Estate Planning Isn’t Just For The Elderly

Happy, smiling couple in their sixties.

What Financial and Insurance Professionals Should Know About Elder Law: A Primer

By Anthony J. Enea, Esq.*

As the 75 million members of the “baby boomer” generation come of age, the frequency with which financial and insurance professionals will be called upon by their clients, friends and families, to address elder law issues will inevitably increase and will go beyond just knowing the ins and outs of long term care insurance. Although the practice of elder law has significantly evolved in the last decade to encompass many diverse areas of law, medicaid eligibility and asset protection planning continue to remain its core components. Interestingly, it is within these components of the practice of elder law, that the most common misconceptions occur.

What are Medicare and Medicaid

It is important to understand the distinctions between Medicare and Medicaid. Briefly, Medicare is a federal program which is available to persons who are sixty-five years of age and older as well as certain disabled persons. Since the passage of Title XVII of the Social Security Act in 1965, Medicare has basically been the health insurance component of Social Security.1 Medicare provides health insurance for those sixty-five years of age and older without any asset or income requirements. The Medicare program is administered by the federal government.

There are three separate components of Medicare:

Medicare Part A – covers the costs of in-patient hospital care, home health care, hospice care and some “skilled” nursing care. The hospital care must be determined to have been medically necessary.2
Medicare Part B – covers part of the cost of physician services and other medical services and supplies. For example, if an individual is hospitalized, the hospital bill would be covered by Part A; however, the patient’s physician services would be covered by Medicare Part B.3
Medicare Part C (Medicare Plus Choice) – this portion of Medicare was enacted to provide those eligible for Medicare to have the option of having physicians’ services provided to them by various health care providers such as HMO’s.4

For purposes of nursing home planning, it is important to remember that Medicare only covers a maximum stay in a skilled nursing facility of one hundred days, (twenty days in full and for the next eighty days everything except $101.50 per day) if the admission to the nursing home is within thirty days of the hospital discharge.5 The patient must require skilled nursing or skilled rehabilitative services on a daily basis.6 Medicare does not provide any coverage for custodial care, which is generally most of the care a nursing home patient receives. This is where the need for Medicaid eligibility is of importance.

Unlike Medicare, Medicaid is a “means tested” entitlement program which is jointly administered by the federal and state government. The Medicaid program was enacted in 1964 by Title XIX of the Social Security Act. As a “means tested” entitlement program Medicaid has income and resource limits as a prerequisite to eligibility. In order to participate in the Medicaid program, in 1965 New York State enacted the enabling legislation to effectuate the availability of Medicaid in New York.7

In addition to the income and resource requirements for eligibility for Medicaid, residency is an additional prerequisite for eligibility. For purposes of Medicaid eligibility, residency is defined as the location where the applicant has his permanent home.8 Generally, to be eligible for Medicaid in New York, an individual must be a resident of the State and County where the application is made.9 Although, New York has no durational residency requirement, it still is necessary that the individual applicant be a resident of New York.10 The intent to remain is a critical factor in establishing residency.11 Although it is not necessary that one be a citizen, it is necessary that one be a legal resident.12

Finally, to be eligible for Medicaid it is necessary that an individual be under the age of twenty one or over the age of 65.13 Those between the ages of twenty one and sixty five can become eligible for Medicaid if they are blind, disabled, eligible for public assistance, or recipients of Supplemental Security Income.14

Income and Resource Requirements for Nursing Home Medicaid Eligibility

For purposes of this article, I will focus on eligibility for Medicaid for institutional services in New York State, which most importantly includes nursing homes. There are also categories of Medicaid coverage for home care services as well as community Medicaid.

An applicant for nursing home Medicaid must have income and resources below specified amounts.15 If the applicant for nursing home Medicaid is single, his or her monthly income in excess of fifty ($50) dollars (“personal needs allowance”) must be paid to the nursing home.16 In addition to the aforestated fifty dollars ($50) per month of income, the applicant for Medicaid is permitted to have Three Thousand Eight Hundred Fifty ($3,850) Dollars in resources, which is also referred to as a “luxury fund” or a “personal resource allowance.” Resources are defined as property of any kind, whether real property, tangible or intangible, liquid or non-liquid. Administrative Directive: 96 ADM-8 of the NYS Dept. of Social Services provides that assets for purposes of Medicaid eligibility are defined as all of the individual’s and spouse’s income and resources. However, there are exceptions which I will discuss later. For a married couple who are both seeking eligibility for nursing home Medicaid, the combined resource allowance is Five Thousand Six Hundred ($5,600) Dollars in the year 2003. Both the income and resource requirements are uniform throughout the entire State of New York.17

As can be seen from the above, one who is single can have neither a significant amount of income nor resources to satisfy the eligibility requirements for Medicaid. In order to encourage individuals to remain at home as long as possible, rather than entering a nursing home, the income and resource eligibility requirements for the spouse of an applicant for Medicaid are significantly higher than those for an individual applicant. The spouse of an individual who is applying for nursing home Medicaid is referred to as the “community spouse.” For the year 2003, the “community spouse” is permitted to have resources that range in amount between $74,820 and $90,660.18 Thus, if a couple’s resources are between $149,640 and $181,320, the allowance permitted will be one half of the combined resources. If the resources exceed $181,320, the $90,660 resource limit will be applied. Additionally, if the resources exceed the $181,320, those excess resources will be subject to a claim by Medicaid to their full extent.19

In discussing the resource allowance for either a single person or for the community spouse, it is important to remember that only non-exempt resources are counted for purposes of Medicaid eligibility.20 There are resources which are exempt, thus, having no effect on eligibility for Medicaid. For example, personal belongings such as clothing, jewelry, automobile, and other tangible personal property such as the contents of one’s home or apartment are exempt.21 Most importantly, one’s “primary residence”, which is referred to as the “homestead” if occupied by the applicant, the applicant’s spouse or a minor disabled child, is also an exempt asset for purposes of Medicaid eligibility.22 The homestead will be considered exempt even if it is a two or three family residence, condo or cooperative apartment.23 Further, if the homestead generates income, the homestead will remain exempt but the income generated is not exempt.24 If the homestead is occupied solely by the applicant who is applying for nursing home Medicaid, the applicant would need to establish that he or she intends to return home. This is critical in avoiding Medicaid’s determination that the occupant is in “permanent absent status,” thus resulting in the homestead losing its exempt status.25

Although the homestead is exempt for purposes of eligibility, it is important to note that Medicaid will have a lien for Medicaid benefits paid for nursing home care or the equivalent thereof.26 Sections 104 and 369 of the Social Services Law of the State of New York grant to Medicaid the right to recover against the estates of Medicaid recipients and their spouses. Additionally, under the provisions of the Omnibus Budget Reconciliation Act of 1993(“OBRA93”), the States were further mandated by the federal government to adopt estate recovery programs.27

For the year 2003 the community spouse in addition to the resources described above is permitted to have income of $2,267.00 per month.

Transfer of Asset Rules and Medicaid’s Lookback Period

On numerous occasions, I have had both clients and colleagues advise me of their belief that all gifts or transfers of assets will automatically disqualify one from Medicaid for three years. This is perhaps the most often repeated and most common misconception that both the public and non elder law attorneys have about Medicaid eligibility. At times, I believe this misconception has taken on a life of its own; it’s the equivalent of the Miranda Warning of the elder law profession, often repeated, but rarely fully understood. Because Medicaid is a “means tested” program, if assets are transferred (gifted) without the receipt of something of equivalent value in return, an “uncompensated transfer” of assets has occurred, which, with a few exceptions which I will discuss later, triggers a period of ineligibility for Medicaid.28 Calculation of this period of ineligibility is determined by taking the dollar value of the uncompensated transfer of assets and dividing it by the average cost of a nursing home (skilled nursing facility) in the region (county) in which the applicant resides as determined by the Department of Social Services.29 For example, commencing in January of 2003 the rate for Westchester and other northern metropolitan counties is $7,464 per month. Thus, in Westchester, an uncompensated transfer of one hundred thousand ($100,000) dollars utilizing the rate of $7,464 per month ($100,000 divided by $7,464) would create a period of ineligibility for Medicaid of approximately 13.39 months. The commencement date of the period of ineligibility is the first day following the month of the transfer.30 For example, a non-exempt transfer made on September 1st would create a period of ineligibility commencing on October 1st.

With the enactment of OBRA 93, a thirty-six month look back period was created. Thus, an individual who transfers assets of a high enough value to create an ineligibility period in excess of thirty six (36) months, (for example, $300,000 divided by the Westchester rate of $7,464.00 creates 40.19 months of ineligibility), and if that individual waits at least thirty six months before applying for Medicaid, he or she can avoid the longer period of ineligibility (above thirty six months). However, if one creates an ineligibility period in excess of thirty six months and does not wait for the thirty six months to end before applying for Medicaid, he or she would be ineligible for the full period of ineligibility created above the thirty six months.31 Thus, it is critical that the application for Medicaid not be filed until the entire period of ineligibility has expired. When applying for Medicaid for nursing home care all transfers of assets made within thirty six months of the date of filing the application have to be disclosed to the Department of Social Services.

One important distinction with the Rules for the transfer of assets, applies to transfers made to or from an irrevocable lifetime trust. With the enactment of OBRA 93 a sixty month look back period was created for transfers made to or from an irrevocable lifetime trust.32 This sixty month look back period has spawned the misconception that all transfers to a lifetime (inter-vivos) trust will automatically create a sixty month period of ineligibility and a sixty month look back period for Medicaid. If the ineligibility period created by funding the trust (same formula for outright transfers is used) is less than sixty months, assuming all other income and resource requirements have been satisfied, eligibility would be established when the penalty period ends. If the ineligibility period created by the transfer to the irrevocable lifetime trust is in excess of thirty six months, a sixty month look back period is created. For example, if $300,000 is transferred to an irrevocable lifetime trust, the ineligibility period created in Westchester would be 40.19 months, but the look back period for the transfer to the trust is 60 months. However, if the ineligibility period created is sixty months or more, the applicant will have to wait for the sixty month period to expire before submitting his or her application for nursing home Medicaid.33

It should be remembered that all the assets transferred to a revocable lifetime trust are considered available for Medicaid purposes and offer no protection for purposes of Medicaid eligibility. The irrevocable income only trust has established itself as the most commonly used trust for Medicaid asset protection planning. It provides to the client a level of comfort in knowing that they have taken a positive step to protect their assets for purposes of Medicaid eligibility, while allowing the client to receive all of the income from those assets. In most instances there is little if any change in the client’s lifestyle as a result of the creation and funding of said trust.

The transfer of asset rules and the applicable ineligibility periods only apply with respect to applications made for nursing home Medicaid or its equivalent. Thus, no ineligibility period is created by any uncompensated transfers for Medicaid home care.

Finally, there are transfers of assets which do not create any periods of ineligibility for nursing home Medicaid. For example, the homestead can be transferred to (a) one’s spouse, minor child, disabled or blind child (any age), (b) adult child who has lived in the home of the parent for at least two years prior to the parents’ institutionalization and who has been a care giver to the parent and (c) a sibling of the Medicaid applicant who has resided in the home for a least one year prior to institutionalization and who has an equity interest in the home.34 In addition to the transfer of the homestead, any assets can be transferred without any period of ineligibility being imposed when the transfer is made for the benefit of a spouse or disabled child.35

Spousal Refusal In New York

Typical of the numerous complexities confronting the elder law attorney in New York, is Medicaid’s “spousal refusal” rules. Medicaid having previously delineated specific financial requirements relevant to the spouse (“community spouse”) of the applicant for Medicaid, one would think there would be no way of sidestepping those requirements. However, under New York Law if the spouse of an applicant for Medicaid refuses to pay for the medical expenses of his or her spouse, then the eligibility of the applicant for Medicaid must be determined without giving any consideration to the income and resources of his or her spouse. Thus, once a spousal refusal statement has been filed with Medicaid, irrespective of the income and resources of the applicant’s spouse that may be above the Medicaid eligibility levels, Medicaid will not be permitted to consider them.

Although the spouse is permitted to refuse to pay for his or her spouse’s medical expenses, the execution of the spousal refusal does not obviate the refusing spouse’s liability for Medicaid paid on behalf of his or her spouse. Medicaid can initiate a support proceeding in the Family Court against the refusing spouse to recover the actual expenditures made by Medicaid. However, Medicaid’s recovery is limited to the community spouse’s resources and income in excess of the amount she is permitted to have (“community spouse resource allowance.”).37

The right to execute a spousal refusal provides the elder law attorney with a significant amount of flexibility in making recommendations to the client. Although Medicaid has in recent years been significantly more aggressive in pursuing reimbursement from the community spouse, there still exists the possibility that Medicaid will not pursue reimbursement. Furthermore, even if reimbursement is pursued, the amount Medicaid can seek reimbursement for is limited to the amount actually expended. Lastly, because Medicaid pays the nursing home a significantly reduced rate for a room versus the rate the applicant as a private pay patient would pay, the execution of a spousal refusal may be a prudent planning choice.


As you can see from the above even the most basic rules for Medicaid eligibility can be quite perplexing. Because of its dynamic and continuously changing nature, elder law requires a significant commitment. I am hopeful that I have provided the reader with a basic overview of some of its more important components and helped eliminate some of its often repeated misconceptions.

1 42 U.S.C.A.§§ 301-1397 e 42,U.S.C.A §§ 301-1397e
2 42 U.S.C.A. §1395f(a)(2), 42 C.F.R. §§ 424.5(a)(4),
3 42 C.F.R. §§ 410.20, 410.22 and 410.23
4 42 PL 105-33 § 4001, creating Social Security Act §1857
5 42 C.F.R. § 409.85
6 42 C.F.R. § 409.31(b)(l)
7 Soc. Serv. L §363
8 NYCRR §360-3.2(g)
9 Soc. Serv. L §117, 18 NYCRR §§349.4,360.2
10 18 NYCRR §351.2(g)
11 18 NYCRR §360-3.2(g)(5)
12 Social Security Act, §1901 et seq., 43 U.S.C.A. §1396
13 Soc. Serv. L. §366 (1)(2)(3)
14 Id
15 18 NYCRR §360-4.1
16 18 NYCRR §360-4.9(a)(l)
17 18 NYCRR §360-4.9
18 Soc. Ser.L §366-c
19 96 ADM-8 NYS Dept. of Social Services
20 18 NYCRR §360-4.7(a)
21 Id
22 Soc. Serv. L.§366(2)(a) and 18 NYCRR§§360-1.4(f), 4.7(a)(l)
23 18 NYCRR §360-1.4(f)
24 18 NYCRR §360-4.3(d)
25 18 NYCRR §360-4.10
26 18 NYCRR §360-7.11(a)(3)
27 42 U.S.C.A.§1396p(b)(l)
28 18 NYCRR §360-4.4(c)
29 18 NYCRR §3604.4(c)(l)(iii)(a)(2)
30 96 ADM-11 NYS Dept. of Social Services
31 P.L. 103-66, 1993 HR 2264
32 18 NYCRR §360-4.4(c)(2)(i)(c)
33 18 NYCRR §360-4.4 (c)(2)(i)(c)
34 18 NYCRR §360-4.7
35 Soc. Serv. L.§366(5)(d)(3)(ii)
36 Soc. Serv. L.§366(3)(c), 18NYCRR §360-4.3(F)(1)(i)
37 Commissioner of the Dept. of Social Services v. Spellman, 173 Misc.2d 979, 661 N.Y.2d 895 aff’d 243 A.D.2d 45

Enea, Scanlan & Sirignano, LLP