to be poor before they can qualify. The cost of privately paying for a nursing home can be many thousands of dollars every month for an indeterminate time, which is much more than most families in retirement can afford. To qualify for Medicaid, people must spend down their assets, such as selling off their houses, so that they can qualify.

There are ways to avoid this and preserve some assets. For example, the assets can be transferred to a trust that can then be set up to be inherited by heirs. The original owners can still draw money in the form of interest or use the assets, such as living in a house that is in a trust. Other trusts can capture excess income. Combining asset gifts and annuities can also help reduce, but not eliminate, Medicaid penalties. In New York, a sick spouse can transfer those assets to their healthy spouse, who then legally refuses care to them and makes them immediately eligible for Medicaid.

It is quite difficult to avoid Medicaid asset spend-down rules without at least five years of notice, because Medicaid always examines the last five years of finances. Therefore, early preparation for this problem is very important.