By: Isaac Yedid, Esq. & Raymond Zeitoune, Esq.

As Summer 2017 comes to an end, now is a good time as any to understand and prepare�for what is commonly known as Medicaid Planning.

As we get older, we begin to worry about the possibility that we may get sick and end up�in a nursing home.�Paying for a nursing home can drastically reduce a person�s savings.�In New�York, the average cost of nursing home care is a little more than $75,000 per year, with the cost�of better nursing home care being upwards of $170,000 a year.

Most Americans will drain out their savings while paying for nursing home care until�they qualify for Medicaid, but with proper planning, this unfortunate result can easily be�avoided, and people can go to a nursing home and still leave an inheritance for their children.

Medicaid is an entitlement program for people and families with low income and limited�resources. In order to qualify for Medicaid, you must be impoverished under the guidelines�prescribed by the program. Essentially, there are two types of Medicaid, �plain� and �nursing�home,� each with very different requirements.

Plain Medicaid: To be eligible for medical care, the monthly income limit for an�applicant aged 65 or older living in a one-person household is $825.� The monthly�income limit for an applicant aged 65 or older living in a two-person household is�$1,209.� The resource limits for applicants aged 65 or older are $14,850 (plus a�separate burial account of $1,500) and $21,750 (plus a separate burial account of�$1,500), respectively for a one-person and a two-person household.

Nursing-Home Medicaid: To be eligible for nursing home care, the program�states that the applicant�s income must be $50 or less per month, and if there is a�community spouse (the spouse remaining in the home), the couple cannot have�income exceeding $2,980.50 per month. If this amount is exceeded, then�Medicaid may request monthly income contributions from the community�spouse.

The community spouse resource allowance is a potential maximum of $119,220�in resources (plus a separate burial account of $1,500). If this amount is exceeded,�then Medicaid may seek reimbursement from the community spouse holding the�money.

* The income and resource levels stated above are based on 2017 guidelines and�may increase or decrease in future years.�

The New York Department of Social Services requires persons seeking Medicaid to meet�the above listed limits in order to qualify. Without proper Medicaid planning, most people will�have to spend down most of their assets before being eligible to qualify for Medicaid.� Therefore,�if a person thinks he or she may apply for Medicaid in the future, certain measures must be taken�today in order to avoid that unfortunate result of being denied from Medicaid in the future.

�The Basics of Medicaid Trusts

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A Medicaid trust is a way to transfer money to someone you trust with restrictions so that�they cannot just keep the money. If you no longer qualify for long-term care insurance, a�Medicaid trust is a great way to secure your future eligibility for Medicaid. The key word here is��future� because a Medicaid trust will not qualify you for Medicaid immediately. There will be a�penalty period, which can be up to five years (but is often less). If you have an immediate need�for Medicaid, there are a number of other techniques that can be used, such as a �gift and loan��or a �spousal refusal.�

As a part of creating a New York Medicaid trust, you will have to transfer your assets to�the trust (i.e. transfer your money to a bank account in the name of the trust and re-title your�brokerage accounts and real estate to the trust).

Example: David creates a Medicaid trust called the �David Medicaid Trust.� For the trust to work, David has to transfer most of his money and stock to an account belonging to the �David Medicaid Trust� and deed his house to the �David Medicaid Trust.� This is the only way Medicaid will accept the premise that David no longer has the money.

Once assets are put into a Medicaid trust, it is impossible to take them out. It goes�without saying that once you take the assets back from the trust, you lose Medicaid eligibility.� It�is this inability to revoke or amend the trust that makes the trust untouchable by Medicaid. Now�that you no longer own the property, you prevent Medicaid from asserting that you don�t meet�the Medicaid resource limit. The trustee of your choosing will manage the trust. This is usually�the person who is very close to you, such as a son or daughter, although some trusts are managed�by an attorney or a bank. Some people opt to have more than one trustee, for example, two�children and an attorney or a banker. You can receive income from the trust, as long as the�income is below the Medicaid eligibility limit. Medicaid will count the income but ignore the�principal of the trust. Any income over the Medicaid limit will have to be put back into the trust.

Once again, planning in advance is the key factor.� A proper Medicaid trust that is more�than five years old will qualify you for all types of Medicaid, but a �younger� trust may incur a�period of ineligibility (the waiting period).

When Will I Begin to Qualify for Medicaid After Transferring Assets?

When the Medicaid trust is more than five years old, you will qualify for Medicaid�without a waiting period. Otherwise, a period of ineligibility is calculated by taking the dollar�value of the transfer divided by average monthly cost for nursing care, which equals the number�of months you will be ineligible for Medicaid.

Example:� Dad gives Son a gift of $100,000.� Medicaid will consider the $100,000 figure and�divide it by the average monthly cost of nursing care, let�s say $10,000 which equals 10. �Therefore, Dad will be ineligible for Medicaid for 10 months.

Additionally, you may be able to have a Medicaid trust without the imposition of a�penalty period if the transfer is made to: (i) a qualifying relative; (ii) your child who is either�under 21 years of age, blind or permanently disabled; (iii) your sibling, if he or she has an equity�interest in the house and was living there for at least one year before you went into a nursing�home; or (iv) your adult child, if that child has lived in the home at least two years before you�went into a nursing home and that child was taking care of you.

Speaking with an experienced trusts and estates attorney will be useful to you because the�attorney will advise you on the options available to you which will allow you to use Medicaid to�cover the cost of medical care without depleting your assets.� In addition, planning in advance�is�a good option because the penalty period will likely expire before you may need to be admitted�to a nursing home.

Forming a New York Medicaid trust allows you to protect your family�s assets from�being used to pay for your medical and nursing home care by justifying the need to receive�Medicaid in the future to cover those expenses. Additional benefits in forming a New York�Medicaid trust are the usual lifetime trust benefits, which can help save money on estate taxes,�keep assets out of the probate court, maintain privacy, avoid the hassle of multi-state probate�proceedings, avoid interruption of income and use of assets after your death, and provide�planning for mental disability.�Let us help you prepare for you and your family�s future.

May we all merit living long, healthy and happy lives – amen.

The attorneys in the Trust & Estates Practice Group at Yedid & Zeitoune have a combined 20 years of legal experience and are ready to assist you with all your estate planning needs.

Isaac Yedid, Esq. and Raymond Zeitoune, Esq.

Yedid & Zeitoune, PLLC

1172 Coney Island Avenue Brooklyn, New York 11230

Phone: (347) 461-9800 � � �Fax: (718) 421-1695 � � �Email:�[email protected]

NYC Office – By Appointment Only:

152 Madison Avenue, Suite 1105 New York, New York 10016

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