REVISITING THE FORTUNATE SPOUSE

In a previous column, The Fortunate Spouse, I discussed the Medicaid laws governing the treatment of a couple’s income after one spouse had qualified for Medicaid benefits. In that column I gave an example of the income allowance that Medicaid would make for the spouse who was not residing in a nursing home, called the Community Spouse.

In this column I will discuss how Medicaid treats a couple’s assets. So many people come to my office with misconceptions regarding Medicaid’s treatment of a couple’s assets. Many believe that because an asset is owned by the spouse who does not require nursing home care that the asset does not have to be used to pay for the nursing home.

For example, assume that the husband requires care in a nursing home and that the wife owns an IRA worth $50,000 – there are a lot of people who believe that the wife can keep the IRA no matter what and that the IRA does not have to be spent to pay for the husband’s care. But this may or may not be true.

The truth is, for purposes of Medicaid, a couple’s assets are pooled. The couple is one economic unit when it comes to the assets they own.

You may recall from my previous column that this is not the case with income. Medicaid does not pool the couple’s income. If the husband has $1,000 a month in income, that is his income for purposes of qualifying for Medicaid. If the wife has $500 a month of income, that is her income, and it does not count against the husband when determining his Medicaid eligibility.

Regarding assets, Medicaid will allocate a certain dollar value of assets to the wife. That is the dollar value that she can retain. The maximum dollar value of assets that the wife can retain is currently $89,280. This number is indexed for inflation and typically rises every January.

If the couple had assets worth $1,000,000, the wife could keep $89,280 of those assets. If the couple had $200,000 of assets, the wife could keep $89,280.

But the $89,280 figure is a maximum, not a guarantee. Only if the couple’s combined assets meet or exceed $178,560 (which is $89,280 times 2) will the wife be able to retain $89,280 of the couple’s total assets. If the couple’s combined assets are less than that sum, the wife will be allowed to keep one-half of the couple’s assets.

In other words, if the couple had assets worth $150,000, the wife would be able to retain $75,000. If the couple was worth $100,000, the wife would keep $50,000. And so this goes until you reach a minimum level of assets.

Currently, the minimum is $17,856. Given the minimum, if the couple owned assets worth $20,000, the wife would be permitted to retain $17,856 of those assets.

What doesn’t matter is which member of the couple owns the asset. If the couple only owned $50,000 of assets and that $50,000 was an IRA in the wife’s name, the wife would still only be permitted to retain $25,000 of that IRA.

The good new is, in addition to the “cash” assets, of which the community spouse can, in most instances, retain one-half – the community spouse is also entitled to retain the couple’s house, most items in the house, and one car. If a couple owns a house worth $250,000 and other assets worth $200,000, the wife could keep the house and $100,000 of the cash assets.

The best news of all is, with proper planning, consulting with an Elder Care Lawyer, the couple may be able to retain the vast majority of the cash assets – as well as the house, most items in the house, and the car.

Knowing what the non-institutionalized spouse is entitled to keeps finances secure and avoids surprises. Planning ahead ensures both spouses are protected during long-term care transitions.

The goal of these rules is to prevent the spouse at home from being left without resources, but the outcome depends on how assets are categorized and applied. Looking closely at those distinctions can make a meaningful difference in what is preserved.