Three Medicaid Planning Tips You Should Know
Opinion Advocates for ideas and draws conclusions based on the author/producer’s interpretation of facts and data.
By Alan D. Feller
“It is the best sleep you will ever have.” If you hear those words, you’re probably about to undergo a colonoscopy — or you’re 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’s not bad, though. You wake up generally unfatigued. As far as being the best sleep ever … there was a Wednesday night into Thanksgiving Thursday 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, here are three major tips that may help you rest easier than after a hospital procedure.
- Spousal protection
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, state regulations allow assets to be transferred from the ill spouse to the healthier spouse without a penalty. These transfers can occur immediately before the Medicaid application and are not subject to the five-year lookback.
Even if the amount of these transfers pushes the healthier spouse’s assets above the Community Spouse Resource Allowance ($157,920 for 2025), the ill spouse can still be eligible for Medicaid with a spousal refusal form. The form ensures that Medicaid considers only the assets and income of the ill spouse, not the healthy spouse, for eligibility. Medicaid has the right to seek contributions from the healthy spouse, but that right is not exercised uniformly by county departments of social services.
- Protecting the home
One of the primary concerns for someone dealing with a chronic illness is the vulnerability of their home if Medicaid is needed to pay for nursing home care. For many seniors without a spouse, a relatively straightforward way to protect their house is unavailable. But Medicaid regulations offer a couple of exceptions.
An adult child who has lived in the ill individual’s home for at least two continuous years before that person required nursing home care is entitled to receive title to the home without being subject to the five-year lookback or a Medicaid penalty. This “caregiver child” exception can protect the home from a Medicaid lien or estate recovery action.
The “caregiver sibling” rule follows a similar pattern but requires the healthy sibling to have lived with the ill sibling for at least one continuous year and to have been on the property deed to avoid penalties.
- Using promissory notes
If none of these exceptions or spousal protections are available, elder law practitioners may use 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 portion of their assets in the family.
Protectable assets include proceeds from a real estate sale, investments, bank accounts and other nonretirement 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 repays the Medicaid penalty, the individual becomes 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, giving you more opportunities to preserve your family’s finances. In other words: Don’t sleep on it. Be proactive.
Alan D. Feller, Esq. is managing partner of The Feller Group, a law firm dedicated to the practice of elder law and estate planning, located at 625 Route 6 in Mahopac. He can be reached at afeller@thefellergroup.com.
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