Posted by: BlogMaster | September 7, 2011

Expected Medicaid Changes Will Alter Senior and Disabled Planning Options

The new fiscal year budget passed by New York Governor Andrew Cuomo and the NYS Legislature on April 1, 2011, included sweeping proposals for changes to Medicaid. Because many of these changes dramatically alter the federally approved plan all states must submit to receive federal funds as part of services cost sharing (with county and state), they must be approved by the federal government.

As a reader of this blog (and my newsletter), you already know that spousal refusal will remain legal for nursing home and home care. Spousal refusal permits a couple to ‘divide’ their countable assets into two pots: one owned by the Medicaid applicant, and the other owned by the non-applying spouse.

It comes as no surprise that cost saving measures affecting advance planning are now under review. This effort is expected to produce regulations that will enable New York State to implement those law changes. The state has asked the federal government to expand ‘estate recovery’ as broader than a Surrogate estate matter (‘probate’ if the applicant or their spouse die with a will; ‘administration/intestacy’ if there is no will). Recovery is expected to be broadened to cover ‘testamentary substitutes’ such as revocable living trusts, jointly owned financial accounts, life insurance with designated beneficiaries, and, most troubling, real property subject to a life estate.

Watch for my upcoming blog discussing how irrevocable living trusts (Medicaid trusts) are still protected.

What does this mean?

The most troubling aspect of the requested expansion of recovery is New York’s decision to try and recover for benefits paid on behalf of a senior —or a disabled person over age 55 – from their life estate in real property (typically, their home).

Since 1993, seniors have legally transferred their homes (or other real estate) to adult family members, and retained a life estate in the real property as a simple and often less expensive form of Medicaid planning. If the transfer is the homestead, the life estate permits the senior to keep real estate tax reductions such as the Veterans exemption, STAR and senior exemption.  New York State’s proposal to recover against the life estate interest would permit the state to determine the value of the life estate interest based upon the value of the home and the age of the Medicaid senior on the day before the death of the senior. The regulatory proposal does not appear to carve out any exceptions to the proposed benefits recovery, even if the transfer of the home was lawful, including to a caregiver child who resided for 2 years with the parent, or to a disabled adult child.

My next blog will discuss other changes submitted to the federal government.

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