Shielding Your Family's Inheritance from Medicaid Spend-Down: A Comprehensive Guide for Brooklyn Families

For many middle-income families in Brooklyn, Queens, and Staten Island, protecting a lifetime of savings from the high cost of long-term care is a pressing concern. Medicaid is often the only way to afford the astronomical prices of nursing homes and assisted living, but qualifying for Medicaid means strict limits on assets—which leaves many families wondering: “Is it possible to shield my family's inheritance from Medicaid spend-down requirements?”

This detailed guide, brought to you by Alatsas Law Firm, explains how Medicaid spend-down works, the strategies available to protect your family’s legacy (including trusts and lawful planning tactics), recent policy changes, and actionable steps for your unique situation in New York.

Understanding Medicaid Spend-Down and Inheritance

Medicaid spend-down refers to the requirement that individuals must use (“spend down”) their assets to a minimal threshold—currently $30,182 for an individual in NY in 2024—before qualifying for Medicaid long-term care. If you or a loved one receives an inheritance while on Medicaid, those new assets can temporarily disqualify you from benefits.

In essence:

• If you inherit cash, investments, property, or even personal items while on Medicaid, you may be required to spend those assets on care until eligibility is regained.

• Without proper planning, a family’s hard-earned inheritance is at risk of being absorbed by long-term care costs.

The Medicaid spend-down is not inevitable—there are legitimate ways to protect assets and ensure your family, not the state, benefits from your legacy.

How Medicaid Treats Inheritance in New York

Receiving an inheritance while on Medicaid is a double-edged sword. On one hand, it increases your resources, possibly pushing you over Medicaid’s asset limit. On the other, it creates an opportunity for proactive planning if approached in time.

Key facts for NY families:

• Inheritance is Counted as a Resource: Once you receive the inheritance, cash or property increases your countable assets.

• Reporting Requirement: New York law mandates you report any change in financial circumstances, including inheritance, to Medicaid within 10 days.

• Temporary Loss of Coverage: If the inheritance places you above the resource limit, you may lose Medicaid until those assets are "spent down"—unless you use an approved strategy to protect them.

• Penalty Risk: Transferring inherited assets improperly (i.e., gifting to family) can trigger a Medicaid penalty—resulting in months or years of ineligibility for care.

That’s why planning ahead is essential.

Medicaid Asset Protection Trusts (MAPTs): The Core Solution

Medicaid Asset Protection Trusts (MAPTs) are one of the most powerful and court-tested tools to shield inheritance and other family assets from Medicaid spend-down requirements.

What Is a MAPT?

A MAPT is a special irrevocable trust that allows you to transfer ownership of assets—such as a family home, savings, or investments—out of your individual name, into the trust, managed for the benefit of heirs.

• Assets in a properly structured MAPT are not counted by Medicaid after a “look-back” period.

• The trust may pay out income to you, but the principal is shielded from Medicaid.

• After your death, the assets pass to your heirs, bypassing probate and Medicaid recovery.

Essential Features

• Irrevocable: You cannot access principal once the trust is funded, which is key to Medicaid protection.

• Trustee: Typically a trusted family member other than yourself or your spouse.

• Flexibility: Your home can often be sold, and the proceeds remain protected, with careful planning.

The “Look-Back” Consideration

Assets transferred into a MAPT are subject to Medicaid’s five-year (60 months) “look-back” period. Transfers within this timeframe may disqualify you from Medicaid coverage for a period based on the value transferred (“penalty period”). Therefore, the sooner you plan, the more protection you can achieve.

Real-World Example

Mrs. L, a retired Brooklyn teacher, transferred her home and savings into a MAPT managed by her daughter five years before needing long-term care. When she eventually needed a nursing home, her assets were protected, and Medicaid paid for her care—her daughter inherited the family home and remaining savings, not the nursing home.

The Medicaid Look-Back Period Demystified

Medicaid’s five-year “look-back period” means that any asset transfers to trusts or gifts made within 60 months of applying for Medicaid can be scrutinized.

• Penalty Calculation: If you transfer $120,000 within the look-back, and the average cost of care is $12,000/month, you may face a 10-month penalty (ineligible for Medicaid).

• No Penalty for Transfers Outside the Look-Back: Once assets have been in a MAPT for over five years, they are fully protected.

New York holds strictly to these look-back rules. Some exceptions (such as transfers to spouses or disabled children) exist but are narrowly applied.

Alternatives to MAPTs: Pros, Cons, and Comparisons

1. Outright Gifts

• Fast, simple, but exposes assets to family misuse or creditor claims.

• Triggers look-back penalties if done within five years.

2. Spend-Down Strategies

• Paying off debt, purchasing exempt assets (a car, repairs to home).

• May protect some value, but usually less effective for large inheritances.

3. Special Needs Trusts

• For families with disabled children, protects their inheritance and Medicaid eligibility.

4. Annuities

• In limited scenarios, Medicaid-compliant annuities can convert assets into a non-countable income stream.

5. Irrevocable Funeral/Burial Accounts

• Exempt from Medicaid but only practical for small sums.

Comparing Options:

Common Myths & Real-Life Examples

Myth 1: “I Need to Give Away My Home Right Now to Protect It”

• Reality: Transferring a home directly can cause penalty periods and tax consequences. Trust planning is safer, with more predictable results.

Myth 2: “Inheritance Can Always Be Disclaimed to Stay on Medicaid”

• Reality: Disclaiming inheritance is treated by Medicaid as if you received it and gave it away—triggering the look-back penalty.

Myth 3: “I Can Wait Until I Need Care to Make a Plan”

• Reality: The five-year clock means last-minute moves rarely work; advance planning is critical.

Real-Life Example (Brooklyn Case Study):

After their father’s sudden need for skilled nursing care, the Rodriguez family discovered he had inherited $100,000 from an uncle. Unaware of the spend-down rules, they deposited the check, which made him ineligible for Medicaid. A crisis consultation enabled some quick planning—paying off mortgage bills and prepaying funeral expenses—but only a fraction of the inheritance was truly protected. If they’d established a MAPT years beforehand, the entire sum could have benefited his children.

Step-by-Step: How to Start Protecting Assets Today

1. Consult with an Experienced Elder Law Attorney: Local rules and Medicaid quirks demand Brooklyn-specific expertise. Alatsas Law Firm specializes in helping middle-income families navigate these waters.

2. Inventory Your Assets and Inheritance Risks: List homes, savings, investments, anticipated inheritances, and possible benefits you may receive.

3. Design and Fund a MAPT or Appropriate Trust: Choose the right assets, name your trustee, and follow all legal procedures.

4. Track the Look-Back Timeline: Aim to have trusts funded before the five-year deadline, ideally far in advance of any anticipated need for long-term care.

5. Periodic Review and Adjustments: Laws change; regular review with your attorney keeps plans current.

6. Communicate with Heirs: Make sure family knows how the trust works and their roles.

FAQs: What Brooklyn Families Ask Most

Q: Can I protect assets if my loved one already needs care?

A: Some crisis planning is possible, but full protection is unlikely. Consult an attorney immediately.

Q: Does putting my house in my child’s name work?

A: Usually no—may trigger look-back penalties, lost tax benefits, and legal complications.

Q: What assets are exempt from Medicaid?

A: A primary residence (up to $1,033,000 equity in NY in 2024), one car, some funeral accounts, and personal belongings.

Q: Can I transfer assets to my spouse?

A: Yes, with spousal exceptions, but this only delays, not eliminates, Medicaid spend-down for the surviving spouse.

Q: What about IRAs and retirement accounts?

A: Complex treatment—depends on how the assets are held and withdrawn. Review with a qualified attorney.

Why Personalized Legal Guidance Matters

Rules change, every family scenario is unique, and simple mistakes can cost tens or hundreds of thousands of dollars. Alatsas Law Firm’s nearly 30 years of experience serving Brooklyn’s diverse middle-income families means we understand:

• The local Medicaid system and nuances

• Neighborhood property values and common inheritance issues

• The importance of cultural sensitivity in family legacy planning

Workshops, one-on-one consultations, and tailored asset protection plans are our hallmark.

Securing Your Family’s Future with Alatsas Law Firm

Is it possible to shield your family’s inheritance from Medicaid spend-down?
Absolutely—with foresight, legal know-how, and the right tools like Medicaid Asset Protection Trusts, you can safeguard what matters most. The key is to act before the need arises. You’ve worked hard to build your family’s future; don’t leave it exposed to the unpredictable costs of long-term care.

If you have questions or are ready to start planning, contact Alatsas Law Firm in Brooklyn today. Our community-focused, client-centered approach ensures your legacy stays in your family—where it belongs.

Ready to protect your family's future? Book a confidential consultation with Alatsas Law Firm at alatsaslawfirm.com or call us directly. Secure peace of mind for yourself and those you love.