June 16, 2019










Medicaid Redesign team Proposes Changes to Medicaid Eligibility in New York

Governor Cuomo recently accepted proposals from New York’s newly created Medicaid Redesign Team (“MRT”). While it is early in the process, and the proposals may not be implemented in their present form or at all, budgeting pressures at all levels of government make it likely that some changes in the Medicaid program will occur. Here are a few of the particularly troubling features of the MRT’s proposals:

Elimination of Spousal/Parental Refusal

Currently, a spouse may refuse to support their spouse who is an applicant for Community Medicaid or Medicaid Home Care. When this occurs, Medicaid is obligated to provide care or services to the applicant, assuming he is eligible (under $13,800 in resources), even if the spouse can afford to pay. The MRT is proposing that the resources and income of the spouse should be considered in determining whether the applicant is eligible for Medicaid. This means that spouses, and parents of disabled children, will be required to spend down virtually all of the household’s assets, and contribute a share of their income, before their ill spouse or disabled child will be eligible to receive care.

5-year “Look Back” for Community Medicaid and Home Care

Currently, the 5-year look back and transfer penalties apply only to applicants for Institutional Medicaid (for Nursing Home Care). Currently, applicants for Community Medicaid or Home Care are able to transfer their assets to family members, friends, or trusts, and thereby become eligible for Community Medicaid benefits. The MRT’s proposal would extend the 5-year look back to Community Medicaid and Home Care, which means that many potential applicants will find that they are ineligible for Medicaid, or subject to a lengthy penalty period before benefits can be obtained.

Estate Recovery

Currently, it is difficult for Medicaid to recover from the estates of medicaid recipients where the recipient has effectively transferred their assets during life to a family member or trust. The proposed law would allow medicaid the ability to seek recovery in these cases.

Impact of these proposals

If these proposals become law, many Medicaid applicants and their families will be severely affected. Some will find their financial situation and lifestyle significantly diminished, and others may find it difficult to pay for even basic living expenses. Many may to apply for food stamps, another program funded by the government.

What to do? Now, more than ever, people who need, or may need (even if they think they will never need it), long-term care should make it a top priority to consult a Long Island Elder Law attorney. Planning may need to be taken earlier than previously seemed necessary. As always, with proper planning, t will still be possible to improve your situation, even if these new measures find their way into law.

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The Irrevocable Income Only Trust

A Case Study in protecting your assets against the cost of long term care

Mr. and Mrs. Watson are in their mid-seventies. Mr. Watson recently fell and injured his hip. He is home from re-hab and is doing better, but may require assistance in the coming years. Additionally, Mrs. Watson has just been diagnosed with the onset on Alzheimers. They own their house (valued at $550,000) on Long Island and have a nice nest egg of about $400,000 in investments and savings. They also receive a combined $3,700 per month in income from social security, Mr. Watson’s pension and income from their investments. They can comfortably live off of their income and do not need to touch the principal of their savings. Their children are concerned with how they can protect their assets while receiving the care they will require in the future.

Their situation is common to many seniors on Long Island. The solution – The Irrevocable Income Only Trust (IIOT). In simplest terms, a Trust is private agreement used to achieve various estate planning goals. There are many kinds of Trusts – the most common being Revocable and Irrevocable. The Irrevocable Trust, as it’s name implies, cannot be altered, modified, amended or revoked. Then why do it?

Simple – if your situation is similar to the Watson’s, the Irrevocable Trust is most often the best way to protect assets against the cost of long term care (cost of home health aide or nursing home).

Here’s how the IIOT would work for the Watson’s. Mr. and Mrs. Watson would create the Trust (they are called the Settlor’s) and appoint one of their two children as Trustees. The Trust would have a name, just as any company has a name. It may be called the “Watson Family 2010 Irrevocable Trust”. Then they would transfer the deed to their house to the Trust. Although they technically do not own the house, the Watson’s would still receive all tax breaks associated with property ownership, such as a property tax deduction or veteran’s deduction. The Trust terms would also stipulate that the Watson’s can live in the house for the remainder of their lives.

The Watsons are considering selling their house in 1 year to buy a condo. The good news is that the Trustee can sell the house for them and buy the condo with the proceeds. The remaining proceeds as well as any of their other investments can also be owned by the trust. The principal remains in the Trust and the income generated (dividends from stock, interest from CD’s, etc..) will continue to go to the Watsons. This is important because they need currently rely on that income. By creating the Irrevocable Trust and transferring assets to the Trust, the assets are protected from Medicaid because the Trust is Irrevocable. By giving control of the assets to one of your children, you are protecting the assets.

If you require the assistance of a home health aide in New York, the assets are protected immediately. This means that, assuming you have protected all of your assets, you would qualify for Medicaid benefits. To be eligible for Institutional Medicaid (Nursing home), you have to do this planning 5 years before applying for Medicaid (The Deficit Reduction Act of 2006 (DRA) imposed a five year look back period on asset transfers).

Typically, I would not advise my clients to transfer all of their assets to the Trust. That would be a big step for most. Fortunately, you can continue to transfer assets down the road.

Protecting assets against the cost of care is important. Most of my clients are like the Watson’s. They want to ensure that their assets are protected and would rather their children inherit than the money go to a nursing home. Though important, this planning must also be done with the counsel of trusted advisors.

With questions about how the Irrevocable Trust can be used to protect your assets, please call this office for a free consultation at 516-605-0625, or contact us online.

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Client Case Study: Be Organized, or else

A few months ago, I met with a client who wished to update his Last Will and Testament and learn how to protect his assets against the cost of Long Term Care. He was widowed, had a partner of 10 years and two children from his previous marriage. He was 85 years old. His assets included his primary residence and modest savings, mostly in the form of CD’s.

He wished to leave his assets to his partner and one of his daughters – disinheriting the other daughter. Because of this – and because he wanted to protect his assets – I suggested that he create an Irrevocable Trust. This would help protect his assets in case he had to be placed in a nursing home or require the assistance of a home health aide. More importantly, perhaps, it would allow his estate to avoid the probate process – especially important when disinheriting a child.

Probate is the process of proving the validity of the will and administering the estate. During this process, all children are asked to be involved by consenting to the appointment of the named Executor – including those who are disinherited. Because he wanted to disinherit a child, I thought that the probate process could be difficult for his partner and other daughter.

He decided to take my advise and create a Trust and then transfer his assets to the trust, including the deed to the house. We began the process by drafting and executing the Trust agreement. Unfortunately, he could not find the deed to his house. He took more time to try and locate the deed, but to no avail could not locate it. We eventually found the deed with the assistance of a Title company.

Unfortunately, before we had time to draft and sign the deed, my client passed away. The house, therefore, was not owned by the Trust. Accordingly, the house would pass through the Will, forcing probate. Because the Will states that one of his daughter is not to inherit, we expect there to be a contested proceeding.

It is all too common for individuals not to know exactly where their important documents are located. Whether they be Wills and Trusts, Powers of Attorney and Health Care Proxies, Deeds and Health Insurance information, or a list of bank accounts, it is important that you be organized and know where everything is located so that when the time, comes there are not unnecessary delays that cause unnecessary problems.