Most people do not understand how Medicaid works.  As an elder law attorney in New York, I often help clients qualify for the program in the state. A disability or old age alone does not entitle someone to Medicaid benefits. When determining eligibility, the local agency considers the income and assets of the applicant.

Income Standards

For the purposes of Medicaid eligibility, the permissible income level is uniform throughout the fifty-eight separate counties within New York State. The income level typically changes yearly, adjusted for inflation. For the year 2016, your income can be no more than $1354.00 if you are a single individual, which is a total of $16,243.00 annually. Contrary to popular belief, the income level does not double when another person is considered. For example, a married couple’s monthly income can be no more than $1763.00, which is $21156.00 per year, to qualify for Medicaid. For each person in your household, other than the spouse, Medicaid allows for an additional amount of $409.00.  Individuals who are disabled, blind or the age of 65 and over the income level is $825.00 for a family size of one person. For a family size of two people, the monthly income level is $1209.00.

It is usually the case that an elderly individual seeking to qualify for the program will have income in excess of the permissible levels established by Medicaid.  A person with an income level above the specified range may nevertheless qualify for benefits due to the fact that New York is a state that allows for the income to be spend-down before Medicaid will pay for medical expenses of the senior.  To avoid the spend down requirement, an elder law attorney can assist the individual in depositing the monthly excess income into a pooled trust. The pool trust can then issue the excess income as a supplement to any of the Medicaid recipient’s living expenses.

Resource Standards

An individual’s application for Medicaid is not determined only by the person’s income but also by any available resource of that person. As is the case with permissible income standards noted above, the Medicaid allowable resource standards are uniform throughout all counties within New York State. What this basically means is that in determining your eligibility, Medicaid will apply the same income and resource guidelines whether you live in Kings County or Broome County. For the year 2016, any person who is blind, disabled, or age 65 or over, cannot have more than $14,850 in resources in order to qualify for Medicaid. The agency not consider any resources under the specified amount when making a decision on an application for a community plan or nursing home benefits.

In Medicaid’s definition of “resources” they include all kinds of property: personal property, real estate, tangible and intangible property, liquid and non-liquid assets. Cash and any other assets that can easily convert to cash such savings and checking accounts, brokerage accounts, and a life insurance policy with a cash value are considered liquid resources. Non-liquid assets are not easily converted to cash, such as real estate. Pursuant to a governing statute used for Medicaid eligibility purposes (Administrative Directive: 96ADM-8), the term “asset” is defined as all income and resources of the applicant and the applicant’s spouse.

Homestead Exemption

For many Americans, their home is the only significant asset they own. Nevertheless, people continue to roll the dice not knowing the laws pertaining to Medicaid. A primary residence also known as the “homestead” is not counted as resource when determining whether the applicant qualifies for the program. The term “homestead” is defined as the applicant’s primary residence. The property can also qualify as a homestead if the applicant’s spouse, or the applicant’s minor, disabled or blind child occupies the premises as their primary residence. A homestead under Medicaid eligibility rules can include a one, two or a three family home, a condo, or co-op. The homestead may even be an income producing property, such as a two family home in which the apartment on the second floor is rented to a tenant. However, it is important to note that while the property itself is not considered a resource for eligibility purposes, the income it produces is not exempt. Homes that do not qualify as a primary residence include seasonal homes (vacation property), time-shares, and any additional real estate the applicant may own. Any parcels other than the property occupied by the applicant as his or her primary residence will not be exempted and will have a negative affect on Medicaid eligibility.

Although an applicant’s home may be an exempt asset under the program’s rules, the trouble arises when the individual later sells the home while receiving Medicaid benefits. The typical occurrence is that Medicaid claims a right to the sale proceeds of the home based on the assignment of rights provision imbedded in the Medicaid application submitted by the applicant. On the other hand, if the applicant succeeds in retaining the property throughout his or her life, and the home is later sold by the heirs of the estate upon the applicant’s death, Medicaid will have a claim over the sale proceeds as well.

Medicaid Asset Protection Trust

If an individual is unable to qualify for long-term care insurance, the other best alternative is the Medicaid Asset Protection Trust (MAPT). The quick fix of transferring assets outright or into joint accounts is not advisable since Medicaid penalizes for improper conveyances. The Medicaid Asset Protection Trust, also known as the “income only” trust, cannot name you or your spouse as the trustee for Medicaid eligibility purposes. The trustee has to be someone you trust, such as an adult child or an attorney. The principal, which is often a home, cannot be accessible to the person making the trust (settlor). Under the trust, the settlor will only have a right to the income of the trust property, such any rental income or stock dividends.

The Medicaid Asset Protection Trust is very accommodating. If needed, the trust can sell the home, and have the sale proceeds paid to the trust. The trust may then buy a different property in the name of the trust, while continuing to protect the asset. There is no need for a probate proceeding at the settlor’s death since the assets placed into the trust pass directly to the beneficiaries named in the instrument.

In cases where Medicaid planning is necessary, whether it be because of age, disability, or basic need, the help of an NYC elder law attorney is essential.  An elder law lawyer can implement estate planning techniques that will ensure that your assets and life long savings are protected when health care or nursing home care is required. An attorney focusing their practice in elder law can also make sure that assets are distributed to loved ones in the most effective way possible, avoiding probate and saving on any tax liabilities.