Asset Preservation When Already in a Nursing Home – Purchase Life Estate

April 22, 2008

This edition of the Koldin Report E-Newsletter reviews asset preservation options when you are already ill.

The Medicaid Laws were substantially revised under the Deficit Reduction Act which went into effect in New York on February 8, 2006.

Under this law, all transfers to a Trust or to individuals will be subject to a 5 year lookback period. For example, if you make a $10,000 gift to assist your grandchild with college expenses and you need nursing home care within 5 years of this gift, Medicaid could require that this gift be returned to you or Medicaid will penalize this gift by creating a period of ineligibility for Medicaid coverage of the nursing home cost.

Under this Law, estate planning in advance of an illness becomes even more critical. If you are already ill, your options are now more limited, but there are steps that still can be taken to protect some of your assets. If you are ill, your options should be reviewed as soon as possible.

Two asset preservation options were discussed in prior e-newsletters regarding (1) Personal Service Contracts and (2) Home Care, both of which have been posted on our website, koldin.com.

Another asset preservation option to consider in situations where a parent moves into a child’s home is to have the parent purchase a life estate in the home. This is a way for the parent to transfer assets to the child (or other family member who owns the home) without a transfer penalty.

Currently, the Medicaid Agency will treat this purchase as a legitimate transaction provided that the parent lives in the property for at least one year after the date of purchase. If the parent does not live in the property for at least one year, the Medicaid Agency will treat the purchase of the life estate as a transfer of assets which would be subject to the transfer penalty rules unless the property owner returns the funds. The sale of a life estate will result in transfer taxes, recording fees and possibly capital gains taxes.

Other asset preservation options which will be discussed in future e-newsletters are promissory notes, annuities, spousal refusal, and irrevocable trusts.

If you are in a medical crisis, the Koldin Law Center, P.C. is available to review your options. There is no fee for the initial consultation. This newsletter is not intended to provide legal advice, but is intended to alert you that you may have legal options even when you are in a nursing home.

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We have been told by many clients who are in a crisis that they wish they had known about our firm much sooner. We are proud of the many families we have helped in times of crisis.

We are also proud of the many families we helped avoid financial crisis by doing estate planning in advance.

We all share the responsibility for making our family and friends aware of the planning options available to them.

Your referral to the could make a major difference in the lives of your family and friends if they are someday faced with a long term illness.

Remember that the offers many services for clients of all ages. Our services range from basic estate planning such as a simple will to complex estate planning including asset preservation planning.

There is no fee for the initial consultation.