Divorce As A Way To Soften Medicaid Qualification
Family Law — Interaction With Medicaid Rules
Steps can be taken to prevent the devastating cost of nursing home care — which averages $350 to $450 per day in northern New Jersey — from depleting your life savings. In order to avoid Medicaid’s five-year look-back rule, couples generally have to make plans five years in advance. THINK AHEAD. PLAN AHEAD. ACT NOW! Unfortunately, many couples do not think about the cost of long-term care until one of the spouses is about to enter a nursing home. “Crisis planning” is never as good as planning ahead.
Couples who wait may find themselves in the unfortunate position of having to spend a lifetime of savings on nursing home care, often leaving the spouse who remains in the community with insufficient assets and income to live comfortably.
Although it may be possible to protect the marital home if the well spouse (called the community spouse in Medicaid language) continues to live in it, Medicaid regulations say that he or she can protect 50 percent of the marital savings, but not more than $126,420. This is called the community spouse resource allowance or CSRA. Thus, a couple with $500,000 in investments must use all but $128,420 ($2,000 for the applicant and $126,420 for the spouse) before Medicaid will start paying for nursing home care. A couple with more modest savings of $100,000 can protect only $50,000.
A possibility is to consider a “Medicaid divorce” as a means of saving money for the community spouse. We recognize that the idea of divorcing a spouse you love can be an unpleasant and unacceptable idea. However, suppose a divorce results in a substantial saving that avoids impoverishing the well spouse (the “Community Spouse” in Medicaid language).
A hypothetical example will explain.
Let’s suppose a couple owns a house jointly and that each of the parties has bank accounts and investments valued at $500,000. Suppose also that the husband will soon need skilled nursing home care. Under Medicaid rules, the husband’s assets must be spent on his nursing home costs until he has only $2,000 left. The wife’s assets must also be spent for his care until her assets are $126,420. In other words, the wife must spend $373,420 of her money before her husband can qualify for Medicaid benefits. The reason for this is that Medicaid considers a husband and wife (or domestic partners) to be a single unit. The rules regarding qualification are established by statutes and regulations. There are ways to avoid the harshness of the rules, but options are limited.
If the parties are no longer married or in a domestic partnership, and if divorce proceedings are handled properly, the assets of the well spouse are not at risk.
If a divorce is handled properly, the assets will be divided in accordance with family law statutes, rules and case law. A property settlement and support agreement (PSA) will be signed, and a court order dissolving the marriage will be entered. The Community Spouse will be able to retain his or her assets in accordance with the PSA. When the Medicaid application is submitted, only the assets of the Medicaid recipient will be taken into consideration.
An alternative is for the parties to enter into a postnuptial agreement, dividing their assets without going through with a divorce. When the Medicaid application is submitted, the community spouse can refuse to contribute to the nursing home costs of the applicant. This is called “Spousal Refusal.” Although the Federal Medicaid law permits this, New Jersey’s Medicaid regulations purport to prohibit spousal refusal. There are, however, no New Jersey cases dealing with the subject. Cases in other jurisdictions, which are not technically binding in New Jersey, support spousal refusal. If a post-nuptial agreement to be approved, it must meet a reasonableness test.
One of the requisites of using divorce or a post-nuptial agreement is reasonableness. No one should attempt this action unless each spouse or domestic partner is separately represented by an attorney who is conversant with both Medicaid and family law.
Connect With Us For A Consultation
Call us at 973-208-2900 or contact the firm online to discuss whether a Medicaid divorce is appropriate for your family situation. At the law offices of Rudolph and Bloodgood, LLC, our understanding of the issues senior citizens face, along with our experience in representing clients in divorce matters for many years, makes our firm well-qualified to guide families through difficult times. We know the law, and we know the rights New Jersey law provides in family law cases.
To schedule your initial consultation with one of our attorneys, contact us online or call 973-208-2900. Our office in Riverdale is handicap-accessible and has adequate off-street parking. We are available during regular business hours in Riverdale and are convenient to New Jersey Route 23 and Route I-287.
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