Nursing home costs are a real worry for many families in Suffolk County. A long stay can quickly use up savings and put a family home or inheritance at risk. Many clients come to us thinking that putting assets in a trust will protect everything, but that is not always true. Some trusts can help with long-term care planning, while others do not offer real protection for Medicaid eligibility. The type of trust, what powers the creator keeps, when assets are transferred, and each person’s situation all play a role. Good planning means more than just signing a trust. It takes a coordinated approach that considers New York Medicaid rules, estate planning goals, taxes, and how much control the client is willing to give up.
A Revocable Living Trust Usually Does Not Protect Assets From Nursing Home Costs
A revocable living trust can help avoid probate, manage incapacity, keep things private, and make it easier to transfer property. But it usually does not protect assets if the creator applies for Medicaid nursing home coverage. This is because if someone can revoke the trust and take back the property, they still control those assets. Medicaid will usually count property in this kind of trust as available to the applicant.
People often misunderstand this because revocable trusts are sometimes called asset-planning tools. While they can make estate administration easier, avoiding probate and qualifying for Medicaid are two different things. Putting a Hauppauge home or investment account into a revocable trust does not automatically put the property out of the applicant’s control or keep it from being counted during a Medicaid review. New York Estates, Powers and Trusts Law § 7-3.1 also shows that property put in a trust for the creator’s own use can usually still be reached by the creator’s creditors.
We encourage clients to start by identifying the problem they want to solve. A revocable trust might work for some goals, but a different approach may be needed for long-term care planning.
An Irrevocable Medicaid Asset Protection Trust May Provide Protection
An irrevocable Medicaid asset protection trust may An irrevocable Medicaid asset protection trust can help protect certain assets if it is set up, funded, and managed the right way. Usually, the creator puts property into the trust and gives up the right to take the main assets back. The creator might keep some limited rights, like the right to live in a home placed in the trust or, depending on how the trust is written, to get income from trust property. The trustee is responsible for managing the assets as the trust agreement says. A trust that permits unrestricted distributions of principal back to the creator may fail to accomplish the intended result. New York Estates, Powers and Trusts Law § 7-1.17 also imposes formal execution requirements on lifetime trusts, while EPTL § 7-1.18 addresses the funding of those trusts. A signed but unfunded trust does not protect property that was never legally transferred into it.
This strategy needs careful thought because the client is giving up real control. The decision should consider cash flow, housing plans, family relationships, who will be the trustee, taxes, capital gains, and the chance that things might change in the future.
The Five-Year Medicaid Look-back Makes Early Planning Important
In New York, there is a 60-month look-back period when someone applies for Medicaid nursing home coverage. This means that any transfers made in the five years before applying can be reviewed. If someone transfers assets to an irrevocable trust for less than fair market value during this time, it can lead to a period of Medicaid ineligibility.
New York Social Services Law § 366 governs Medicaid eligibility and the consequences of uncompensated asset transfers. The penalty period is not necessarily measured from the date the asset was transferred. That feature can create a serious coverage gap when an applicant already needs institutional care but is temporarily ineligible because of an earlier gift or trust transfer.
Because of this, an irrevocable trust should not be used as a last-minute solution. Planning several years before nursing home care is needed usually gives more options. Even if a medical crisis has already happened, families should get legal advice before thinking that all planning options are gone. There may still be ways to help, like spousal protections, exempt transfers, caregiver-child rules, asset allocation, and other legal strategies.
The Home Requires Careful Planning
For many Suffolk County families, the home is their biggest asset and the one they most want to keep. Putting a home into an irrevocable trust can help with long-term planning, but the decision should be looked at from different angles. The trust should cover the creator’s right to keep living in the home, who pays the expenses, who can sell the home in the future, how taxes will be handled, and what happens to the property after death. It is important to understand the difference between Medicaid eligibility and Medicaid estate recovery. New York Social Services Law § 369 authorizes recovery in certain circumstances for Medicaid benefits properly paid, subject to statutory restrictions and protections. Proper trust planning may affect whether property becomes part of the probate estate against which recovery can be pursued, but no family should assume that simply retitling a deed produces complete protection.
Transferring a home can also affect future refinancing, title insurance, property taxes, and the ability to change your plans later. We look at all these factors before recommending a transfer because keeping the home should not lead to a plan that is hard to manage or creates tax problems.
New York Snowbirds Must Coordinate Their Planning With Florida Law
Clients who split their time between New York and Florida need extra planning. Each state runs its own Medicaid program within federal rules, and eligibility depends on the state where benefits are requested. A trust set up only with New York rules in mind may not work as expected if the client later moves to Florida and applies for benefits there.
Property location also matters. A New York resident may place a Florida residence into a trust to reduce the risk of ancillary probate, but probate planning and nursing home planning remain distinct objectives. Florida also maintains a Medicaid estate recovery statute, Florida Statutes § 409.9101, that permits recovery through claims against certain estates of deceased Medicaid recipients.
We suggest looking at domicile, trust terms, real estate ownership, beneficiary details, and long-term care plans all together. Having a coordinated plan is especially important if a client might get care in either state.
Trust Planning Must Be Part Of A Larger Estate Plan
An irrevocable trust is not right for every family, and it should not be used just because nursing home costs are scary. Some people need to keep access to their assets. Others may have long-term care insurance, enough income, family issues, or tax concerns that call for a different plan. The best plan might include a trust, updated powers of attorney, health care directives, beneficiary designations, insurance, and a well-structured will.
We see long-term care planning as part of a full estate plan, not just a single step. The goal is not only to qualify for benefits, but also to keep financial security, maintain the right amount of control, protect a spouse, lower family conflict, and transfer property according to the client’s wishes. Starting early and tailoring the trust to the client’s needs can make it a valuable part of the plan.
Frequently Asked Questions About Trusts And Nursing Home Costs
Can We Put A Home Into A Medicaid Asset Protection Trust?
A home can be put into a well-designed irrevocable trust, and the creator may still be able to live there. The trust should cover who can live in the home, who pays the bills, what happens if the home is sold, tax effects, and who will get the property in the end. Moving the home into the trust starts the Medicaid lookback period, so timing matters. The transfer should also be checked for deed, property tax, capital gains, and title issues before it is done.
Can We Take Money Back Out Of The Trust?
The creator usually cannot keep an unlimited right to take money out of the trust and still expect that money to be protected for Medicaid. The trustee might be able to give money to other beneficiaries, depending on the trust, but those funds cannot just be given back to the creator as part of a plan. Losing direct access to the money is one of the main downsides of this strategy. Clients should keep enough resources outside the trust for living expenses and emergencies.
What Happens If Nursing Home Care Is Needed During The Five-Year Look-back?
If a transfer is made during the 60-month look-back, it can cause a period when the person is not eligible for Medicaid nursing home coverage. How long this lasts depends on the value transferred and the local Medicaid cost rules. This means the applicant may have to pay for care during the penalty period. Families in this situation should get advice before undoing transfers, selling property, or spending assets, because the best options depend on the person’s health, marital status, finances, and transfer history.
Can A Married Couple Still Protect Assets If One Spouse Needs Care?
Married couples may have different protections than single applicants. Medicaid rules have allowances to help make sure the spouse who stays at home does not become impoverished. Transfers between spouses and to certain exempt people may be treated differently under the law. Trust planning can be part of the strategy, but income, exempt property, retirement accounts, and how things are owned should also be considered. The plan should be made for both spouses, not just the one who may need nursing home care.
Should New York Snowbirds Use A New York Or Florida Trust?
The answer depends on where you live, what property you own, where you expect to get care, and what the trust is for. Someone planning to stay in New York may need a different plan than someone moving to Florida. Both states follow federal Medicaid rules, but how they run the program and handle estate recovery can be different. We look at the trust along with deeds, tax residency, wills, powers of attorney, and care plans to make sure documents from one state do not cause problems in the other.
Speak With A Hauppauge Estate Planning Attorney About Long-Term Care Planning
A trust can help protect assets from future nursing home costs, but only if it is the right kind of trust, set up at the right time, and fits with the rest of the estate plan. At Bernard Law P.C., we help clients look at the legal, financial, tax, and family effects of irrevocable trust planning. We do not use a one-size-fits-all approach. Our goal is to make a plan that matches each client’s assets, priorities, family situation, and whether they live in New York or Florida.
Bernard Law P.C. is located in Hauppauge, New York, and serves clients throughout Suffolk County. To discuss Medicaid asset protection trusts, long-term care concerns, wills, or other estate planning needs, call our Suffolk County estate plan attorney at Bernard Law P.C. at (631) 378-2500 to schedule a free consultation.
