Advance planning with professional help is your best ally in dealing with this dreaded scenario.
What happens when one spouse needs long-term expensive care in a nursing home and they want to apply for Medicaid, so the other spouse’s quality of life won’t be wrecked?
nj.com’s recent article, “Married and protecting assets from Medicaid,” explains that when a single person applies for Medicaid, he or she must have no more than $2,000 in assets to meet Medicaid's eligibility requirements. However, the rules for married couples are different.
Medicaid deems the married couple to be one unit. Therefore, it doesn’t matter which spouse owns the assets. If you need Medicaid, you can’t just transfer your assets to your spouse in order to qualify. There are certain assets that are exempt from Medicaid rules. These include the primary home (if at least one of the spouse’s lives in it), a car, and term life insurance that doesn't have cash value. The healthy spouse can keep those. However, anything else is countable.
Medicaid totals the countable assets and divides them in half. The healthy spouse (called “the community spouse”) gets to keep one half of those assets, but only up to a maximum of just under $121,000. Everything else must be spent down to become Medicaid eligible.
But what if I divorce my spouse and keep all the assets? Provided there’s a valid prenuptial agreement in place that establishes what you can keep, this may be a solution. But, if you just want to shift all the assets to the community spouse by a divorce, the state probably will challenge that when it comes time to apply for Medicaid.
Remember, there’s also a five-year look back rule if you transfer assets that are gifts and not purchases or other legitimate expenses. These transfers don’t stop a person from applying and receiving Medicaid benefits. However, the transfers penalize the recipient by delaying the amount of time until he or she can be eligible for benefits.
Your best bet is to speak with a qualified elder law attorney, in advance if possible, who will explain how Medicaid works, review your financial situation and determine which strategies might be used to protect assets. The attorney will also be able to help, when it’s time to file a Medicaid application.
Reference: nj.com (December 13, 2017) “Married and protecting assets from Medicaid”