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What Assets Can You Keep When You Go on Medicaid?

Posted on January 12, 2024

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Understanding what assets you can keep when applying for Medicaid in New York is crucial for successful financial planning. The state’s specific rules and regulations can often be complex and overwhelming, leaving many residents uncertain about their financial future. The need to balance asset protection with Medicaid eligibility is a common concern, and it’s essential to have clear, accurate information about asset and income limits to make informed decisions.

While there are several assets considered exempt or non-countable, the rules surrounding these exemptions can be intricate. Without the right guidance, you risk making costly mistakes that could jeopardize your assets and your Medicaid eligibility.

At Schlessel Law, PLLC,  our experienced Nassau County Medicaid planning lawyers are well-versed in Medicaid policies. Our team may be able to provide you with comprehensive and current advice to ensure you’re taking the necessary steps to protect your assets when applying for Medicaid. Contact Schlessel Law PLLC today at (516) 574-9630 for a consultation and let us assist you with your Medicaid planning needs.

Understanding Medicaid Eligibility

Medicaid is a joint federal and state program designed to provide health coverage to people with limited income, including some low-income adults, children, pregnant women, elderly adults, and people with disabilities. The eligibility rules for Medicaid in New York are complex and depend on a variety of factors, including income, assets, age, and disability status.

Income and Asset Limits for Medicaid

In 2023, the income threshold for Medicaid beneficiaries was raised. Effective January 1, 2023, the DAB population’s income limit has seen an increase from $934 to $1,677 for a single person, and a jump from $1,367 to $2,268 for a couple. 

For New York residents, the annual income limits for Medicaid are $20,1241 for an individual and $27,2146 for a couple. Almost all sources of income, with very limited exceptions like Holocaust reparation payments, are considered in Medicaid’s income limit. This includes earnings from employment, alimony, pensions, Social Security Disability Income, Social Security Income, gifts, annuity payments, and distributions from IRA-type accounts.

The Importance of Medicaid Planning

Medicaid planning is a critical part of preparing for potential long-term care needs. With the high costs associated with nursing homes and home care services, adequate planning is essential to avoid quickly exhausting one’s life savings. Through strategic asset positioning, a well-executed Medicaid plan can help individuals qualify for Medicaid benefits while still preserving a substantial portion of their wealth.

Moreover, proper Medicaid planning can prevent penalties or coverage denial due to improper asset transfers. Given Medicaid’s five-year look-back period, understanding how and when assets can be transferred is key. Additionally, planning plays a crucial role in maximizing resources for a spouse or dependents. Through various strategies, it’s possible to secure a comfortable living for the family while ensuring the individual in need receives proper care.

Common Misconceptions About Medicaid Eligibility

Medicaid, despite being a crucial resource for millions of Americans, is often misunderstood. These misconceptions can lead to missed opportunities for assistance, unnecessary spending of personal assets, and even accidental fraud. Here are a few common misconceptions:

  • You must be impoverished to qualify for Medicaid. In reality, while Medicaid is a means-tested program, there are many strategies for protecting assets and income while still qualifying for benefits.
  • You can give away assets to qualify for Medicaid. In fact, Medicaid has a five-year look-back period, and inappropriate asset transfers can lead to penalties.
  • All of your assets must be spent on care before Medicaid will cover the cost. The truth is, certain assets are exempt and strategies exist to help preserve some assets for family members.

Navigating these misconceptions is critical for potential Medicaid recipients. Understanding the nuances of Medicaid eligibility can help individuals and families make informed decisions about their healthcare and financial future.

Exempt vs. Countable Assets

In New York State, Medicaid considers certain assets as ‘exempt’ or ‘non-countable’ towards the overall asset limit for eligibility. Understanding the difference between exempt and countable assets is crucial as it directly impacts Medicaid eligibility and the planning process.

Exempt Assets in New York State

Exempt assets, as the name suggests, are those that Medicaid does not take into account when evaluating an individual’s eligibility for benefits. These assets can include:

Primary Residence

The primary residence is generally exempt from being considered as a countable asset for Medicaid purposes if the applicant, their spouse, or a dependent relative resides in the home. There is, however, a limit on the equity value of the home that can be exempted. As of 2023, this limit stands at $1,033,000. Therefore, if the equity in the home surpasses this figure, the excess may be classified as a countable asset.

Personal Belongings and Household Goods

Typically, personal belongings such as clothing, furniture, appliances, and other household goods are exempt from being considered countable assets. Unless these items hold an unusually high value, like highly sought-after art pieces or valuable antique collections, they are not factored into the Medicaid eligibility process.

Life Insurance Policies

Life insurance policies can be exempt, but this is dependent on their face value and whether they have a cash value. As per New York regulations, if the face value of all life insurance policies owned by an applicant totals $1,500 or less, they are classified as exempt assets.

Prepaid Burial Plans

Prepaid burial plans and a sum of $1,500 earmarked for burial expenses are considered exempt assets. It should be noted that for the prepaid burial plan to be exempt, it must be designated as irrevocable.

One Vehicle

A single vehicle, irrespective of its value, is exempt if it’s used for the transportation of the applicant or a member of their household. This exemption can be particularly significant in rural regions where public transportation options may be limited or non-existent.

Countable Assets in New York State

Countable assets, on the other hand, are those that Medicaid includes when determining an individual’s eligibility. These assets encompass:

Cash and Bank Accounts

All cash on hand and money in checking or savings accounts are deemed countable assets. These are the most liquid of assets, and their value is easily ascertainable and therefore counted by Medicaid.

Investments and Stocks

Investments, including stocks, bonds, and mutual funds, are generally classified as countable assets. The value of these investments is considered in the eligibility determination for Medicaid and can have a significant impact on whether an individual qualifies for benefits.

Real Estate Properties Other Than the Primary Residence

Real estate holdings other than the primary residence, such as second homes, rental properties, and other real estate investments, are deemed countable assets. The value of this additional property is factored into the eligibility determination for Medicaid.

Strategies for Protecting Assets

When planning for Medicaid, it’s crucial to understand and explore different strategies to protect assets while ensuring Medicaid eligibility. Here are some common ways individuals can safeguard their assets:

Medicaid Compliant Annuities

A Medicaid-compliant annuity can be a valuable tool in Medicaid planning. These annuities are specialized financial products that convert countable assets into a stream of income, assisting individuals to meet Medicaid’s asset limit. The annuity must be irrevocable, non-transferable, provide equal payments (with no deferral or balloon payments), and be actuarially sound (i.e., the term of the annuity must not exceed the Medicaid applicant’s life expectancy). It’s critical to work with a knowledgeable Medicaid planning attorney when considering this strategy, as incorrectly structured annuities can lead to Medicaid disqualification.

Irrevocable Trusts

An irrevocable trust can be an effective means of protecting assets from Medicaid’s countable asset limit. Once assets are transferred into an irrevocable trust, they are no longer considered owned by the individual, reducing their countable assets. However, this strategy comes with a significant loss of control over the assets, as changes cannot be made to the trust without the consent of the beneficiary. Furthermore, due to Medicaid’s five-year look-back period, any transfer of assets into a trust must occur at least five years before applying for Medicaid.

Spousal Protections and Community Spouse Resource Allowance (CSRA)

Medicaid regulations provide certain protections for the spouse of a Medicaid applicant to prevent them from becoming impoverished. The Community Spouse Resource Allowance (CSRA) allows the ‘community spouse’ (the spouse not applying for Medicaid) to retain a certain amount of the couple’s joint assets, which as of 2023, can be up to $148,620. The CSRA is intended to provide the community spouse with sufficient resources to continue living independently while their spouse receives long-term care.

Gifting and the Medicaid Look-Back Period

Gifting assets can help reduce an individual’s countable assets for Medicaid eligibility. However, Medicaid’s five-year look-back period can complicate this strategy. If Medicaid finds that an applicant has transferred assets for less than fair market value during this period, it can result in a penalty period of Medicaid ineligibility. Therefore, gifting should be considered carefully and within the context of a broader Medicaid planning strategy.

Spend-Down Strategies

Spend-down strategies involve reducing one’s countable assets by spending the funds on specific, allowable expenses. These expenses can include paying off a mortgage, repairing a home, buying a new car, or purchasing personal items. The goal is to convert countable assets into exempt assets or to use them for the benefit of the Medicaid applicant. However, these expenses must be for the applicant themselves or their spouse, and not for other family members.

Asset Protection Strategies for Medicaid Eligibility Description
Medicaid Compliant Annuities Specialized annuities that convert countable assets into income, must meet specific criteria to avoid Medicaid disqualification.
Irrevocable Trusts Transfer assets into an irrevocable trust to reduce countable assets, but this involves giving up control and has a 5-year look-back period.
Spousal Protections and CSRA Community Spouse Resource Allowance (CSRA) allows the non-applying spouse to keep a portion of joint assets to prevent impoverishment.
Gifting and the Medicaid Look-Back Period Gifting assets can reduce countable assets, but be cautious of the 5-year look-back period to avoid penalties.
Spend-Down Strategies Reduce countable assets by spending on allowable expenses such as mortgage payments, home repairs, or personal items.

The Role of a Medicaid Planning Attorney

Medicaid planning can be a complex task, given the intricate rules and regulations that govern the program. A New York Medicaid Planning Attorney can provide invaluable assistance in several ways:

  • Understanding Medicaid Eligibility: They can help clients understand the complex eligibility requirements of Medicaid, including income limits, asset limits, and other qualifying factors.
  • Asset Protection Strategies: They can advise on strategies to protect assets, such as setting up irrevocable trusts, purchasing Medicaid-compliant annuities, or implementing spend-down strategies.
  • Navigating the Look-Back Period: They can help clients understand and navigate Medicaid’s five-year look-back period, ensuring that actions taken today won’t negatively impact Medicaid eligibility in the future.
  • Applying for Medicaid: They can assist with the Medicaid application process, helping to fill out forms accurately and efficiently, and advocating for the client if difficulties arise.
  • Spousal Impoverishment Prevention: They can provide guidance on spousal impoverishment rules and help implement strategies to protect the financial well-being of a community spouse when the other spouse needs to qualify for Medicaid long-term care.
  • Appealing Medicaid Denials: If a Medicaid application is denied, they can guide clients through the appeal process, helping them understand the reasons for the denial and what steps can be taken to correct it.

The Benefits of Early Medicaid Planning

While it’s never too late to start Medicaid planning, starting early has several benefits. Early planning allows for a wider range of options and strategies to protect assets and ensure Medicaid eligibility. It provides more time to implement strategies like setting up irrevocable trusts, which need to be in place for at least five years due to the Medicaid look-back period.

Early planning can also help alleviate stress. Knowing that there is a plan in place for long-term care can provide peace of mind for both the individual and their family. Additionally, it allows for more time to understand and navigate the complex Medicaid system, reducing the likelihood of errors that could lead to a denial of benefits.

Preparing for Medicaid Application

The process of applying for Medicaid can seem overwhelming, given the multitude of rules and regulations. However, with adequate preparation and understanding of what the process entails, the task becomes more manageable. Below are key steps involved in preparing for a Medicaid application.

Gathering Necessary Documentation

Proper documentation is vital when applying for Medicaid. Applicants must be able to prove their financial situation, medical necessity, and other personal details. Essential documents to gather include:

  • Proof of Identity and Citizenship: This could be a U.S. passport, birth certificate, or other valid identification.
  • Income Documentation: This includes pay stubs, Social Security benefits statements, and pension distribution statements.
  • Asset Documentation: Bank statements, property deeds, vehicle titles, and investment account statements are all needed to show the value of countable assets.
  • Medical Documentation: Medical records, doctor’s reports, and other documentation may be necessary to prove a medical necessity for long-term care.
  • Insurance Information: Details of any health, life, or long-term care insurance policies should be included.
  • Marital Information: If married, you’ll need to provide your marriage certificate and details of your spouse’s income and assets.

After gathering all the necessary documentation, the next step is to fill out and submit the Medicaid application. You can apply online, by phone, by mail, or in person at a local Medicaid office.

The application will require detailed information about your income, assets, expenses, and medical needs. It’s crucial to fill out the application accurately and thoroughly, as mistakes or omissions could delay the process or result in a denial of benefits.

Once the application is submitted, it will be reviewed by the state’s Medicaid agency. They may request additional information or documentation, so it’s important to respond promptly to any such requests.

Getting the Help of an Experienced Nassau County Medicaid Planning Lawyer

Understanding the assets you can maintain while applying for Medicaid in New York is a crucial step in your financial planning journey. The complexity of the state’s rules and regulations should not deter you from ensuring your financial security. Remember, protecting your assets while remaining eligible for Medicaid is achievable but requires careful planning and informed decision-making.

Armed with the right information and professional advice, you can successfully balance asset protection with Medicaid eligibility. Don’t let the complexities of the system overwhelm you. Reach out and contact the experienced Nassau County Medicaid planning lawyers at Schlessel Law PLLC at (516) 574-9630 for a consultation today. Let us assist you in securing your financial future while successfully applying for the Medicaid benefits you need.

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