I often meet with families from Brooklyn or Queens who have done everything right. They worked for decades, paid off their mortgage, and built a nest egg they hoped to pass on to their children. Then, a sudden illness or accident forces one spouse into a nursing home. The shock comes not just from the diagnosis, but from the monthly bill—often exceeding $15,000. They quickly realize that the home and savings they worked a lifetime to build are now exposed, set to be systematically depleted to cover the cost of care.
This is not a failure of planning. It’s a failure to understand the rules of the system. The belief that Medicare will cover long-term nursing home stays is a common and costly misconception. It does not. For most New York families, the default payer for long-term care, after their own assets are gone, is Medicaid. And Medicaid has strict financial eligibility requirements.
The Hard Math of Medicaid Eligibility
Before Medicaid will pay for long-term care, it requires you to “spend down” your assets to a nominal level. For a single individual in 2024, that number is just over $30,000 in non-exempt assets. This means a lifetime of savings, investments, and sometimes even the value of a family home must be exhausted before any government assistance becomes available. This process can feel punitive, as if the reward for a life of prudent saving is to be the last one to receive help.
The state is not being malicious—it is simply following rules designed to reserve public funds for those with the greatest need. But for the family whose assets are just above the threshold, the result is the same. Their legacy, intended for children and grandchildren, is instead paid directly to a healthcare facility. This is where proactive stewardship becomes essential. It’s not about hiding money; it’s about intentionally structuring your assets in a way that is compliant with the law, well in advance of any need for care.
The Five-Year Look-Back: A Critical Timeline
The cornerstone of Medicaid planning in New York is the five-year “look-back” period. When you apply for long-term care Medicaid, the agency scrutinizes every financial transaction you’ve made for the 60 months prior to your application date. Federal law requires this to prevent individuals from simply giving away their assets to family members right before applying for benefits.
Any gifts or transfers of assets for less than fair market value during this five-year window trigger a penalty period. During this penalty, you will be ineligible for Medicaid coverage, even if you otherwise meet the financial requirements. The length of the penalty is calculated by dividing the value of the transferred assets by the average monthly cost of nursing home care in your region. The result can be months or even years of ineligibility, forcing the family to pay out-of-pocket for care they can no longer afford.
This is the rule that makes early planning so critical. An action taken 59 months before an application is simply a personal financial decision. The same action taken 58 months before is a transfer that can have devastating consequences. Stewardship.
The Irrevocable Trust as a Shield
For many of our clients, the most effective instrument is a properly drafted Irrevocable Trust, often called a Medicaid Asset Protection Trust.
You, the creator of the trust (the “grantor”), transfer ownership of certain assets—typically your primary residence and non-qualified financial accounts—to the trust. You name a trusted individual, often an adult child, as the trustee. You also name beneficiaries, who will inherit the assets upon your death. The key is that you relinquish direct control over the principal of the assets in the trust. This structure is intentionally difficult to undo. Under New York’s Estates, Powers and Trusts Law § 7-1.9, modifying an irrevocable trust requires the consent of all beneficiaries, making it a durable act of preservation. You can, however, retain the right to live in the home and to receive all the income generated by the trust’s assets.
Once the assets are in the trust, the five-year clock begins to run. If you do not need to apply for Medicaid for at least five years after funding the trust, those assets are no longer considered “countable” for eligibility purposes. They are protected. The home is safe. The savings are preserved for the next generation. The trust acts as a shield, legally separating the assets from your name while still allowing you to benefit from them during your lifetime.
This is a deliberate, intentional act of legacy planning. It requires foresight and a willingness to confront an uncomfortable possibility. But the alternative—doing nothing—is a choice to leave your life’s work vulnerable to the immense and unpredictable costs of long-term care.
This type of planning is not a last-minute maneuver. If a health crisis has already occurred and care is imminent, our options become far more limited. While some crisis-planning strategies exist, they are not nearly as effective at preserving assets as the proactive work done years in advance. The law rewards those who plan.
If the possibility of long-term care costs is a concern for your family, the prudent first step is not to wait for a crisis. It is to create a clear inventory of your assets and liabilities. With that document in hand, you can schedule a legacy review to determine whether an asset protection strategy is an appropriate contingency for your specific situation.
