What You Need To Know About Medicaid Asset Protection Trusts In NY

In this article, you can discover…

• The purpose and benefits of a Medicaid asset protection trust.
• The types of assets that can be legally placed into a trust.
• When to create your Medicaid asset protection trust for the best possible outcomes.

What Is A Medicaid Asset Protection Trust, And How Does It Work Under New York Law?

Medicaid asset protection trusts help you protect your assets from being counted against Medicaid eligibility threshold. By placing these assets within the trust, you give up your ability to access them for your own benefit, but you also protect your ability to fund long-term care through Medicaid. You also protect these assets for your beneficiaries.

To avoid Medicaid’s look-back period, the trust must be established and assets transferred at least five years before you apply. If your trust is newer than five years and you suddenly require nursing home care, you may have to pay for long-term care privately until the end of the five year look-back period or reverse your trust to undertake alternative planning at the time.

To qualify for Medicaid benefits in New York in 2025, you must be disabled and must not have individual assets beyond a value of $32,396. Without a Medicaid asset protection trust, Medicaid can simply review your assets’ value and deny your application on that basis. It will then be up to you to sell off your assets to pay for long-term care.

Medicaid asset protection trusts also allow you to claim capital gains exemptions as well as change beneficiaries if you wish. And while you’ll have access to any income the trust generates, you won’t have access to the principal.

However, New York Medicaid law can allow you to get a reverse mortgage loan while still qualifying for Medicaid, so long as your Medicaid asset protection trust contains specific language to permit this.

How Is A Medicaid Asset Protection Trust Different From A Revocable Living Trust?

Revocable living trusts do not protect your resources from the cost of long-term care since they are counted against the Medicaid eligibility threshold. And with revocable living trusts, you can be the trust’s creator, trustee, and beneficiary, as well. This gives you far more power over the trust and how you use or benefit from its assets.

A Medicaid asset protection trust, on the other hand, helps protect your assets from being counted by Medicaid for eligibility, so long as the trust has been funded for the last five years or more. A Medicaid asset protection trust also preserves the principal for a beneficiary or beneficiaries of your choosing, but does not allow you to directly access or use that principal for your own benefit.

What Types Of Assets Can I Legally Transfer Into A Medicaid Asset Protection Trust?

Most resources may be transferred into a Medicaid asset protection trust. For example, your home, bank accounts, brokerage accounts, annuities, life insurance, stocks, and investment accounts. However, Medicaid treats qualified money (such as IRAs) differently, and you can not transfer those assets into a Medicaid asset protection trust.

Furthermore, if you’re receiving, for example, $500 per month as a required minimum distribution (RMD) from an IRA, Medicaid would require you to double or triple the amount of that distribution to help fund long-term care because it is based on the social services tables.

Annuities may be transferred into a Medicaid asset protection trust, and if you’re receiving Medicaid benefits, you will not be required to name the State as the beneficiary of the annuity in second position after your spouse or a disabled child.

When Is The Best Time To Create A Medicaid Asset Protection Trust?

Most clients come in to talk with me about Medicaid asset protection trusts when they’re in their 60s or 70s. While you may not want to restrict how you can handle your assets if you’re in your 60s and healthy, a Medicaid asset protection trust may prove helpful if you’re struggling with a chronic, serious condition and expect to need long-term care sooner rather than later.

Generally, however, around the time you retire is a good time to begin to consider financial planning for long-term care. Think about what you’d like to do with your assets and with your retirement years. A Medicaid attorney can help you consider your needs and goals, and take small, initial steps towards protecting your assets and preparing for possible long-term care.

Notes From The Field: How Do You Uniquely Help Clients With Their Long-Term Care Planning?

There was a couple I helped from Staten Island. The husband had major surgery and nearly died. He was in his late 80s, and he and his wife set up an asset protection trust post surgery.

They transferred the husband’s resources to his wife, as exempt transfers between spouses. They put their home and their investments in separate trusts and went about their lives. They prepaid for their funeral, which is another exempt transfer.

Anything else the wife had in her name, she kept. But five years later, in 2018, she fell and broke her hip. In her mid-90s, she got through the surgery, and we helped her liquidate her remaining assets and transfer them out to reliable family members.

The family members put these assets into revocable trusts to hold for the couple’s benefit. In her case, a Medicaid asset protection trust wasn’t needed, and her loved ones were able to protect over one million dollars of her assets.

One more important thing to remember: if you do transfer assets to loved ones, make sure they’re responsible and financially secure. You never want to transfer your assets to someone with a drug or gambling problem. Family background and personal responsibility are incredibly important.

Still Have Questions? Ready To Get Started?

For more information on Medicaid asset protection trusts in New York, an initial consultation is your next best step. Get the information and legal answers you are seeking by calling (631) 489-6613 today.