In this article, we are going to cover the topic of protecting your assets from Medicaid. You may have heard of this possibility previously but not quite known what it was all about, or how it could work for you. We hope that you will be better informed by the end of this piece, and you’ll be able to move forward with the process of planning your next financial moves.


Let’s get started!


Why Do Assets Matter?

First, we’d like to take a step back and explain why there is so much fuss around assets when talking about Medicaid benefits.

Simply put, if you have too many assets, you won’t qualify for Medicaid. For instance, for a married couple in New York in 2020 who are both applying for benefits, the asset limit is $23,100. If a couple holds more than that amount of assets, they will not be approved for benefits.


So, what we are talking about here is the matter of managing assets in a way that will allow you to become eligible for Medicaid. In other words, just because you have too many assets at the moment to be eligible, that doesn’t mean you can rule out the possibility of becoming eligible in the future.

As we work through this article, you’ll learn what you might be able to do to become eligible while protecting your assets.


What Assets are Protected from Medicaid?

There are a couple of topics to consider in this section. First, in terms of qualifying for Medicaid, some of your assets will not be counted toward that limit we discussed earlier.

For instance, things like personal belongings, IRAs, equity in a primary home, and a vehicle all fall in the exception category to not be counted against your asset limit.

What is counted for those asset considerations are things like cash, investments, checking accounts, non-primary residences, etc. If the total of those assets exceeds the limit, you’ll be on the wrong side of the qualifying picture.


With this in mind, many people look for ways to protect their assets from Medicaid, so they aren’t considered in the eligibility equation. One such option to protect assets is a Medicaid Trust.

By placing some of your assets in an appropriate trust, you can protect them from Medicaid and have them not be counted when you are applying for benefits. However, it’s important to use the right kind of trust for this planning strategy, as it will need to meet certain requirements if it is going to gain exempt status.


One of the most important pieces of this puzzle is to make sure that your trust is established before the look-back period for your Medicaid qualification. The standard look-back period is five years, meaning you will want to have dealt with this issue at least five years before you plan to apply for benefits. If you establish your trust somewhere within that five-year window, it won’t be considered exempt and the assets within the trust will be counted as part of your application.


Will a Trust Protect My Assets from Medicaid?

The simple answer here is yes – a trust can protect your assets from Medicaid. But the devil, as they say, is in the details. If you do not use the right kind of trust, those assets might not be protected as you had anticipated, and they may be counted when trying to determine Medicaid eligibility. If you want to protect your assets with a trust, you need to be sure to do it the right way.


As the name would suggest, a Medicaid Asset Protection Trust is the right way to go here. There are a couple of key elements involved in a Medicaid Trust that you should be aware of while you are in the planning stages.

First and foremost, this is an irrevocable trust. In other words, that means the trust cannot be cancelled, and the assets that are placed in the trust are no longer the property of the individual who created the trust. This action cannot be undone, so it is essential that the process is carefully considered at every step before the trust is finalized.


It might be helpful to walk through a quick example to make sure you understand the basic concept at play here. To get started, there needs to be someone who is creating the trust. Let’s say that you are going to create the trust to protect some of your assets from Medicaid as you attempt to qualify for benefits. That makes you the trustmaker, although there are other terms that may be used.


In addition to you as the trustmaker, there are two other important parties – the trustee and the beneficiaries. The trustee is an individual who has control over the trust, and this cannot be the same person as the individual who created the trust so you can’t serve as your own trustee.

Often, people will use their grown children to serve in the trustee role, but it can be anyone that you trust with these duties. The trustee will have to act in accordance with the rules established when the trust is formed. Part of those rules will be that the assets cannot be used for the trustmaker, since the whole point of the Medicaid Trust in the first place was to remove these assets from that person’s possession.


Finally, we get to the beneficiary or beneficiaries. These are the people in line to receive the assets from the trust when you pass. Again, just as you can’t act as your own trustee, you also can’t be named as a beneficiary in your own trust. It’s likely that any children you have will be named as beneficiaries, but ultimately the choice is yours.


That was a lot of information on this important topic, but the basic points to remember are as follows –


·       It’s important to use the right kind of trust if you hope to protect your assets from Medicaid

·       If you are in the role of trustmaker, you need to name both a trustee and a beneficiary or beneficiaries

·       The trust must be irrevocable, meaning you’ll want to be careful with your planning before making this official


How Do I Protect My Home from Medicaid?

There are a couple of important topics to discuss regarding the home you own and Medicaid. First, there is the matter of qualifying for Medicaid while you own a home. If you have lived in your home for a long period of time, you may have quite a bit of equity built up in the home.

In fact, there is a good chance that this is your most valuable asset by a large margin. It might even be the only asset you have with any notable value. So, if you own a home that has significant equity given current market conditions, are you out of luck for Medicaid?


Not necessarily. Your primary residence is one of those assets that is exempt from the asset limitations set forward in the Medicaid qualification rules. So, don’t make the mistake of assuming that you are ineligible for Medicaid just because you own a home with positive equity.


The other important issue here is protecting your home from Medicaid Recovery after you have passed. Many people desire to have their children take over control of their home when they pass, either for the kids to keep the house in the family, or for them to sell and share the proceeds from the sale. Either way, you’d probably prefer to keep your home in the family than have it lost to Medicaid Recovery.


This is where the idea of a trust comes back into play. With a Medicaid Asset Protection Trust, the home itself can be placed into the trust, and it will then be protected from Medicaid (as long as the trust is done properly). As an added benefit, it’s permissible for you to stay in that home for the time being, as your right to live in the home can be established when the trust is created. If you are already considering using a Medicaid Asset Protection Trust, the ability to put your house in the trust is one more reason to give this method serious consideration.


Can Medicaid Take Your Spouse’s Assets?

If you are in need of long-term care and you are seeking Medicaid benefits to pay for that care, you may be worried about what will happen to your spouse’s income and assets as part of the process. In the case that your spouse does not need care at the current time, he or she may not be applying for Medicaid with you, so their own financial life will need to be considered. Fortunately, there are rules in place to provide some important protections to the spouse of an individual receiving Medicaid benefits.


There are protections in place to deal with both your spouse’s income level and assets. For instance, a spouse can retain one-half of whatever assets the couple had, although there is a limit in place for that provision. Also, a spouse is entitled to keep all of his or her own income, even if that amount is in excess of what would be allowed by Medicaid income limitations. It’s also possible to allow your spouse to keep some of your ongoing income, as long as that amount falls within guideline levels. Those levels are annually revised to reflect the current cost of living conditions, etc. Ultimately, while your spouse’s financial life is sure to be impacted in some way by your Medicaid benefits, there are protections offered by the system to help keep them in a comfortable position.


Does Medicaid Check Bank Accounts?

This one has an easy answer – yes.

You will need to provide a variety of documents to verify the information you provide on your Medicaid application, and that is sure to include checking and savings accounts. If you were thinking you could lie about how much you have in the bank just to slip under the limits for Medicaid qualification, think again. You will need to prove the various pieces of your financial life, so plan to have as much documentation as possible ready so you can provide what is needed.


At this point, it would be good point to out that you should always be completely upfront and truthful throughout the Medicaid application process. Trying to ‘hide’ assets or income through any illegal means is a bad idea for a variety of reasons. For one thing, you will be breaking the law, and you’ll open yourself up to very serious consequences if you are caught. While it is important to qualify for Medicaid, it certainly is not worth breaking the law and putting yourself at such serious risk. Play by the rules and be nothing but honest through the process.


Can Medicaid Take Your 401K?

In most cases, if you hold a 401K, that account will be taken into consideration when you apply for Medicaid. This is one of the complicated areas of Medicaid planning that you would be wise to handle with the help of an attorney. If you make the wrong move with regard to your 401K, you could be making an expensive mistake. We will talk below about the importance of getting help with your Medicaid planning process, and that is certainly a point that applies here.


It is worth noting that the status of your 401K can have an impact on how it is viewed by Medicaid. For instance, if you have your 401K in payout status, some states will see it as income rather than an asset. Depending on your circumstances, that could be an improvement that would help you fall on the right side of the income and asset limits. However, that’s not how the rules are applied in every state, and how any change affects your personal qualification status is unique to your circumstances, so go over this carefully with an experienced professional before making any moves.


There are plenty of other potential strategies in play for dealing with your 401K, as well. For some people, the right way to proceed will be to cash out the account and use a spend-down strategy to make it under the asset limit successfully. It might also be possible to convert the account to an annuity, allocate it to a spouse, or take some other type of action. The key takeaway from the discussion on 401K accounts is that there is truly no one-size-fits-all way to approach this matter. It’s a highly individual process based on the needs of you as an individual, and your family. Working together with a lawyer to understand the ramifications of your various options will make it easier to arrive at a clear and confident choice.


Law Firms in NY That Can Help with Asset Protection

When dealing with something as important as your eligibility for Medicaid benefits, you want to make sure you get things right the first time. A mistake in this process could be expensive, so it’s wise not to take any chances. By working with a law firm to help guide you through this process, you can lean on an experienced and knowledgeable team to do things properly and maximize your chances of being approved for benefits.


It’s important to work with legal representation because every case is so different. You might not think you are eligible for benefits at the moment, based on what you have read about how Medicaid benefits work, but that might not actually be the case. It would be an expensive mistake to assume that you are not eligible when there was, in fact, a path to eligibility available to you. It’s a good idea to explore all of your options in this area, and an experienced legal team can help you do just that.


Below is a list of NY firms that specialize in this area:


The Virdone Law Firm

The Rubinstein, Zeh Firm

Futterman, Lanza, and Pasculli, LLP

Russo Law Group, P.C.

Galdfarb, Abrant, and Salzman, LLP




We would like to close with one last point on Medicaid asset protection – don’t wait! It’s important to get started right away, because there is a time-sensitive aspect to much of what you will be doing. If you delay getting started and put this off for several months or more, that inaction could cost you significantly down the line. Be proactive with this issue and get ahead of the game so you can be granted Medicaid benefits as soon as possible.

One last piece of advice, if you qualify for Medicaid you can qualify for the CDPAP program.