Important Update on Pending Medicaid Legislation

Koldin Law Center E-Mail Newsletter
December 27, 2005

On December 21, 2005, the United States Senate, by a vote of 51 to 50 with Vice President Cheney breaking the tie, passed the “Deficit Reduction Act of 2005.” The House of Representatives will vote on this Act when it comes back into session shortly after the Christmas break. We anticipate based on a previous vote that the House will also vote to enact this legislation.

This legislation makes numerous changes to the Medicaid laws which will be very detrimental to individuals who are faced with long term illnesses.

One major change that we want to bring to your immediate attention is the change in the Medicaid transfer penalty rules.

Under current law, transfers made to an Irrevocable Trust are subject to a 5 year lookback period. Transfers made to individuals are subject to a 3 year lookback period. Transfers made within the lookback period can be protected under a special “federal credit formula” at a rate of approximately $6,000 per month in Upstate New York. This rate varies depending on your region of residence. For example, if you transferred $60,000 to your children or to an Irrevocable Trust within the lookback period, your transfer would be protected in 10 months ($6000 credit times 10 months equals $60,000). This credit formula made it possible for you to make periodic transfers over time and protect your assets incrementally. For example, we have some clients who have chosen to make annual or monthly additions to their Trusts rather than making lump sum transfers.

Under the new law, all transfers to a Trust or to individuals will be subject to a 5 year lookback period. The federal credit formula for transfers made within the lookback period has been abolished. Any transfer made will now be subject to a straight 5 year waiting period before it becomes protected. For example, if you make a $60,000 transfer either to your Trust or to your children, this transfer will no longer be protected in 10 months. It will take 5 years before this transfer becomes protected.

This new law takes effect immediately upon its enactment and only applies to transfers made on or after the effective date of the law. Any transfers made before this law is enacted are grandfathered under the old rules. Therefore, if you want to take advantage of the current transfer laws, we urge you to make immediate transfers before the House of Representatives votes on this legislation and the President signs it into law.

If you are a client of our office and wish to discuss your file, please call your legal assistant. If you are not a client and want to review your options, please contact our office to schedule an appointment. There is no fee for the initial consultation. This newsletter is not intended to provide legal advice, but is intended to alert you of an important legal development.

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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 Koldin Law Center 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 Koldin Law Center 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.

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This Newsletter is not intended to give or be relied upon as legal advice, but only to provide general information.