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    Medicaid eligibility and trusts

    Jurisdiction / State: New York

    Back in 2009 I had an extended hospitalization where it looked like I might die. I was single, 30 years old, owned my own house (with a mortgage) and my disabled father was living in the house with me.

    My parents were separated but not divorced. Mom came back as soon as I got sick and moved into my house with Dad.

    After several months when it looked like I would live but need long term medical care and my $1 Million cap on my private health insurance had run out they contacted a lawyer for advice and were advised to created an Irrevocable Income Only trust. (Mom had power of attorney for me.) Mom is the trustee, my sister is the beneficiary, I am the settlor.

    The deed to my house is in the name of the trust now but I am still responsible for the mortgage.

    Into this trust goes my monthly checks, one from Social Security Disability and one from my private insurance I had from my job. The total amount is enough to pay my mortgage and utilities but not much else.

    However it is an expensive mortgage (this is NYC after all) so the "income" I receive in my name monthly looks off hand to be too high to qualify for medicaid or such if you don't account for how much is going to pay the mortgage and basic utilities (power, water, gas).

    I qualified for Medicaid before I started receiving disability payments.

    Now I am up for re-certification and I don't know how to fill out the paperwork. If my income money is going directly into this trust do I have to claim it as income? I pay taxes on it so I think I do but there is nothing on this paperwork that asks about trusts or such. I'm afraid if I put down my income I'll be rejected.

    Dad passed away at the end of last year and mom had to quit her job to take care of me. The only income into the household is my disability payments and there is virtually nothing left after expenses.

    So my question is if in NY State is money deposited in my name (checks are made out to me) but deposited into an irrevocable income only trust considered to be income I need to declare on a medicaid application/re-certification?

    Thanks

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    Quote Originally Posted by BirdOPrey5 View Post
    Back in 2009 I had an extended hospitalization where it looked like I might die. I was single, 30 years old, owned my own house (with a mortgage) and my disabled father was living in the house with me.

    My parents were separated but not divorced. Mom came back as soon as I got sick and moved into my house with Dad.

    After several months when it looked like I would live but need long term medical care and my $1 Million cap on my private health insurance had run out they contacted a lawyer for advice and were advised to created an Irrevocable Income Only trust. (Mom had power of attorney for me.) Mom is the trustee, my sister is the beneficiary, I am the settlor.

    The deed to my house is in the name of the trust now but I am still responsible for the mortgage.

    Into this trust goes my monthly checks, one from Social Security Disability and one from my private insurance I had from my job. The total amount is enough to pay my mortgage and utilities but not much else.

    However it is an expensive mortgage (this is NYC after all) so the "income" I receive in my name monthly looks off hand to be too high to qualify for medicaid or such if you don't account for how much is going to pay the mortgage and basic utilities (power, water, gas).

    I qualified for Medicaid before I started receiving disability payments.

    Now I am up for re-certification and I don't know how to fill out the paperwork. If my income money is going directly into this trust do I have to claim it as income? I pay taxes on it so I think I do but there is nothing on this paperwork that asks about trusts or such. I'm afraid if I put down my income I'll be rejected.

    Dad passed away at the end of last year and mom had to quit her job to take care of me. The only income into the household is my disability payments and there is virtually nothing left after expenses.

    So my question is if in NY State is money deposited in my name (checks are made out to me) but deposited into an irrevocable income only trust considered to be income I need to declare on a medicaid application/re-certification?

    Thanks


    Okay, I suggest you consult with an estate or trust attorney.

    Your bank that holds your trust should be able to help you properly answer your question.

    I won't cloud the issue by giving you advice, that could mislead you.

    Why?

    I don't know enough about the terms (or type) of trust to comment appropriately.

    I will offer one suggestion for your consideration.

    Have you considered GIFTING the home to your sister or mother?

    As part of the gift terms, you gift yourself with a LIFE ESTATE in the property.

    Now, you once again need to discuss teh details of this arrangement with an attorney acquainted wills and trusts.

    By gifting the home to your sister or mother, and giving yourself a LIFE ESTATE, you potentially could open up other avenues of assistance and effectively lower your purported income and financial position.

    Good luck, see an attorney (and the trust) as son as you can!

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    Thanks army judge. I understand there is probably too much to this for an easy answer, but it didn't hurt to try.

    I would be comfortable gifting my house to either mom or sis but neither could hope to pay the mortgage. Mom is full time taking care of me and my sister has a job but not enough to come close to paying this mortgage. I feel if I gift the house away and the disability checks still come in my name it would be even worse.

    Nevertheless we do have a call into the attorney's office that created the trust to begin with but we won't be able to speak to them until tomorrow. We just trying to get a jump on things.

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    Quote Originally Posted by BirdOPrey5 View Post
    Thanks army judge. I understand there is probably too much to this for an easy answer, but it didn't hurt to try.

    I would be comfortable gifting my house to either mom or sis but neither could hope to pay the mortgage. Mom is full time taking care of me and my sister has a job but not enough to come close to paying this mortgage. I feel if I gift the house away and the disability checks still come in my name it would be even worse.

    Nevertheless we do have a call into the attorney's office that created the trust to begin with but we won't be able to speak to them until tomorrow. We just trying to get a jump on things.






    I didn't say that by gifting the house, you'd be dispossessed.

    You would still have a LIFE ESTATE.

    A life estate is a legal arrangement that transfers property automatically upon a person’s death to another person or entity.

    You give yourself an interest in the property for your lifetime.

    You then become a life tenant (LT).

    Upon the death of the LT (YOU), the property will pass automatically to one or more other individuals (in your case sis and mam) or other entities.

    The people or entities that receive the property at death are called remaindermen.

    Life estates are sometimes used as a device to avoid probate.

    It is important to understand that a life estate is a form of co-ownership.

    Both the LT (YOU) and the remaindermen (mom and sis) have real interests in the property.

    However, unlike other forms of co-ownership, the co-owners do not have rights to the property at the same time.

    Instead, the interests are stacked in time, with only the LT (YOU) having a right to current possession of the property.

    The remainderman’s (mom's and sis') interest will not begin until the death of the LT (YOU).


    This could have a positive affect on your earned income (by removing your property ownership).

    It should not affect your income or disability income.









    There is another option you could consider.

    Again, I urge you to discuss this with your attorney or trust officer.

    Some think a living trust serves as a better choice than a life estate:

    You create your living trust to run during your lifetime. DUH, HUH!!!!

    You retain full control over the trust, including the right to revoke the trust or “undo” any transfers that you make to the trust.

    The trust provides that your real estate will be transferred automatically upon your death to whomever you wish to have it.


    You then deed your real estate to the living trust.

    This takes it out of your name so that it will not be part of your probate estate when you die.

    You still have full control over the property, however, since you control your living trust.

    This means that, unlike a life estate, you can call all the shots during your lifetime.

    Now, the next sentence is the BEST part, for most folks.

    The trust is disregarded for tax purposes, there are no negative tax consequences.


    When you die, the trust provides for the automatic distribution of the real estate to your heirs.

    This event occurs outside of the probate process.

    The property is no longer in your name.

    The property belongs to the trust!!!

    Hence, no negative tax consequences.

    Damn, I'm still pretty good at this stuff, if I must say so myself!!!

    Mom would be proud knowing that I did learn some of that complicated law stuff during those three years of my law school attendance.






    Last edited by army judge; 02-01-2012 at 02:33 PM.

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    Thanks army judge. We have an appointment with a local attorney.


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