When a spouse needs long-term care, the spouse who remains at home often wonders what assets will be left to live on. Long-term care is exceedingly expensive. In the past five years, the cost has even surprised me. A nursing home can cost $12,000 to $17,000 a month. An assisted living residence can cost $9,000 to $15,000. A live-in home health aide can cost over $9,000 a month.
And the need for long-term care can, as the name suggests, last a long time. If you required care in a nursing home for the last three years of your life, the cost of your care could easily exceed $600,000 with incidentals. This is a cost that could easily bankrupt most Americans.
Care in a nursing home is a medical expense. New Jersey law states that one spouse is responsible for the other spouse’s medical debts. So, if the husband (wives need long-term care too but I’ll stick with the husband for readability’s sake) needs care in a nursing home, the wife is responsible for the bills associated with that care. Eventually, the husband may spend all of the couple’s money on his care, leaving the wife asking: What’s left for me? What assets will I live on now that my husband is in a nursing home and has qualified for Medicaid?
Because long-term care costs so much money, Medicaid has become the largest payor of long-term care costs. People simply run out of money paying for their care and need to qualify for Medicaid. A long stint of long-term care almost inevitably leads to Medicaid eligibility.
Medicaid is a government health payment program. To qualify for Medicaid, a person must have limited assets (typically less than $2,000) and insufficient income to pay for his care. Because nursing homes cost about $15,000 a month, most people have insufficient monthly income to pay for their care. When a person qualifies for Medicaid in a nursing home, most of his income is owed to the nursing home every month as his cost share; he pays his income to the facility, and Medicaid pays the remainder of his monthly bill.
But this leaves nothing for the wife. To avoid spousal impoverishment, the Medicaid program incorporated certain provisions into the law that permit the spouse who is still living at home—called the “community spouse” in Medicaid parlance—to retain certain assets.
The community spouse can retain the home. She can retain all the personal property (furniture, clothes, appliances, etc.) in the home. She can retain a car. She can also retain approximately $160,000 in cash assets. Finally, she can retain all of her income, and she may be able to retain a portion of her spouse’s income. The spousal income allowance is based on a rather complicated formula that is beyond the scope of this article, but know that she may be able to keep a portion (perhaps a large portion) of the ill spouse’s income.
Being able to retain the home is a valuable feature of the law. In Monmouth and Ocean counties, that home could easily be worth in excess of $700,000. The downside is that she can retain only $160,000 in cash assets, so if she wants to keep the home, she may have to tighten her belt after her husband qualifies for Medicaid.
In part, this is where an experienced elder law attorney comes in. Through proper planning, I have been able to save hundreds of thousands of additional dollars for the community spouse—by paying off mortgages and car loans, or by purchasing Medicaid-compliant spousal annuities that return hundreds of thousands of dollars to the community spouse, allowing her to live comfortably in retirement. The key is doing this planning within the confines of the law and working closely with the Medicaid office to ensure the planning is accepted.
A community spouse does not have to be impoverished because her spouse needs nursing home care, but if you simply let things happen when a loved one needs care, you could easily find yourself in dire straits. Contacting an experienced elder law attorney is essential.