Spotlight on Elderlaw: Rising Home Values Make Use of Trusts A Critical Planning Tool

by Nancy J. Brady, RN, Esq.

Medicaid regulations and New York law provide for means to protect the value of our savings and real property from the costs of long term care- by transferring title of the assets and property to an Irrevocable Trust with specific language and requirements as delineated under the Medicaid regulations. The trusts need to be established and assets transferred five years prior to applying for benefits to finance long term nursing home care.  With the value of homes in our area steadily rising, these trusts can result in protecting the value of the assets and property from long term care costs. While called “irrevocable,” the law allows for specific circumstances under which these trusts can be revoked, in whole or in part.  Attorneys experienced in these types of trusts can tailor a plan specific to your family’s circumstances- plans typically take into consideration, for example, the availability of long term care insurance to finance part of the long term care, with Medicaid eligibility planned for once those benefits are spent.  If long term care is never needed, the irrevocable trust will still have the advantage of removing the assets titled under the name of the trust from the costs and delays of the probate process.

Well established New York law allows for the creation of such trusts and for transfers of assets and property to both avoid probate, and remove the assets and property transferred from being considered for Medicaid eligibility. Medicaid programs in New York provide benefits available to finance long term care for the elderly, blind or disabled who financially qualify.  These Medicaid benefits will finance long term care either at home or in a facility.

By way of background, Medicare- the insurance to which we are all entitled at age 65 (younger if disabled and specific requirements are met)- will finance short term care. If one has been hospitalized for a minimum of a few days, and requires skilled nursing care or therapy, Medicare will finance up to 100 days with some copayment required.  Medicare may also be available for home care for a few hours a day for a few weeks.  After these Medicare benefits are used, if long term care insurance is available, those benefits may finance part or all of a continued stay in a facility, or at home with home care.  Long term care in a facility costs an average of $15,000.00 per month in our area.  Private pay home care can cost up to $10,000.00 per month or more.

To be financially eligible for Medicaid benefits the individual can have no more than $15,150.00 to his/her name. If the individual owns a home, AND the home is the primary residence, it is possible to be eligible for Medicaid benefits, PROVIDED the equity value in the home is below $858,000.00.  If the home is not transferred during one’s lifetime, and the individual received Medicaid benefits, there may be a lien to be satisfied once the individual passes.

There are additional eligibility rules regarding to whom the home may be transferred without impact on Medicaid eligibility. A married person may transfer the home to a spouse, without impact on Medicaid eligibility.  IF the equity value of the home is below the Medicaid limit, this transfer is considered by Medicaid to be an exempt transfer.  IF however, the value of the home is above the limit, the spouse to whom the house was transferred may receive notice of a claim by New York City for benefits paid by the City (Medicaid) for the spouse’s care.

After Hurricane Sandy, homeowners in our area feared for the loss of value to their homes- however the opposite has occurred- and many modest homes in our area are valued at over the Medicaid limit of $858,000.00. A look at the recent sales in the area, and a review of the New York City Department of Finance website for the market value history of local properties reveals continued appreciation in value for even modest sized homes.  Some properties have nearly DOUBLED in value.  To have a look at the estimate for your own property go to www.nyc.gov and search under property taxes.

This is a only a brief summary of part of the Medicaid regulations, and is intended as general information only, not to be substituted for nor intended as specific legal advice. If you have any questions about the information provided here, or would like a consultation to discuss your specific circumstances, please contact the office of Brady & Marshak, LLP at 1-718-738-8500.