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Estate Planning- Medicaid Makes You Exercise the Right of Election

When a person is receiving Medicaid in New York in 2015, it means that the individual is effectively “poor.” Specifically, the Medicaid recipient has resources or assets less than $14,850.00. If the individual had assets above this level, Medicaid would deem them “over-resourced,” and ineligible to receive Medicaid.

If the healthy spouse of a Medicaid recipient passes away, Medicaid eligibility can be affected in a few different ways. Obviously, if the healthy spouse leaves property to the Medicaid recipient, the Medicaid recipient could now be “over-resourced.” With this possibility in mind, a healthy spouse may decide to disinherit his or her spouse and believe that leaving the spouse out of their Last Will and Testament will solve this potential problem. The healthy spouse would be wrong.

Administrative Directive (ADM) 96 ADM-8 discusses the treatment of transfers and trusts in the Medicaid program as a result of the enactment of the Omnibus Budget Reconciliation Act of 1993 (OBRA ’93, a Federal law). Specifically, it directs that “[a]ssets include all income and resources of the individual and the individual’s spouse. This includes income or resources which the individual or the individual’s spouse is entitled to but does not receive because of any action or inaction…” (emphasis added). It further gives examples of behaviors which would cause income or resources not to be received; one example is “refusing to assert one’s right of election against an inheritance.” (ADM 96 ADM-8).

Therefore, a mentally competent Medicaid recipient must exercise the right of election entitling him or her to assets which could make the Medicaid recipient ineligible due to the ownership of assets greater than $14,850.00. If the Medicaid recipient does not exercise his or her rights, Medicaid will assess a transfer penalty period.

If the Medicaid recipient is not competent a court could, nevertheless, require the incompetent surviving spouse (Medicaid recipient) or their Guardian, to exercise their right of election. The court in Matter of Mattei (169 Misc.2d 989 (N.Y. Misc. 1996)) found: “(1) that the Medicaid recipient lacked the requisite mental capacity to exercise the right of election presently or in the foreseeable future; (2) a competent, reasonable person in her position would want to assure the continuation of her care, without unnecessary risk and in accordance with law, and thus would exercise said right of election, albeit only to the extent necessary so as to maximize the amount left for her only child; and (3) there is no evidence of any manifested intent by the incapacitated person before her incapacity to sacrifice her own well-being and violate the law for the limited financial gain of her daughter …. Consequently, we find the subject right of election should be exercised to the extent necessary to provide for the period of Medicaid ineligibility resulting therefrom…”

To be continued …
Aaron E. Futterman, CPA, Esq. is a partner in the law firm of Futterman & Lanza, LLP with offices in Smithtown, NY and clients throughout Suffolk, Nassau, Queens, Brooklyn, Bronx, Richmond, New York, Westchester and Rockland Counties. He concentrates his practice to Elder Law, Medicaid Planning, Medicaid Applications, Estate Planning, Probate, Estate Taxes, and Estate Administration.

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