Can A Nursing Home Take Your House if it is in A Trust in New York?

The prospect of long-term care can cast a shadow over the golden years of retirement, especially in New York with its high cost of living. Navigating the complexities of nursing home care can be overwhelming for families, as the unexpected need for such care can impose significant financial burdens. This is where a New York asset protection lawyer can step in to provide valuable assistance.

Understanding the significance of financial planning for nursing home care is the first step toward securing a bright future for yourself or your loved ones. By incorporating long-term care costs into your overall financial planning, a Long Island asset protection lawyer can help you find peace of mind and ensure financial security for your family.

At Schlessel Law, PLLC, our team of New York asset protection attorneys may be able to provide valuable assistance in navigating the complex landscape of nursing home care and its associated financial implications. Call us today at (516) 574-9630 to schedule a consultation.

The Cost of Nursing Home Care in New York

The financial realities of long-term care are a growing concern as the baby boomer generation enters retirement. This concern is particularly pronounced in New York, one of the costliest states for senior care in the United States. This article will delve into the average cost of nursing home care in the state, the factors that contribute to these costs, and the vital necessity of financial planning for nursing home care.

The Average Cost of Nursing Home Care

As of 2023, the average cost of nursing home care in New York can reach upwards of $150,000 per year. It is important to remember that these are state averages. Certain high-demand areas such as Manhattan or the Hamptons can exceed this average significantly, while more rural parts of the state may have lower costs.

These figures are substantially higher than the national average, which currently stands at around $105,000 per year for a private room. The median duration of stay in a nursing home is about two and a half years, but many residents live in these facilities for far longer. Therefore, the lifetime cost of nursing home care in New York can easily run into the hundreds of thousands of dollars.

Factors Contributing to Nursing Home Care Costs

There are several key factors contributing to the high costs of nursing home care in New York. First, the state has a high cost of living in general, which directly influences the cost of care. Expenses such as wages for skilled nursing staff, utilities, food, insurance, and property costs all contribute to the overall cost of providing care. Additionally, the demand for high-quality, professional care is strong in New York, further driving up prices.

Second, New York’s strict regulations and high standards for nursing home care can also add to the expense. These standards are designed to ensure patient safety and quality of care but require investment in staff training, facility upkeep, and compliance procedures, which all increase costs.

Lastly, the nature of care provided in nursing homes is a significant contributing factor. These facilities offer round-the-clock skilled nursing care, assistance with daily living activities, medication management, and often various therapy services such as physical, occupational, and speech therapy. This level of care is inherently expensive to provide.

The Necessity of Financial Planning for Nursing Home Care

Given the substantial cost of nursing home care in New York, financial planning is of paramount importance. In fact, planning for long-term care should be an essential component of any comprehensive retirement strategy.

Without adequate planning, the cost of nursing home care can quickly deplete an individual’s life savings. Long-term care insurance is one solution, but it may not be the right fit for most people due to high premiums and potential coverage limitations. Medicaid is another option, but qualifying for it can be complex and requires individuals to meet strict income and asset limits.

A skilled New York elder law attorney can provide valuable guidance in navigating the financial aspects of long-term care. They can help individuals and families understand their options and develop a comprehensive plan that includes not only funding for potential nursing home care but also the exploration of alternative care options such as home care or assisted living.

Understanding Trusts in New York

Trusts represent a vital tool in estate planning, offering a degree of control over how and when assets are distributed to beneficiaries. They also provide significant opportunities for tax planning, asset protection, and privacy. This section will explain the fundamentals of trusts, discuss different types of trusts in New York, and outline the reasons for putting a house into a trust.

Different Types of Trusts and Their Purposes in New York

In estate planning, trusts play a vital role in managing and distributing assets according to an individual’s wishes. In New York, a variety of trust options are available, each designed to serve specific purposes and provide unique benefits to grantors and beneficiaries alike.

Irrevocable Trusts

When it comes to safeguarding assets, especially for older adults, the use of irrevocable trusts is essential. The establishment of an irrevocable trust serves as a solid foundation for asset protection, ensuring that one’s assets are not unnecessarily depleted to cover expenses like nursing home care or long-term care. By securing assets in this type of trust, individuals can become eligible for Medicaid benefits, including nursing home care, home care, and, in certain cases, assisted living programs. Through proactive planning with an irrevocable trust, one can maintain Medicaid eligibility while preserving their family’s assets.

Special Needs Trusts

Special needs trusts, also known as supplemental needs trusts (SNTs), are instrumental in ensuring continuous care for individuals with special needs without disrupting their government entitlement benefits like Supplemental Security Income (SSI) and Medicaid. These trusts can be established either through a will or as a living trust, providing support for expenses not covered by government benefits. Items such as computer equipment, vacations, special medical equipment, and home modifications can be funded through trust assets. It is crucial to consult an experienced attorney specializing in special needs planning to navigate the various types of SNTs available (First Party, Third Party, Pooled Trusts).

Irrevocable Life Insurance Trusts

For individuals whose estates are expected to surpass federal or New York estate tax exemptions, the establishment of an irrevocable life insurance trust (ILIT) can result in significant estate tax savings. By having the trust own the life insurance policy on behalf of the individual, estate taxes can be minimized. In this arrangement, the individual establishes the trust, selects the trustee, and designates beneficiaries, retaining control by providing instructions for the trustee to follow. The assets held within the ILIT bypass both the individual’s and their spouse’s estates, directly benefiting children or other specified beneficiaries. By utilizing this strategy, estate taxes in both estates can be avoided, ensuring the preservation of a substantial portion of the insurance proceeds.

Revocable Trusts

A revocable trust offers individuals the ability to transfer their assets into a trust while maintaining complete control over them. This type of trust can be easily amended, modified, or revoked by the individual during their lifetime. Upon death, the trust’s assets are passed on to the beneficiaries named within the trust. Revocable trusts are commonly used to avoid the probate process, which can lead to significant delays in the distribution of assets after an individual’s passing. Additionally, a revocable trust can be particularly beneficial in cases where there are potential disputes or contests regarding the will or inheritance. However, it’s important to note that a revocable trust does not provide asset protection; for that purpose, an irrevocable trust is necessary.

Charitable Trusts

Charitable trusts come in various forms, with one of the most common being a charitable remainder trust (CRT). A CRT allows individuals to transfer assets while receiving a charitable deduction for a portion of the transfer. Following this, the individual or a designated beneficiary receives tax-free income for their lifetime or a fixed period. Upon the individual’s death, the remaining principal in the CRT is passed on to the chosen charitable organization. The primary advantage of a CRT is the ability to obtain an immediate income tax deduction for a charitable gift while still enjoying income from the trust during one’s lifetime.

Another type of charitable trust is the charitable lead trust (CLT). In a CLT, the donated assets generate income for a specified period, which is then directed to the designated charity. After this period ends, the remaining assets are passed on to family members or other beneficiaries as designated. This structure allows individuals to support charitable causes while also providing for their loved ones or chosen beneficiaries.

By utilizing various types of trusts, individuals can protect their assets, provide for the care of loved ones with special needs, minimize estate taxes, avoid probate delays, and contribute to charitable causes. Each trust serves a specific purpose and should be established with careful consideration of individual circumstances and goals. 

Seeking professional guidance from New York estate planning attorneys can help individuals navigate the complexities of trust creation and ensure the best possible outcomes for asset protection, wealth preservation, and philanthropic endeavors.

Medicaid and Long-term Care

Medicaid is a lifeline for many seniors and their families facing the high costs of long-term care. This section will discuss what Medicaid is, its role in paying for nursing home care, the eligibility criteria for Medicaid in New York, and the implications of the Medicaid look-back period.

Definition of Medicaid

Medicaid is a federal and state program that helps cover medical costs for some individuals with limited income and resources. Although the federal government sets up general guidelines for the program, Medicaid programs must comply with federal standards to receive federal funds. Still, they vary somewhat from state to state.

In addition to covering certain low-income individuals and families, Medicaid also provides benefits not normally covered by Medicare, like nursing home care and personal care services.

Medicaid’s Role in Paying for Nursing Home Care

Given the steep cost of nursing home care, many families turn to Medicaid for assistance. Medicaid is the single largest payer of nursing home bills in America, providing benefits for over 60% of all nursing home residents, and it covers the cost of a semi-private room in a nursing home.

In addition to basic nursing home care, Medicaid can also cover other services like prescription drugs, physical therapy, and necessary medical equipment. However, the recipient may be asked to contribute towards the cost of their care out of their income.

Medicaid Eligibility Criteria in New York

If you have a disability, visual impairment, or are 65 years of age or older, you may qualify for long-term care Medicaid if your monthly income in 2023 is $1,677 or less for an individual, or $2,268 for a couple applying for Medicaid.

In New York, the Excess Income Program enables individuals to become eligible for Medicaid by using their income to cover qualified medical expenses until they meet the income limits. For example, if your monthly income is $2,000 but you spend $600 on medical expenses, you can qualify for Medicaid by reducing your income to below the $1,677 limit after deducting the $600.

Furthermore, New York provides a program that allows individuals to pay their excess income to the Department of Social Services to maintain their Medicaid eligibility. Additionally, individuals of any age in New York can establish pooled income trusts to set aside surplus income while still meeting the Medicaid requirements. 

If you are considering a nursing home stay, it’s important to be aware that New York Medicaid requires nursing home residents to contribute almost all of their monthly income towards the cost of their care. Medicaid recipients in nursing homes are only allowed to keep $50 per month for personal use.

The Medicaid Look-Back Period

The Medicaid lookback period for Chronic Care/Nursing Home coverage Medicaid is 60 months, starting immediately after submitting the Medicaid application. During this period, Medicaid examines your financial transactions over the past 60 months to identify any asset transfers below fair market value. If such transfers are found, it may lead to a penalty period where you are responsible for your long-term care expenses. However, it’s important to note that New York has implemented a 30-month asset transfer lookback period specifically for Community Based Long Term Care (CBLTC) services.

As a result of the lookback period, many applicants for New York Medicaid may opt to transfer assets in order to meet the program’s income and asset limitations for healthcare eligibility. New York offers several long-term care programs for seniors under Medicaid, including:

• Institutional or Nursing Home Medicaid: This program provides coverage to eligible individuals who require care in a nursing home. It is an entitlement program, meaning all eligible individuals have the right to receive benefits.
• Medicaid Waivers or Home- and Community-Based Services: Unlike nursing home Medicaid, this option is not an entitlement program. The state has a limited number of participant slots, which often leads to waitlists.
• Regular Medicaid or Disabled, Aged 65 Plus, or Blind: This entitlement program offers various long-term care services for individuals who qualify based on disability, age (65+), or blindness.

The Protection Offered by Trusts

Trusts can provide a powerful shield, protecting one’s assets from a variety of threats, including potential nursing home claims. However, not all trusts offer the same level of protection, and it’s important to be aware of their limitations and considerations. This section will detail how trusts can protect assets, explore the benefits and drawbacks of revocable and irrevocable trusts, and discuss the role of New York laws on trusts and asset protection.

How Trusts Can Protect Assets from Nursing Home Claims

Asset protection is a fundamental reason many people create trusts. For many seniors, the primary threat to their estate is not taxes or probate, but rather the potential for significant long-term care costs such as nursing home care. Trusts, particularly irrevocable trusts, can safeguard assets from being used to pay for this care.

When assets are transferred into an irrevocable trust, they no longer belong to the original owner; they belong to the trust. As a result, when a nursing home facility, Medicaid, or any other entity looks at the person’s assets to determine what they must pay for care, the assets in the trust are not considered part of the person’s estate. Therefore, they are not available to pay for nursing home costs.

Limitations and Considerations of Trusts

It’s essential to understand that not all trusts are created equal when it comes to asset protection. The protection offered largely depends on whether the trust is revocable or irrevocable.

Revocable Trusts – Benefits and Limitations

Revocable trusts, also known as living trusts, offer significant flexibility. The person who creates the trust (the grantor) can modify or revoke it at any time. These trusts are beneficial for avoiding probate and managing assets should the grantor become incapacitated.

However, the flexibility of a revocable trust comes at a price – they typically do not protect assets from nursing home costs. Because the grantor retains control over the assets in the trust, those assets are still considered available to pay for care.

Irrevocable Trusts – Benefits and Limitations

Irrevocable trusts offer substantial protection from nursing home costs. Once assets are transferred into an irrevocable trust, they generally can’t be removed or controlled by the grantor, meaning they’re shielded from nursing home claims.

However, the downside of an irrevocable trust is its inflexibility. After it’s established, the terms of the trust can’t be easily changed, and the grantor surrenders control over the assets placed in it.

Moreover, irrevocable trusts are subject to the Medicaid look-back period. If assets are transferred into an irrevocable trust within five years of applying for Medicaid, it could trigger a penalty period of Medicaid ineligibility.

Medicaid Asset Protection Trust (MAPT)

A Medicaid Asset Protection Trust (MAPT) is a legal tool that can be used to protect your house and other assets from nursing home claims while still allowing you to qualify for Medicaid assistance if necessary. An MAPT is an irrevocable trust established to hold and manage your assets for your benefit.

How an MAPT Works

When you create an MAPT, you transfer ownership of your house and other assets to the trust. While you cannot directly control the assets held in the trust, a trustee, typically a family member or trusted friend, is responsible for managing the trust assets for your benefit.

In order to be effective for Medicaid planning purposes, an MAPT must be established and funded at least five years before applying for Medicaid assistance – this is known as the “lookback period.” Assets transferred within the lookback period may still be considered available to pay for nursing home costs, potentially resulting in a period of ineligibility for Medicaid.

Advantages and Disadvantages of an MAPT

There are several advantages to creating an MAPT:

• Protection of your house and other assets from nursing home claims
• Continued use and enjoyment of your house while it is owned by the trust
• Potential tax advantages, such as preserving the capital gains tax exclusion for the sale of your house
• The ability to qualify for Medicaid assistance, if needed, without having to sell your house or deplete your financial resources

However, there are also several disadvantages to consider:

• Loss of direct control over your assets held in the trust
• The need to plan and establish the trust at least five years ahead of applying for Medicaid assistance
• Potential negative tax consequences if the trust is not properly structured
• The creation and administration of the trust can be complex and may require the assistance of an experienced attorney

There are several alternatives to protect your house from nursing home claims, with long-term care insurance and Medicaid Asset Protection Trusts being two popular options. Carefully consider your personal financial situation and long-term care needs when deciding on the most suitable protection strategy for you.

How a Long Island Asset Protection Lawyer Can Help

The question of whether a nursing home can seize your house if it is placed in a trust in New York is a complex and multifaceted issue. While there is no definitive answer, it is crucial to understand the legal framework surrounding trusts and asset protection in order to make informed decisions.

This is where an experienced asset protection attorney can play a crucial role. Consulting with an attorney widely experienced in elder law and asset protection can provide invaluable guidance and assistance. They can also help you understand the intricacies of Medicaid eligibility and develop a comprehensive asset protection strategy tailored to your specific circumstances.

At Schlessel Law PLLC, estate planning lawyer Seth Schlessel and our team of New York asset protection attorneys may be able to help review your overall financial situation and recommend additional strategies to safeguard your assets, such as long-term care insurance or establishing a comprehensive estate plan. Contact us today at (516) 574-9630 to schedule a consultation.

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