Medicaid is a federal program that provides benefits to certain individuals who are unable to pay for the medical services and supports they need to remain alive and healthy. These benefits are provided in accordance with strict income and asset criteria, which can mean that individuals with limited means may still not qualify.
Medicaid trusts are trusts recognized by the program that allow for an individual to meet eligibility criteria for long-term care benefits, even if that individual’s means exceed the program’s income and asset limits. The use of these trusts and their operating rules are strictly governed by New Mexico law, so there is little room for expansion or customization.
Nevertheless, a New Mexico Medicaid trust can be the only thing that will allow a person to qualify for badly needed medical care.
In addition, forming an irrevocable trust five years before applying for certain Medicaid programs may allow family members to keep assets held in the trust without needing to worry about estate recovery.
Because Medicaid programs are controlled by state and federal laws with no amount of “wiggle room,” it is in the best interests of an applicant and their family to speak to a New Mexico Medicaid trust lawyer when they think they may need long-term care assistance. Learn more about your options for qualifying for Medicaid programs or protecting family assets when you call New Mexico Financial & Family Law at 505-503-1637 or contact us online.
There are two primary situations where it may be in your best interests to form a New Mexico Medicaid trust with the help of an experienced attorney:
In either situation, a New Mexico Medicaid trust lawyer can act as your best source of knowledge, along with assisting in the formation of a trust that can successfully perform its expected role.
When you reach out to New Mexico Financial & Family Law, we will provide you with an experienced attorney to review your situation and offer tailored recommendations.
Our first step is always to review your current level of assets and income and then compare those to the eligibility requirements of all Medicaid programs you are considering. We can then discuss your goals, along with an assessment of how feasible it would be to achieve each goal.
Then, we will recommend a New Mexico Medicaid trust or another suitable strategy to give your goals the highest possible chances of success.
Talking to a Medicaid trust attorney in New Mexico is highly advisable because any mistakes in trust formation could affect your ability to qualify for your intended program. If the new trust has flaws, it can be impossible to dissolve if it is irrevocable, as many Medicaid trusts are.
Working with an attorney will help you avoid this situation while ensuring that you are closely following rules set by the Medicaid program and the state of New Mexico.
Medicaid services differ from Medicare because they are only offered to individuals who meet stringent needs criteria for income and asset ownership. Many Medicare provisions are guaranteed to all adults 65 and older by comparison.
With most Medicaid programs, individuals can qualify for benefits without subjecting their personal income and assets to recovery actions by the New Mexico Human Services Department (HSD).
However, with Medicaid programs that offer long-term care benefits, applicants have to prove that they exhausted every other available resource beforehand. Additionally, if the individual gains access to financial resources after they are accepted into a program, then those resources may be diverted to HSD to help cover the cost of provided benefits.
In the words of New Mexico’s own laws (NMAC §8.302.3.9[1]): “The New Mexico medical assistance program (Medicaid) is the payer of last resort. When resources are available from third parties, HSD administers a specific program to ensure that these resources are used to pay for the medical services furnished to eligible recipients.”
In making their determination of need, the HSD will perform a five-year lookback, searching for transfers of property that were free or below fair market value. If they find any such transfers, they may be reversed, and those assets must be spent down or placed in a Medicaid trust before the applicant can be considered eligible.
Below, we have listed some of the specific long-term care benefits programs that can trigger the need to put assets and income sources into a trust prior to applying.
“Institutional” care refers to inpatient services provided in a residential facility that has total responsibility for the care of the patient. These facilities provide room and board to the patient, making institutional Medicaid coverage the only type of benefits that apply to room and board.
Individuals who qualify for benefits to pay for the cost of their institutional stay must first meet criteria known as the “Nursing Facility Level of Care” or “NFLOC.” Individuals can only meet this criteria if they are over 65 (or under 65 and have a qualifying physical disability) and have been certified by a physician.
The test for NFLOC typically involves a questionnaire asking about the applicant’s daily routine and whether they need assistance with two or more of the following activities: eating, moving around, dressing, bathing, or going to the bathroom.
Applicants must also meet a needs test, as determined by analyzing their monthly income and their total owned assets.
A Medicaid waiver pays for the cost of in-home care or care in a facility that does not qualify as a nursing facility. These waiver programs allow recipients to receive the care they need to live a healthy, fulfilling life within the community, as opposed to inside of an in-patient residential institution.
An HCBS recipient may even be allowed to stay in their own home if supports can be provided to deliver a level of care equivalent to a nursing facility.
To qualify for a Medicaid waiver for HCBS, the applicant must be discharging (or have recently been discharged) from a Medicaid-approved nursing facility and still meet the criteria for NFLOC.
In New Mexico, HCBS waivers are provided under the Centennial Care Community Benefit Program.
Examples of in-community supports that can be rendered through the program include home health aides and homemaker services. These individuals can assist recipients with tasks like bathing, dressing, doing light cleaning, and eating meals.
Medicaid programs can also provide benefits for other medical care services, such as for paying emergency department bills.
In these cases, individuals must meet the needs criteria, but the state does not institute a five-year lookback to determine if any assets were transferred as a gift or below fair market value. Additionally, these benefits are not subject to estate recovery, unlike long-term care programs.
Because of these qualities, a trust may not be needed to qualify for services that don’t involve long-term care. You can verify with a New Mexico Medicaid trust attorney to be sure.
As described above, qualifying for Medicaid benefits can be extremely tough. Many households feel as if they have next to no money at all, but the applicant is still unable to qualify because of a technicality in asset ownership.
Below, we have listed the 2024 monthly income and asset requirements for eligibility for Medicaid long-term care benefits.
| Type of Medicaid Program | Monthly Income | Assets |
| Nursing Home Medicaid | $2,829 | $2,000 |
| Medicaid Waivers (HCBS) | $2,829 | $2,000 |
| Other Programs for the Elderly, Blind, and Disabled | $943 | $2,000 |
If two married individuals in the same household apply for Medicaid long-term care benefits, then the above limits will be combined to $5,658 in monthly income and $4,000 in total assets, based on when this was written in 2024.
If one spouse is applying but the other is not, only the applicant’s income is counted. However, the other spouse’s income may factor in if there is reason to believe they could be contributing to required medical expenses.
Non-applicant spouses can also exempt 50% of the total household’s assets, up to $154,140, from the total, at the time of this writing.
Most forms of income are counted when calculating the applicant’s monthly total, including:
For program eligibility determination purposes, some assets may be exempt from the total value calculation, including:
As mentioned above, when calculating the value of assets owned by an applicant, HSD will investigate financial activities in the period up to 60 months prior to the date of the application.
The purpose of this investigation is to determine whether the applicant has sold, transferred, or gifted assets to anyone for less than their full, fair market value. These sales and transfers may be reversed, restoring ownership of the asset to the applicant so that it can count towards their total ownership limit.
This process is referred to as the “lookback period.”
Federal laws require that New Mexico seeks to recover assets owned by the recipient of Medicaid long-term care benefits to repay the cost of their care.
Typically, this action is limited to placing a lien on the sale value of a home, but it may affect other assets owned. Any transfers are supposed to occur during probate.
Sale of the home may be delayed as long as someone residing there is a spouse, a child under the age of 21, or a child of any age with blindness or a permanent disability.
Again, the state performs a five-year lookback investigation to determine if the assets were transferred prior to the owner’s application for long-term care benefits.
If an individual has too much income to qualify for long-term care benefits, then they may be able to qualify by creating a New Mexico Medicaid trust.
The following types of trusts can be referred to as a New Mexico Medicaid trust:
Referred to as an “income diversion trust” by New Mexico law, these trusts may also be called a qualified income trust (QIT), Miller trust, income cap trust, or a number of other possible names.
The purpose of this trust is to divert income to an account that cannot be accessed by the trust creator, or “grantor,” except for extremely limited purposes.
These trusts are irrevocable and reversionary, meaning that ownership in assets reverts completely to the New Mexico HSD once the Medicaid benefits recipient passes.
The trust must also have a trustee who is not the grantor and who is, preferably, also neither the spouse nor child of the grantor.
Funds can be transferred from the account to the grantor only under the following circumstances:
Unlike many other states, New Mexico has no limit on the amount of income that can be deposited into an income diversion trust.
A special needs trust works similarly to an income diversion trust, except it can be set up by an individual other than the intended recipient of Medicaid benefits. The grantor can have income deposited into the account to cover basic care essentials and uncovered medical care costs.
Some special needs trusts are arranged by naming a non-profit organization as a trustee. In these cases, the special needs funds are accessed through a sub-account managed by the trustee organization.
Individuals can only avoid estate recovery by transferring assets well in advance of their need for Medicaid benefits.
By transferring assets into a non-grantor, irrevocable trust and preventing the grantor from having guaranteed distributions from the trust, it may be possible to prevent estate recovery if the trust is created five years before the grantor applies for benefits.
Navigating Medicaid’s long-term care benefits programs can be challenging for families. The rules are quite strict, and the likelihood of estate recovery can act as a major deterrent.
Nevertheless, many thousands of individuals across the state require long-term care and apply to receive Medicaid benefits as the only way to possibly pay for it. The risk that you could lose assets or not qualify for a program because of your income should not have to weigh heavily on that decision.
Reach out to our New Mexico trust attorneys for guidance and assistance when you need it most.
Find out how a New Mexico Medicaid trust, like an income diversion trust, could help you and your family during a no-obligation case review. Schedule a no-risk consultation with our experienced attorneys today when you call 505-503-1637 or contact us online.
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