How to Protect Assets if Spouse Goes into Nursing Home in New York

In New York, when one spouse enters a nursing home, Medicaid imposes income and asset limits on both the applicant spouse and the non-applicant spouse, also known as the community spouse. If the couple's assets exceed Medicaid's threshold, they must be spent down to qualify for Medicaid coverage. However, there are strategies available to safeguard the non-applicant spouse's assets, contingent upon the timing of their estate planning efforts.

Medicaid Income and Asset Limits as of 2024

In New York, as of 2024, when only one spouse is seeking Medicaid coverage, the applicant spouse faces an income limit of $1,732 per month and an asset limit of $31,175. The non-applicant spouse, on the other hand, benefits from a significantly higher asset limit of $154,140 and enjoys the absence of any income restrictions. However, the non-applicant spouse is entitled to a Monthly Maintenance Minimum Needs Allowance (MMMNA) of $3,853.50. In situations where the non-applicant spouse's income falls below the MMMNA threshold, the applicant spouse has the ability to transfer a portion of their income to the non-applicant spouse, up to the MMMNA limit, ensuring their financial well-being.

Countable vs Non-Countable Assets

Medicaid categorizes assets into two distinct classifications when assessing an applicant-spouse's financial standing: countable and non-countable assets. This differentiation plays a pivotal role in determining the extent of a spouse's resources and their potential impact on Medicaid eligibility.

Countable assets include cash such as checking accounts, savings accounts, money market accounts, and certificates of deposit (CDs). Investments like stocks, bonds, mutual funds, exchange-traded funds (ETFs), and real estate investment trusts (REITs) are also considered countable assets. Retirement accounts, including individual retirement accounts (IRAs), 401(k) plans, 403(b) plans, pension plans, and Keogh plans, are countable unless in payout status. Cash-value life insurance policies, such as whole life, universal life, variable life, and permanent life insurance, are included in countable assets. Investment properties, including rental properties, vacation homes, timeshares, and commercial real estate, are countable. In exceptional cases, a primary residence may be considered a countable asset when the equity exceeds the state limit to that portion of excess equity, though the general rule is that a primary residence is a non-countable asset.

Non-countable assets encompass items of a personal nature, such as attire, household furnishings, furniture, and jewelry (up to a specified worth) are excluded from consideration. Prepaid funeral arrangements and burial plots, encompassing irrevocable funeral trusts, burial spaces and plots, headstones, and grave markers, are exempt from the tally of countable assets. A solitary vehicle for personal use, be it a car, truck, or van, employed for transportation to medical appointments and deemed essential for preserving independence, is likewise exempt. Property indispensable for self-support, comprising tools and equipment for a trade, livestock and farmland for generating income, and real estate utilized in a business is not regarded as a countable asset. The primary residence is also not a countable asset, for as long as it is within the equity limit. In New York, the primary residence equity limit is $1,071,000.

How Assets are Counted

In New York, Medicaid considers the assets of a married couple as a single unit, irrespective of how they are titled or owned individually. As a 50% state, New York divides the total countable assets of the couple equally between the applicant spouse and the non-applicant spouse, assigning 50% of the assets to each. This equal division of assets serves as the basis for determining the countable assets of each spouse when assessing Medicaid eligibility.

Protections for Spouse of Nursing Home Resident

Medicaid provides several protections to ensure that the community spouse (the spouse not entering a nursing home) can maintain a reasonable standard of living and is not impoverished due to the costs of their partner's long-term care.

Community Spouse Resource Allowance (CSRA)

The Community Spouse Resource Allowance (CSRA) is the amount of assets the community spouse can retain. In New York, the CSRA is $154,140 as of 2024. The CSRA is calculated using the snapshot date, which is the date of Medicaid application or institutionalization. The total countable assets of both spouses are divided by two. If the result is below the minimum CSRA, the community spouse keeps all assets. If the result is above the maximum CSRA, excess assets must be spent down.

Spousal impoverishment protections

Spousal impoverishment protections allow the community spouse to keep their own income and a portion of the institutionalized spouse's income. The community spouse's income is not counted for Medicaid eligibility and includes Social Security benefits, pensions, and employment income. There is no limit on the amount of income the community spouse can have. If the community spouse's income is below the Monthly Maintenance Minimum Needs Allowance (MMMNA), the institutionalized spouse can transfer income to reach the allowance. In New York, as of 2024, the MMMNA is $3,853.50.

Monthly maintenance minimum needs allowance (MMMNA)

The monthly maintenance needs allowance is the minimum income level for the community spouse, ensuring they have enough income to live independently. If the community spouse's income is below this level, a portion of the institutionalized spouse's income is transferred, limited by the maximum needs allowance. The maximum monthly maintenance needs allowance in New York is $3,853.50 per month in 2024. In exceptional circumstances, the community spouse may request a higher needs allowance by demonstrating financial duress. This requires a fair hearing or court order.

Strategies to Protect Assets

There are several strategies available to protect assets when one spouse is entering a nursing home and applying for Medicaid.

Allowable expenditures when spending down

When spending down assets to qualify for Medicaid, individuals can pay off debts such as credit card balances, personal loans, medical bills, mortgages, home equity loans, and vehicle loans. They can also purchase non-countable assets like home improvements and repairs, including accessibility modifications, energy-efficient upgrades, and necessary maintenance and upkeep. Household goods and appliances, such as furniture, electronics, and kitchen equipment, are also allowable purchases. Personal care items, including eyeglasses, hearing aids, dentures, dental work, mobility devices, and medical equipment, can be acquired during the spend-down process. Prepaid funeral and burial arrangements, such as irrevocable funeral trusts, burial plots, grave markers, headstones, and urns, are exempt from countable assets.

Paying for caregiving services is another way to spend down assets. This can include in-home care and assistance from personal care aides, homemaker services, and skilled nursing care. Adult day care programs that provide social activities, meals, health monitoring, and medication management are also allowable expenses. Respite care for family caregivers, such as short-term stays in assisted living facilities, temporary in-home care services, and adult day care program enrollment, can be used to reduce countable assets.

Other asset protection methods

Irrevocable trusts have become an increasingly popular strategy for preserving wealth and ensuring financial security for future generations. Medicaid Asset Protection Trusts (MAPTs) offer a sophisticated solution, allowing individuals to shield their assets by transferring ownership to a trust while still providing for their loved ones. However, it is crucial to plan ahead and implement this approach at least five years before seeking Medicaid assistance. Failing to adhere to this timeline can lead to a violation of Medicaid's lookback period, resulting in the imposition of a penalty that can hinder an applicant's eligibility for much-needed benefits.

In an irrevocable trust, the designated trustee takes on the duty of overseeing the assets for the benefit of the beneficiaries, while the trust's income can be allocated to the individual. Pooled trusts, managed by non-profit organizations, present an innovative solution by enabling individual beneficiaries to combine their assets into a shared trust while maintaining distinct accounts for each participant. Supplemental Needs Trusts (SNTs) function to supplement Medicaid benefits by designating resources from the assets of the person with disabilities to address costs not covered by Medicaid.

Another approach to safeguarding assets involves divesting the Medicaid recipient of their home ownership. By directly conveying the property to a spouse or dependent, the home transitions into a non-countable asset for the recipient, while the spouse or dependent gains complete ownership and authority over the residence. As an alternative, a life estate deed gives the Medicaid recipient the privilege to inhabit the home throughout their lifetime, simultaneously assigning the residual interest to chosen beneficiaries. As a result, the home is exempt from evaluation as an asset when assessing Medicaid eligibility. However, it is imperative to recognize that transferring property to an irrevocable trust or a third party within the 5-year window preceding a Medicaid application violates the lookback period and will trigger the imposition of a penalty on the Medicaid applicant.

Another strategy to reduce and protect assets is to purchase Medicaid-compliant annuities. Immediate annuities convert a lump sum payment into an income stream, with the payout period falling within the Medicaid recipient's life expectancy. The state Medicaid agency must be named as the remainder beneficiary. This annuity, in order to be Medicaid-compliant, must be irrevocable, non-assignable and actuarially sound. Income derived from Medicaid-compliant annuities is counted towards the income limit. However, since non-applicant spouses have no income limit, they can use excess assets to purchase Medicaid-compliant annuities.

Another option when seeking to protect the non-applicant spouse's assets during the 5-year Medicaid lookback period is to engage in a gift and loan transaction. In this strategy, the spouse gifts a portion of their assets to a child or beneficiary, and simultaneously, the spouse extends a loan back to the child or beneficiary for the same or similar amount. The gift portion of the transaction will be subject to the 5-year lookback period, and if the applicant applies for Medicaid within this timeframe, a penalty period may be imposed. However, the loaned funds are not subject to the lookback period and can be used to pay for the applicant's care expenses during the penalty period.

It is essential to consult with a qualified Medicaid planning attorney like us to ensure that the transactions to protect a non-applicant spouse's assets is structured correctly and complies with New York Medicaid regulations. Should you need assistance, the Law Offices of Albert Goodwin are here for you. We are located in Midtown Manhattan, New York, NY. Call us at 212-233-1233 or email [email protected] to schedule a consultation.