If you are elderly or disabled and need long-term care, and you live in a co-op in New York State, there are steps you can take to protect its value, and still obtain government benefits to pay for your care.
If you are able to remain in the community, and your care will be in your home, there are a few things to understand. First, Medicaid won’t make you leave your co-op or sell it, and they will provide services to you, if you have used up all your other financial resources and are still living in your home. However, if you do no planning, Medicaid is authorized to place a lien on the proceeds of your home equal to the value of the services they provide to you. Once you move out of the co-op or sell it for any reason, Medicaid can enforce its lien.
Is there anything you can do to avoid this? The answer is yes. If you transfer the title to your co-op into a properly-drafted asset protection trust (sometimes called a “Medicaid Trust”), it will no longer be your property. This will protect the value of your home against future creditors, including Medicaid. You can specify in the Trust Agreement that you have the right to continue to live in your co-op.
The best aspect of this situation is that if you are receiving Community Medicaid, which includes home care or assisted living, there is no “look back” for transfers. You can become eligible for Medicaid soon after you transfer your assets into the Trust.
If you move out of the co-op and it is in a Trust, your Trustees can keep it or sell it. If they sell it, the proceeds will be paid to the Trust, and can be used to supplement your lifestyle and care. If the home is ultimately transferred from the trust to the beneficiaries upon your death, the beneficiaries will receive a “step up in basis” to fair market value, thereby avoiding Capital Gains tax on any appreciation in value that accrued during your lifetime.
If you decide to sell your co-op during the course of your Elder Law planning, our firm can represent you in negotiating a contract of sale, and can also represent you at closing.
Because co-ops are not “real property,” different rules apply to them than to houses or condominiums. In order to transfer ownership, approval of the co-op Board must first be obtained. For more details, see “Medicaid Trust” and “Co-op Trust,” or you can find what steps might be applicable to your specific circumstances under “Find Your Situation.”