Medicaid Planning Tips You Should Know

“It’s the best sleep you will ever have.”

If you hear those words, you are probably about to undergo a colonoscopy or are talking with a Sleep Number salesperson.

Since I had an IV in my arm, an untied hospital gown hanging somewhere between on and off, and was not in a mattress store, I was in no position to argue with the anesthesiologist. It is not bad, though. You wake up generally unfatigued.

As far as being the best sleep ever… There was a Wednesday night into Thanksgiving after coming home from college that was just perfect.

If the thought of long-term care and Medicaid planning is keeping you awake at night, we have three major tips that will give you a better sleep than a hospital procedure.

·         New York Medicaid rules have a soft spot for spouses.

When one half of a married couple becomes ill, the fear is that the healthier spouse will suffer a massive financial setback. In fact, New York regulations allow for assets to be transferred from the ill spouse to the healthier spouse without penalty. These transfers can occur immediately prior to the Medicaid application and are not subject to the five-year lookback.

Even if the amount of these transfers pushes the healthier spouse’s asset totals above the Community Spouse Resource Allowance ($157,920 for 2025), the ill spouse can still be eligible for Medicaid with a spousal refusal form. Spousal refusal forms ensure that Medicaid only considers the assets and income from the ill spouse and not the healthy spouse for Medicaid eligibility.

Medicaid has the right to seek contributions from the healthy spouse, but this right is not exercised uniformly by the local county departments of social services.

·         One of the primary concerns for someone dealing with a chronic illness is the vulnerability of their home should Medicaid be necessary to pay for nursing home care. For many seniors, the lack of a spouse means that a relatively straightforward way to protect their house is unavailable to them.

Just when you think all is lost, Medicaid regulations have a couple of surprises. An adult child who has resided in the ill individual’s home for at least two continuous years before that ill individual required nursing home care is entitled to receive title to the home without being subject to the five-year lookback and a Medicaid penalty. The caregiver child exception is a way to save the home from a Medicaid lien or estate recovery action.

The caregiver sibling rule follows a similar pattern, but requires the healthy sibling to live with the ill sibling for at least one continuous year and be on the property’s deed to avoid any penalties.

·         If none of these exceptions or spousal exemptions is available, then elder law practitioners will utilize Promissory Notes to preserve liquid assets.

For a Medicaid applicant with excess resources (above $32,396 for 2025) and a looming nursing home stay, promissory notes offer a way to keep a reasonable percentage of their assets within their family. Protectable assets include proceeds of a real property sale, investment and bank-held funds and any other non-retirement liquid funds.

Promissory Notes divide the total excess assets into two categories – a gift amount and a loan amount. The gift to family creates a controlled Medicaid penalty which the loan pays off each month to the nursing home along with the ill individual’s income. Once the loan pays off the Medicaid penalty, then the ill individual will become eligible for Medicaid nursing home services.

These three Medicaid planning tips may allow a loved one to have the best of both worlds – long-term care coverage and asset protection. Planning ahead is always recommended to afford you more opportunities to preserve your family’s finances. In other words, do not sleep on it, be proactive.

Alan D. Feller, Esq., is managing partner of The Feller Group, located at 572 Route 6, Suite 103, Mahopac. He can be reached at alandfeller@thefellergroup.com.