What Assets are Exempt from Medicaid Estate Recovery in New York

Medicaid Estate Recovery is a program that allows the state to recoup certain Medicaid benefits paid on behalf of a Medicaid recipient during their lifetime from their estate upon death. The purpose is to recover funds that the state spent on long-term care services, such as nursing home care or home and community-based services, for individuals aged 55 or older.

The process begins when the state files a claim against the estate of the deceased Medicaid recipient. The amount of the claim is limited to the total amount of Medicaid benefits paid on behalf of the individual for long-term care services. The state can recover from assets that pass through probate, which is the legal process of distributing a deceased person's assets.

New York's Medicaid Estate Recovery Law

In New York, Medicaid's ability to recover costs from a deceased recipient's estate is restricted by state law. The "estate" subject to recovery includes only real and personal property, as well as other assets, that are transferred through a valid last will or, in the absence of a will, through intestate succession. This typically encompasses the probate estate. However, it does not include assets held in living or irrevocable trusts, properties under joint ownership with rights of survivorship, or properties with named beneficiaries, as these assets avoid the probate process. While some states have broadened Medicaid recovery to encompass non-probate assets, New York has restricted Medicaid recovery solely to assets within the probate estate.

The House as an Exempt Asset for Purposes of Medicaid Eligibility but Not Exempt for Purposes of Medicaid Estate Recovery

When an individual applies for Medicaid to cover the costs of long-term care, such as nursing home care, their primary residence is often considered an exempt asset for the purposes of determining Medicaid eligibility. This means that the value of the home is not counted towards the individual's total assets when determining whether they meet the financial criteria for Medicaid coverage. This exemption allows individuals to qualify for Medicaid while still retaining ownership of their primary residence.

However, it is important to note that while the home is exempt for purposes of Medicaid eligibility, it is not exempt from Medicaid Estate Recovery. Upon the death of the Medicaid recipient, the state may file a claim against the estate to recover the costs of long-term care services provided during the individual's lifetime, which usually includes the recipient's home.

To qualify for Medicaid, individuals must meet strict asset limits ($31,175 as of 2024), often leaving their primary residence as their sole significant asset since its value is exempt when determining Medicaid eligibility. Consequently, New York's Medicaid Estate Recovery Programs frequently focus on the Medicaid recipient's home. If the Medicaid recipient owned a home upon their death, the state may attempt to recoup the value of the home, up to the total Medicaid benefits paid for the individual's long-term care services, by imposing a lien or mandating the sale of the property to settle the claim.

There are some exceptions to this rule. For example, if the Medicaid recipient's spouse, minor child, or disabled child is living in the home, the state may not pursue a claim against the property. Additionally, if a sibling or adult child of the Medicaid recipient has an equity interest in the home, has resided in the home and has taken care of the Medicaid Recipient for at least one (for siblings) or two (for adult children) years prior to the individual's admission to a nursing home, the state may not pursue a claim against the sibling or adult child's interest in the property.

It's important for individuals and their families to understand the potential impact of Medicaid Estate Recovery on their home and to plan accordingly. Options such as transferring ownership of the home to a trust or utilizing a life estate deed may help to protect the home from Medicaid Estate Recovery while still allowing the individual to qualify for Medicaid coverage.

Other Assets Exempt from Medicaid Estate Recovery in New York

The following are other assets exempt from Medicaid recovery in New York:

• Life insurance policies: The proceeds from life insurance policies are exempt from Medicaid Estate Recovery in New York. This means that if the deceased Medicaid recipient had a life insurance policy, the beneficiaries of that policy would receive the proceeds without any claim from the state.
• Joint owned bank accounts: If the deceased Medicaid recipient had a joint bank account with another person, such as a spouse or child, the funds in that account would be exempt from Medicaid Estate Recovery. This is because the joint owner has a right of survivorship, meaning that they automatically inherit the funds in the account upon the death of the other owner.
• Payouts from 401(k), IRA, payable on death accounts, or similar account types: Retirement accounts such as 401(k)s and IRAs, as well as payable on death accounts, are exempt from Medicaid Estate Recovery in New York. This means that the beneficiaries of these accounts would receive the funds without any claim from the state.
• Property placed in certain kinds of trusts: If the deceased Medicaid recipient had placed property in certain types of trusts, such as an irrevocable trust, that property would be exempt from Medicaid Estate Recovery. This is because the property is no longer considered part of the individual's estate and is instead owned by the trust.
• Real estate that is jointly owned: If the deceased Medicaid recipient owned real estate jointly with another person, such as a spouse or child, that property would be exempt from Medicaid Estate Recovery. This is because the joint owner has a right of survivorship, meaning that they automatically inherit the property upon the death of the other owner.
• Real estate or assets entirely in spouse's name or owned by children: If the deceased Medicaid recipient's spouse or children owned real estate or other assets entirely in their own names, those assets would be exempt from Medicaid Estate Recovery. This is because the assets are not considered part of the deceased individual's estate and are instead owned by the spouse or children.

Protecting your assets from Medicaid recovery is possible with proper planning and timing. Should you need assistance with Medicaid issues, we at the Law Offices of Albert Goodwin are here for you. We have offices in New York City, Brooklyn, NY and Queens, NY. You can call us at 212-233-1233.