baghag
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NY Times article on how home ownership afects medicaid eligibility
New Medicaid Rules on Home Ownership
By JAY ROMANO
THE Deficit Reduction Act of 2005, signed by President Bush last Wednesday, makes significant changes in the rules regarding home ownership and its effect on eligibility for Medicaid, which is often used to pay for nursing-home care.
Ronald Fatoullah, a lawyer in Great Neck, on Long Island, said that in determining an applicant's assets, the value of an individual's home was usually exempt. But under the new law, he said, a person with more than $500,000 in home equity is ineligible for nursing-home care under Medicaid. (Homes occupied by a spouse or a disabled or minor child are exempt. And the law allows states to increase the threshold to $750,000.)
Mr. Fatoullah said that while the $500,000 limit on equity might seem reasonable for some parts of the country, it is not realistic for homeowners in the New York area.
Indeed, he said, many of his clients are elderly individuals who bought their houses or apartments years ago and who now have equity far exceeding $500,000. And unless they do something to change their situation, he said, they could find themselves ineligible for Medicaid when they need it.
Two other provisions of the new law, Mr. Fatoullah said, make Medicaid planning even more difficult.
Previously, he said, a three-year look-back period was used to determine eligibility. Basically, this meant that while any asset transferred more than three years before applying for benefits would be ignored, assets transferred during that three-year period would result in a penalty. For example, Mr. Fatoullah said, in New York City, every $9,132 in assets transferred during the look-back period renders an individual ineligible for benefits for one month.
So if a person transferred, say, $27,396 in assets one year before applying for Medicaid, that person would be ineligible for three months. But under the old law, such a transfer would have had no practical impact, since the ineligibility period would have begun on the first day of the month after the transfer and ended months before benefits were sought.
Under the new law, Mr. Fatoullah said, the look-back period is increased to five years, and the ineligibility period starts when the person is in a nursing home and applies for benefits rather than shortly after the transfer was made. So, with that same $27,396 transfer in assets one year before applying for benefits, the three-month ineligibility begins with the application and can have the practical effect of losing three months of benefits.
As a result, estate planners say, individuals — especially homeowners — need to plan carefully and early.
Linnea Levine, a lawyer in Harrison, N.Y., said that homeowners, including those with more than $500,000 in equity, can use a life estate to protect the home while remaining eligible for Medicaid.
With a life estate, Ms. Levine said, a person deeds a property to someone else while retaining the right to live in the home until death. With such a transfer, she said, Medicaid uses tables to determine the value of the asset being transferred. If a 75-year-old transfers title to a $600,000 home and retains a life estate, for example, Medicaid would value the transfer at $287,106.
And though that amount would still be subject to the five-year look-back period, the $500,000 threshold would not apply. "So early planning is essential," Ms. Levine said.
Ralph M. Engel, a Manhattan lawyer, said that another option for a homeowner with more than $500,000 in equity would be to take out a mortgage to reduce that equity.
And what should one do with the proceeds of that mortgage? "You could give it to your kids and hope you won't need Medicaid in the next five years," he said. "Or you could take a trip around the world."
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i had no idea there were conditions for receiving medicaid. 
