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New Definition for “Estate” Threatens NYers’ Long-Term Care Plans

With a definition change in the $132.5 billion state budget the Legislature passed last week, New York has declared it is open season on many of the assets of deceased individuals that normally fell outside of the reach of Medicaid recovery.

Among the many changes to Medicaid ushered into the 2011-2012 budget by Gov. Andrew Cuomo, there was an expansion of the definition of “estate.” The change could have a significant impact on the survivors, heirs and beneficiaries of Medicaid recipients. Certain assets of deceased Medicaid recipients that were directly passed to survivors, heirs and beneficiaries – and counties could not touch for Medicaid recovery purposes under the old definition – are now fair game.

Up until March 31, an estate was generally understood to mean all of a person’s real and personal property and other assets that pass pursuant a valid will or by the state’s intestacy laws if there was no will. Under this old definition, an estate included any assets a person owned exclusively or that were solely in his or her name, such as a house with only the person’s name on the deed. Anything made payable to the person’s estate, such as a life insurance policy, was also deemed an asset of the estate.

The new law expands the definition of “estate” to include “any other property in which the individual has any legal title or interest at the time of death, including jointly held property, retained life estates and interests in trusts…” This could affect all types of property such as houses, bank accounts and brokerage accounts.

This definition change took effect April 1. Individuals on Medicaid, or who anticipate to apply for coverage under the program, need to know the following if they have:

  • Jointly-Held Property
    • When an asset, such as a house, is jointly owned with rights of survivorship, the portion of the asset owned by the deceased party automatically transfers at death to the surviving party.
    • Under the old definition of “estate,” counties could not seek recovery of Medicaid payments from that portion of the jointly-owned property of the deceased Medicaid recipient that automatically transferred to the other joint owner.
    • Under the new definition of “estate,” counties can seek recovery of Medicaid payments from the value of the property received by the surviving joint owner.
  • Retained Life Estates
    • With life estates, an individual, known as a “life tenant,” transfers his or her home to another person or persons, known as “remaindermen.” In this arrangement, the life tenant, typically a senior, retains ownership of the property and can use it for the rest of his or her life. Ownership of the property automatically transfers to the remaindermen, typically the life tenant’s children, at the death of the life tenant.
    • Under the old definition of “estate,” counties could not seek recovery of Medicaid payments from the property transferred from a deceased life tenant who was a Medicaid recipient.
    • Under the new definition of “estate,” counties appear to be able to seek recovery of Medicaid payments from the life estate of the deceased Medicaid recipient. This raises many questions on exactly how the value of the life estate will be determined.
  • Interests in Trusts
    • The assets of a trust are distributed in accordance to its terms when the grantor dies.
    • Under the old definition of “estate,” counties could not seek recovery of Medicaid payments from the property in a trust that was passed on to beneficiaries after the grantor’s death.
    • Under the new definition of “estate,” counties can seek recovery of Medicaid payments from the value of the property in a trust that was passed on to beneficiaries after the grantor’s death. What remains unclear are the types of trusts subject to the new rule.

The definition change of “estate” will throw a wrench in the estate plans of many New Yorkers who count on or expect to apply for Medicaid coverage for long-term care. Many questions about the scope of this definition change remain and answers may not come until the Commissioner of the New York State Department of Health adopts regulations for the new meaning of “estate.” This law change is significant because 70 percent of Americans over 65 years old will require some long-term care services, and that likelihood increases with age, according to the U.S. Department of Health and Human Services.

An elder law attorney can help people determine the best methods for preparing for long-term care under this new definition of “estate.”

To schedule a meeting with one of Tully Rinckey PLLC’s estate planning attorneys call 518-218-7100.

 

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