Don’t get stuck with a ‘Medicaid Divorce’
Gail was devastated when she was told that divorce was the only way Tom would qualify for Medicaid. Gail and Tom are like many elderly middle class couples. They worked hard to give their four children better opportunities than they had. They were successful in marriage, and after a lifetime of ups and downs, were looking forward to growing old together. They saved their money and paid off their home. Tom was a grain elevator operator and later a bus driver for the school district. Gail raised the kids at home and then also went to work for the school district part time in food service.
When Tom was in his late 70s, he began to show signs of dementia. By his early 80’s, Gail had taken over most of the financial responsibilities and was spending all of her time caring for and assisting Tom. Then Tom fell, which ultimately lead to his admission to a skilled nursing facility.
After 45 days at the facility, a meeting was held with Gail, her son Rick, Tom’s social worker, the facility administrative staff, and Tom’s doctor. Gail learned that Medicare would only pay for another 50 days of Tom’s care at the facility. Gail would have to find a way to pay $6,200 per month for skilled nursing care.
Gail was told that if Tom qualified, Medicaid would pay the bill. Rick researched the issue and learned that in order for Tom to qualify, he and Gail could only have $2,000 in assets and no more than $2,163 in income. Realizing that a spend down of Tom and Gail’s assets would leave Gail destitute, Rick urged his mom to see an attorney and have a court divide their assets in a divorce.
What Rick didn’t know was that because Tom was already in a long term care facility, Gail has a better option available. Gail could ask the court to set aside assets to her, rather than divide assets and divorce Gail and Tom.
Under this option, no spend down of assets would be required if a court set aside assets to Gail. This set aside procedure is allowed under both federal and state law and provides the healthy spouse living at home with the ability to keep all or a significant portion of a married couples’ joint assets.
For example, a healthy spouse can have up to $123,600 of un-exempt community assets set aside to her not including exempt assets such as the home, car, household furniture and tangible personal property such as furniture, clothing, and jewelry. Additionally, because the healthy spouse may not have sufficient income to provide for her own needs, under federal law, up to $3,090 per month of the other spouse’s income can be set aside to the healthy spouse.
In Gail and Tom’s case, a set aside to Gail makes perfect sense, and it is a superior option to a “Medicaid divorce.” Gail is able to have their investment account of nearly $100,000 set aside to her as well as $2,700 in Tom’s monthly income. Gail can continue to live in their home because it is an exempt asset and because their equity in it is below the exemption amount of $572,000. Gail won’t have to liquidate her jewelry and personal things either because these items are exempt without any value limitation.
Even though Tom and Gail’s story is fiction, I am confronted with this same scenario frequently. The point is simply that divorce is not the only option, nor is it in most cases the best option. A set aside of assets and income to the healthy spouse should be the preferred option when it’s available.
Don’t let those you know get unnecessarily divorced only to qualify for Medicaid. If you or someone you know is in need of assistance with these issues, only competent legal counsel who have experience assisting with Medicaid eligibility should be sought.
Michael G. Millward, Esq., is an estate planning and business attorney. Michael previously practiced with Cassandra Jones, Esq., at Heritage Law Group, and started his own firm, Millward Law, Ltd., in April of 2017. He is a resident of Douglas County, and practices in state and federal courts in Northern Nevada. He can be reached at 775-600-2776.