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  • Writer's pictureNicole J. Zuvich

Utilizing Irrevocable Trusts for Medicaid Planning in New York



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In New York, Irrevocable Trusts are widely used as part of Medicaid planning to protect assets while ensuring eligibility for Medicaid. This type of planning is essential for those anticipating the need for long-term care and wishing to preserve their wealth for future generations.


Critical Components of Irrevocable Medicaid Trusts

Asset Protection

Assets transferred into an Irrevocable Trust are shielded from being counted as available resources for Medicaid eligibility purposes. This protection is crucial in helping individuals qualify for Medicaid without "spending down " or depleting their assets. The trust must be properly structured to ensure that the assets are not accessible to the grantor, which legally separates the ownership of the assets from the individual.


Look-Back Period and Penalties

New York adheres to a 60-month (five-year) look-back period for Medicaid planning. Any transfers into the trust within this period may trigger a penalty, resulting in a period of ineligibility for Medicaid. The look-back period emphasizes the importance of timely planning, ideally well before the need for Medicaid arises​.


Choosing Beneficiaries and Trustees

A Medicaid Asset Protection Trust (MAPT) must name someone other than the grantor or the grantor's spouse as the beneficiary. The grantor can designate who will receive the trust's income and the remaining assets after their death. This setup allows the trust assets to bypass probate and go directly to the beneficiaries, thus preserving the assets and potentially saving time and legal fees.


Legal Considerations and Planning Strategies

Irrevocable vs. Revocable Trusts

It's critical to distinguish between irrevocable and revocable trusts in Medicaid planning. Unlike revocable trusts, Irrevocable Trusts offer protection against nursing home costs because the assets within are considered outside the grantor's control. Therefore, they are not counted towards Medicaid's asset limit​.


Home and Real Estate Considerations

Placing a primary residence into a MAPT can be a strategic move. It allows the grantor to retain living rights and certain tax benefits while protecting the home's equity from Medicaid consideration. This step ensures the house remains a non-countable asset for Medicaid eligibility​.


Common Pitfalls When Setting Up Irrevocable Trusts

When setting up Irrevocable Trusts for Medicaid planning, there are several common mistakes that can significantly impact the effectiveness of the trust and the grantor's Medicaid eligibility. Understanding these pitfalls is crucial for a successful Medicaid planning strategy.


  1. Timing Issues and the Look-Back Period - One of the most frequent mistakes is not considering Medicaid’s 60-month look-back period. Transferring assets into an Irrevocable Trust less than five years before applying for Medicaid can result in a penalty period of ineligibility.

  2. Incorrect Trust Structuring - Improperly structuring the trust can lead to assets within the trust still being considered available resources by Medicaid. This happens when the trust allows for any potential benefits or distributions back to the grantor.

  3. Selection of Trustees - Choosing the right trustee can ensure the trust is managed correctly. If the trustee is untrustworthy or lacks an understanding of their fiduciary duties, they might mismanage the trust or fail to comply with Medicaid rules.

  4. Failing to Properly Notify Medicaid - Failing to notify Medicaid about establishing a trust or transferring assets can be seen as an attempt to hide assets, leading to denials or penalties.

  5. Neglecting Tax Implications - While an Irrevocable Trust in Medicaid planning aims to protect assets from being used to calculate Medicaid eligibility, ignoring the tax implications can lead to unforeseen financial burdens.


Ready to Secure Your Future? Contact The Law Office of Nicole J. Zuvich Today

Navigating Medicaid planning and setting up an Irrevocable Trust can be complex and daunting. Getting it right the first time is crucial to protecting your assets and keeping your Medicaid eligibility intact. At The Law Office of Nicole J. Zuvich, we have years of experience in Medicaid planning and Irrevocable Trusts, helping you avoid common pitfalls and secure your future effectively.


Don't wait until it's too late. Start your Medicaid planning today to ensure your assets are protected, and your healthcare needs are met. Call us at (631) 840-0100 to schedule a consultation and learn how we can assist you in creating a robust Medicaid planning strategy that works best for your unique situation. Your future security is our priority.

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