Medicaid Planning: Strategies for Preserving Assets While Qualifying for Benefits

Long-term care arrives quietly for some families and abruptly for others. Yet, the financial impact follows a predictable pattern — nursing homes and in-home aides in New York carry costs that quickly outpace even strong retirement savings. Medicaid remains the primary safety net, but its income limits, resource caps, and look-back rules require thoughtful planning well before services are necessary. Preparing Medicaid strategies in advance can help clients preserve their assets while maintaining eligibility.

What is Medicaid Planning?

Medicaid planning is a carefully designed approach to secure long-term care without surrendering a lifetime of accumulated assets. Many individuals find themselves caught in a difficult spot — too rich to qualify for the program but too poor to afford these services out-of-pocket.

Without such a strategy, those in the missing middle might have to exhaust their resources, liquidate investments or worse, sell a beloved home full of memories. A well-executed plan prevents this, providing peace of mind for the client and financial security for their loved ones.

How to Preserve Assets While Qualifying for Medicaid Benefits

Seniors can legally protect their assets to ensure access to future elder care. However, early planning is crucial to avoid penalties, particularly those associated with the program’s look-back period.

Medicaid Asset Protection Trusts

Among the strategies available for long-term care planning, the Medicaid Asset Protection Trust (MAPT) stands out as a significant safeguard. Creators set up this arrangement with the help of an elder law attorney to preserve their wealth for their beneficiaries. A MAPT moves property, investments or other assets into a trust managed by someone other than the applicant or their spouse. Many families select an adult child as the trustee.

One of the key features of a MAPT is its irrevocability. Unlike other estate vehicles that can be canceled at any time and thus offer no protection from Medicaid, resources transferred into a MAPT are no longer under the creator’s direct control. After the required look-back period, those do not count when reviewing for eligibility.

This route is beneficial for the applicant because the arrangement can be structured to allow its creator to still receive income generated by its assets. They can continue receiving their pension, Social Security and other personal income. The earnings count toward eligibility, but the underlying principal doesn’t.

However, the advantages of a MAPT extend well beyond just achieving Medicaid eligibility:

• Protection for loved ones: Trust assets pass cleanly to intended beneficiaries rather than being consumed by long-term care costs.
• Estate recovery avoidance: Because they are not part of the probate estate, MAPT assets are shielded from the program’s post-death recovery efforts.
• Potential tax benefits: Proper drafting supports a favorable step-up in basis treatment, which preserves tax efficiency for future heirs.
• Home preservation: An individual can continue living in their home even after transferring the property deed into the trust.

For all these reasons, even adults with substantial savings or income select this option. However, since it can be complicated to navigate, legal assistance is often necessary.

Ettinger Law Firm has refined this Medicaid strategy for over 35 years. As New York’s most trusted name in elder law, it helps clients combine estate and care planning to ensure they have a certain future to rely on when they need long-term support.

The agency’s MAPT design also allows grantors to change trustees, update beneficiaries and revoke an irrevocable trust with the consent of family members. It also provides them with extensive information on their options and guidance on how to achieve favorable results while staying within compliance.

Spousal Protection

In New York, the Community Spouse Resource Allowance and Minimum Monthly Maintenance Needs Allowance protect the partner who isn’t applying for assistance by letting them keep a set amount of earnings and assets. As of 2025, the permitted monthly income falls between $2,643.75 and $3,948. Since these figures adjust annually, attorneys need to stay current and regularly update these calculations to secure the spouses’ financial stability throughout the Medicaid eligibility process.

Medicaid-Compliant Annuities

These annuities convert a lump sum of countable assets into a predictable income stream. Medicaid treats it differently under income rules, rather than as a resource, but only if the annuity meets several strict requirements. In New York, the annuity must be:

• Irrevocable and non-assignable: Once purchased, it cannot be changed or cashed out
• Actuarially sound: The payout term must match the buyer’s life expectancy according to government tables
• Paid in equal, level installments: No balloon payments or deferrals
• New York State as the primary remainder beneficiary: At least for the amount the program pays for the applicant’s care

This is a common crisis-planning tool for married couples, as the payments can be directed to the spouse at home to help them stay financially secure while the applicant qualifies for Medicaid.

Strategic Gifting

Gifts to children or other family members must be timed carefully because Medicaid reviews all transfers made within the five-year look-back period. Any gift — no matter the amount — can be treated as an uncompensated transfer, which creates a penalty period during which the program will not pay for long-term care. The length of that penalty is calculated by dividing the value of the gift by New York’s regional nursing home rate, as published annually in New York’s General Information System Message.

To avoid penalties, gifts must be made outside the five-year window. Another option is to structure a transfer for fair market value — for instance, through a caregiver agreement — so that it is not considered a gift at all.

Even if gifting is timed well, you must warn clients about the capital gains tax impact. An outright gift means the recipient retains the original, lower cost basis, which can result in higher taxes when they sell the asset. This tax risk is why transferring appreciated properties into a properly structured Medicaid Asset Protection Trust is often a better choice.

Because gifting can be sensitive and easily mismanaged on both the Medicaid and tax fronts, legal counsels need to guide the timing and document transfers correctly. With the right structure in place, it becomes an effective way for clients to reduce countable assets and protect family wealth without jeopardizing assistance eligibility or creating an unnecessary tax burden for their heirs.

Exempt Asset Structuring

Certain resources can be exempt from taxation. For example, New York’s allowable equity limit for primary residences is at $1,071,000 as of 2024, unless a spouse or dependent child lives there. Other exemptions include burial funds and life insurance policies costing $1,500 or less.

Attorneys need to thoroughly review each asset to determine which ones already fall outside Medicaid’s countable rules. This reduces the need for a more aggressive restructuring on your client’s behalf.

Why Medicaid Planning Can’t Be Delayed in New York

Although New York’s metropolitan areas have a relatively younger population, approximately 1.8 million residents aged 60 and above continue to contribute their knowledge and skills to the city’s diversity. Long-term care needs can arise suddenly at any age due to illness or disability, and the likelihood of requiring such services increases significantly after age 65. Projections indicate that New Yorkers over 60 will soon comprise between 19% and 25% of each borough’s population.

The urgency, however, centers on the Medicaid review period. Currently, New York enforces a five-year look-back for facility care, with no specification for home care. That may soon change, as a 30-month look-back is expected to be introduced in 2025 or 2026.

This looming shift creates a critical window of opportunity for seniors to implement efforts and apply for home care services under the existing, more lenient rules. Starting early grants individuals secure access to necessary support while safeguarding their assets.

This urgency and the complexities surrounding safety net planning are precisely why a structure framework becomes valuable. A MAPT created outside the look-back window secures a clean path to eligibility. One created within the window may still be part of a client’s larger Medicaid strategy — especially when combined with caregiver agreements, spousal allowances or income-shifting tools — but it requires your professional oversight.

Medicaid Strategies Cement Long-Term Care Assurance in Advance

Your role as legal counsel is pivotal in helping individuals anticipate the complexities of Medicaid. With shifting regulations and detailed financial analysis, your expertise prevents costly errors and delays. By integrating Medicaid Asset Protection Trust and complementing it with other Medicaid strategies, you can craft a comprehensive plan to help your clients align their needs with the ever-changing law. This proactive approach helps them secure access to essential services while preserving their wealth and preserving their family’s financial security.