Medicaid Planning and Your New York Estate (5-Year Look-Back)

Medicaid planning protects your home and savings from the cost of long-term nursing care, and in New York it turns on one critical rule: the five-year look-back. When you apply for institutional (nursing home) Medicaid, the state reviews the prior 60 months of your finances. Any uncompensated transfers, gifts, or asset moves made during that window can trigger a penalty period during which Medicaid will not pay. The single most powerful tool to get ahead of this rule is the irrevocable trust under EPTL Article 7, which, when funded early enough, removes assets from your countable estate while letting you keep your home and a stream of income. But there is no one-size-fits-all answer here. The right plan depends entirely on your assets, your family, your health timeline, and your goals. That personalized fit is the whole point of this article.

At Morgan Legal Group, Russel Morgan, Esq. builds these plans one client at a time, because the difference between a protected estate and a depleted one often comes down to a single planning decision made at the right moment.

Why the Five-Year Look-Back Matters So Much

Long-term care is the largest unplanned expense most New York families ever face. A nursing home placement can cost well over a hundred thousand dollars per year, and without planning, those costs come straight out of the assets you intended to leave to your spouse and children.

Medicaid can cover this care, but it is a needs-based program. To qualify for nursing home Medicaid, an applicant generally must reduce countable resources to a modest limit. The temptation is to simply give assets away to children before applying. The look-back rule exists precisely to stop last-minute transfers: gifts made within the 60 months before application are added back up and converted into a penalty period of Medicaid ineligibility.

The lesson is timing. Assets moved into a properly drafted irrevocable trust more than five years before you need care are fully protected. Assets moved inside that window create problems. This is why the most valuable planning is done before there is any crisis, not after.

The Irrevocable Trust: The Core of NY Medicaid Planning

A revocable living trust is excellent for avoiding probate, but it does nothing for Medicaid, because you retain full control and the assets remain countable. For Medicaid protection you need an irrevocable trust (EPTL Article 7), often called a Medicaid Asset Protection Trust.

Here is how a well-designed version balances protection with comfort:

• The home goes in, but you keep living there. The trust holds title; you retain the right to reside there for life.
• You keep the income, not the principal. The trust can pay you income while the principal is shielded from the Medicaid spend-down.
• The five-year clock starts at funding. Once the trust is funded and 60 months pass, those assets are outside the look-back.
• You preserve the step-up in basis. Drafted correctly, heirs still receive a stepped-up cost basis at your death, reducing capital gains tax.

For a family member with disabilities, a Supplemental Needs Trust (EPTL 7-1.12) does something different but equally vital: it holds assets for that person without disqualifying them from means-tested public benefits.

Trusts vs. Outright Gifting

Strategy	Look-back exposure	Control retained	Best for
Irrevocable (Medicaid) trust	5-year clock from funding	Income + right to reside	Most homeowners planning ahead
Outright gift to children	Full transfer penalty if within 60 months	None — asset belongs to child	Rarely advisable alone
Supplemental Needs Trust	Not a disqualifying transfer	Trustee-managed	A beneficiary with disabilities
Revocable living trust	No protection (fully countable)	Full	Probate avoidance only

Outright gifting is risky: the asset becomes exposed to your child’s divorce, creditors, or lawsuits, and you lose all control. A trust keeps a guardrail around the gift. Which path fits you is a conversation, not a formula. Explore the options on our trusts page.

Medicaid Planning Is One Part of a Coordinated NY Estate Plan

Medicaid planning never stands alone. A comprehensive New York estate plan coordinates four core documents, and each one carries weight when long-term care becomes a reality:

1. A Will — Under EPTL §3-2.1, your will must be signed at the end by you, the testator, with publication, in front of two attesting witnesses. Dying without one (intestacy) means EPTL Article 4 decides who inherits, which may not match your wishes. See our wills page.
2. Trust(s) — The Medicaid asset protection trust discussed above, plus any revocable trust used to avoid probate on other assets.
3. A Durable Power of Attorney — Under GOL §5-1513, New York’s 2021 statutory short form is durable by default, meaning it survives incapacity. This is essential for Medicaid: someone must be legally able to move assets, fund trusts, and sign the application if you cannot. Without it, your family may need a court-appointed guardian. See power of attorney.
4. A Health Care Proxy — Under NY Public Health Law Article 29-C, this appoints an agent to make your medical decisions. It is separate from the financial POA, and during a nursing home stay it is indispensable. See healthcare proxy.

For the full picture of how these pieces fit together statewide, start with our estate planning overview.

Don’t Forget the New York Estate Tax

Medicaid planning protects assets during your life; the New York estate tax governs what happens at death, and the two strategies must not collide. For 2026, the basic exclusion amount is $7,350,000 for deaths on or after January 1, 2026 through December 31, 2026.

New York’s estate tax has a notorious feature: the cliff. An estate over 105% of the exclusion ($7,717,500) loses the entire exemption and is taxed from the first dollar, at progressive rates from 3% to 16%. Planning to stay below the cliff is its own discipline.

Two points matter for Medicaid clients:

• New York has no gift tax, so lifetime transfers are not separately taxed by the state.
• But gifts within three years of death are added back to the taxable estate. A deathbed gift made for Medicaid reasons can therefore have estate-tax consequences too.

This is exactly why coordinated, personalized planning matters. Our NY estate tax guide walks through the cliff in detail.

A Personalized Plan Beats a Generic One

There is no universal Medicaid plan. A 62-year-old homeowner with adult children needs a very different strategy than a 78-year-old widow whose health is already declining, or a couple where one spouse needs care and the other will remain at home. The right amount to place in trust, the timing of funding, whether to gift at all, and how to protect the well spouse, these are individual decisions.

That is the work Russel Morgan, Esq. does at Morgan Legal Group: sitting down with one family at a time and building a plan around their circumstances, not a template. New York’s rules apply statewide; the strategy that protects your estate is unique to you.

Frequently Asked Questions

Does the five-year look-back apply to home care Medicaid too?
The traditional 60-month look-back is the core rule for institutional (nursing home) Medicaid. Community-based and home care programs have historically been treated differently, but the rules are evolving. Because timing is everything, the safest move is to plan early so your assets are protected regardless of which program you eventually need.

Can I keep living in my home if I put it in a Medicaid trust?
Yes. A properly drafted irrevocable Medicaid asset protection trust can reserve your right to live in the home for the rest of your life. You give up the ability to sell it freely, but you keep your residence and protect its value from the Medicaid spend-down.

Will a revocable living trust protect my assets from Medicaid?
No. A revocable trust (EPTL Article 7) is excellent for avoiding probate, but because you keep full control, the assets remain fully countable for Medicaid. Only an irrevocable trust provides the protection, and only after the five-year clock has run.

Why do I need a power of attorney for Medicaid planning?
Because someone must be legally authorized to act if you become incapacitated. The durable statutory power of attorney under GOL §5-1513 lets your agent fund trusts, transfer assets, and file the Medicaid application on your behalf, avoiding a costly court guardianship.

Protect Your Estate Before the Clock Starts

The most expensive Medicaid mistake is waiting. Every month that passes without a plan is a month the look-back can reach. If you own a home or savings you want to protect from long-term care costs, the time to build a personalized strategy is now, while you still have the full range of options.

Schedule a private consultation with Russel Morgan, Esq. of Morgan Legal Group: https://calendly.com/russel-morgan/30min