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Medicaid Update: New Amendment Expands List of Estate “Assets”

May 11, 2011

On March 30, 2011, New York’s Final Budget Legislation amended Section 369 of the Social Services Law.

The Department of Social Services has a claim against the estate of any Medicaid recipient in the amount of Medicaid assistance issued. The value of the deceased recipient’s estate is used to repay the Medicaid benefits. This new amendment expands the list of assets that are considered to be in an individual’s “estate.” After the death of a Medicaid recipient, the Department of Social Services will be seeking to collect recovery on assets that were not previously permitted.

Prior to March 30, 2011, an “estate” was defined as all real and personal property and other assets included within the individual’s estate and passing under the terms of a valid will or by intestacy. This new amendment now expands this definition include to any other property in which the individual has any legal title or interest at the time of death, including jointly held property, retained life estates, and interests in trusts.

These changes now impact retained life estates, trusts and any other property in which a Medicaid recipient is listed as the beneficiary and has an interest in at the time of death. For example, previously the interest of a life tenant or a joint owner terminated upon death and there was no recovery against assets in which a deceased Medicaid recipient had a life estate or joint ownership.  Now, under this new legislative amendment, after the death of a Medicaid recipient, the Department of Social Services will be seeking to collect (amounts equal to medical assistance paid) against non-probate assets such as jointly owned property, life estates, and trusts to the extent of the Medicaid recipient’s interest.  This legislative amendment drastically changes the landscape of Medicaid planning.

This amendment comes on top of the significant Medicaid law changes that took effect on February 8, 2006 as part of the Deficit Reduction Act of 2005. Under the Deficit Reduction Act, rules concerning Medicaid eligibility and the ability to protect assets from long-term nursing home stay underwent many changes. The following is a quick summary of the provisions of the law:

  • Phase-in the extension of the look-back period for a Medicaid application from three to five years.
  • Changes the way gifts of assets made during the look-back period are penalized. The penalty period will now begin to run after a person applies (and would have been otherwise eligible) for Medicaid. NOT when the asset was gifted.
  • Disqualifies Medicaid applicants if the equity value of the applicant’s residence exceeds $750,000.Requires applicants and their spouses who purchase an annuity after February 8, 2006 to name the State of New York in first position as death beneficiary to pay back Medicaid benefits (or in second position where there is a spouse, minor or disabled child). Any changes made to annuities purchased before February 8, 2006 to prevent the State from recovering may also be considered a transfer of assets.
  • Exempt transfers between spouses, to disabled children, trusts for the sole benefit of disabled children and caretaker children were NOT affected by the DRA.
  • “Institutionalized” individual can retain the following: (1) $13,800 in resources, life insurance with a face value of $1,500 or less, unlimited irrevocable burial trust account, and $50 per month in income.
  • “Community Spouse” can retain the following: (1) $74,820 in resources (or one-half of the couple’s combined assets up to a maximum of $99,540, whichever is greater), house with up to $750,000 in equity, a vehicle of any kind, and $2,739 per month in income. If there is not sufficient income available to provide the community spouse with his or her income allowance, additional resources may be retained to generate extra income. In those circumstances, the community spouse can retain up to $109,560 in resources if needed to generate extra income.

Due to the new and ever-changing laws, as outlined above, pre-planning is now more important than ever. The guidelines concerning Medicaid and the application process are often confusing and overwhelming. If you have any questions about the above material, or wish to speak to an Elder Law/Estate Planning attorney, please contact HoganWillig, Attorneys at Law at 716-636-7600 or visit HoganWillig’s main office is located at 2410 North Forest Road in Amherst, New York with additional offices in Lockport, Lancaster and Buffalo.