Changes in the law can impact your estate plan in several ways, including changes in Medicaid rules. It is crucial to review your estate plan to ensure it continues to meet your needs and wishes when the law changes. This blog by our Morristown estate planning attorneys discusses how New Jersey’s Medicaid rules can impact your estate plan in 2025.
Decreased Penalty Divisor for 2025
There are penalty periods to prevent people from transferring assets to meet eligibility requirements for Medicaid. If a person transfers assets for less than fair market value within the 60-month lookback period, they are subject to a penalty period based on the value of the gift or transfer.
The New Jersey Department of Human Resources announced a decrease in the penalty divisor for 2025. The decrease became effective on April 1, 2025. By decreasing the penalty divisor, Medicaid has effectively increased the penalty period for transfers and gifts. Therefore, a person may need to wait longer to become eligible for Medicaid.
Because of this change in Medicaid rules, you may need to revise your estate planning strategy for gifting and transfers. Estate plans may include using annual and lifetime gift exemptions to transfer assets to heirs during the person’s lifetime to reduce the value of the estate for tax purposes.
Expansion of Medicaid Services in New Jersey
New Jersey’s Medicaid program for Managed Long Term Services and Supports (MLTSS) continues to expand. A significant change is the increase in home-based care versus nursing homes. A family may be able to keep a loved one in their home longer with this assistance.
Long-term care is extremely expensive. However, qualifying for Medicaid benefits can be challenging. The strict rules for income and assets may prevent someone from receiving this benefit. Medicaid planning is an important aspect of estate planning. An attorney can help you develop an estate plan that utilizes various tools to protect eligibility for government benefits, such as Medicaid-compliant annuities, asset protection trusts, and income-only trusts.
Utilizing Exceptions to the Medicaid Lookback Period
A key estate planning option is to use the exceptions to the lookback rule as part of your estate plan. New Jersey’s Medicaid program enforces the 5-year lookback rule, but the following exceptions allow for penalty-free transfers:
- Transfers to your spouse are not included in the penalty
- Transfers to an adult child who has lived with the person for at least two years and provided care that delays admission to a nursing home
- Transfers to a child who is blind or disabled are not included in the penalties
Gifting and transfers must be used carefully to avoid problems with Medicaid. Furthermore, transfers and gifts could impact various aspects of an estate plan. A skilled estate planning and Medicaid planning attorney can help.
Schedule a Consultation With Our Morristown Estate Planning Attorneys
If you are concerned about how new laws and rules impact your estate plan, contact E.A. Goodman Law, LLC today. Our Morristown estate planning attorneys will review your current estate plan and explain how changes in the law impact your plan. We can help you revise your estate plan or create an estate plan if you do not have one.
Posted in: Estate Planning