Medicaid is a federal needs-based assistance program managed by the Social Security Administration. Eligibility for benefits is determined by net worth and income of both spouses pooled together and totaled. The rules are very complex as to how much money must be spent down on one spouse while the other can maintain a spousal resource allowance. Regardless of the calculations, many couples find the idea of impoverishing a healthy spouse to allow the other to qualify for Medicaid a frightening approach to meeting long-term care needs.
Medicaid qualification also has a 5-year look-back window which means that you cannot transfer assets out of your name to other family members to attempt to spend down for qualification. To get around these issues, some couples have approached estate planning attorneys for assistance in what is referred to as a “Medicaid Divorce”. The segregation of assets pursuant to a decree of dissolution of marriage is not considered a disqualifying transfer.
This is an extremely complex strategy that impacts many other issues as well. The divorce also affects other government benefits such as SSI and Social Security Retirement Income. A divorce will change the amount of these benefits received by ending the couple status. The end goal is to calculate the financial needs of the healthy spouse to make sure this approach leaves enough income. This has to be configured through the lens of specific state laws. While Medicaid is a federal program, it is administered by state agencies, which each have different rules and approaches.
Some courts refuse to acknowledge these arrangements. The courts use case law precedents to discourage this practice of Medicaid divorce. The courts understand the primary reason for the divorce is simply the protection of a well spouse’s assets. The courts conclude this approach places an unfair burden on the state. Using a Medicaid divorce as an asset protection strategy requires an attorney well-versed in family law, estate planning and state Medicaid laws.
If you have concerns about long-term care needs, there are many approaches to asset protection available. An experienced attorney can help you explore options based on your specific financial situation. To get started, contact the attorneys at Stouffer Legal in the Greater Baltimore area for a consultation. You can schedule an appointment by calling us at (443) 470-3599 or emailing us at office@stoufferlegal.com.
