The Deficit Reduction Act of 2005 (S.1932) [DRA] was signed by the President on Feb. 8, 2006. Some sections state that they are effective upon enactment. New York enacted changes as part of the 2006 budget process.
The law lengthens the lookback period to 5 years from 3 years. The longer lookback will be gradually phased in as the change would only effect transfers after the date of enactment.
Prior to Feb 8, 2006, a penalty period for institutional (nursing home) care begins the month after a transfer is made. DRA changes this so the penalty does not begin to run until a person is institutionalized and otherwise eligible for Medicaid (in other words, has exhausted other funds). This means any transfer in the past five years would disqualify for a period of time for nursing home care -- no more waiting out a penalty period at home or while private pay in a nursing home. This would effect all transfers on or after the date of enactment.
There are still transfer exemptions and hardship provisions.
Annuities, in order to not be counted as a resource, must be irrevocable and nonassignable; be actuarially sound; and have equal payments with no deferral or balloon payments. The state would have to be named as a remainder beneficiary, although it could be secondary after a spouse or a minor or disabled child.
Equity in a home would count as a resource if it was over $500,000 or at the state's option $750,000 (N.Y. will use the $750,000 figure). An individual could take a reverse mortgage or home equity loan to reduce the total equity.
In order for a loan or mortgage not to be treated as a transfer of assets the repayment must be actuarially sound and it cannot be canceled upon death of the lender.
In order to understand the impact of this complex law, it is important that seniors and their families consult with a knowledgeable elder law attorney. There are many options that should be considered.
There are still ways for seniors to protect assets and income. The law sets out parameters for annuities, loans, transfers and insurance which could be used in various combinations. But action should not be taken without advice. This law will effect the transfer of a home as well as other assets. So for example, a deed gifting a homestead with a reserved life estate, should not be executed without consulting an elder law attorney.