Medicaid Eligibility and Second Marriages
B.
Douglas Hayes
Seniors who get remarried after the death of a spouse
are often concerned about what will happen to their assets if their
new spouse enters the nursing home in the future. They are concerned
that the assets they saved with their first spouse could be lost for
providing for themselves. They also want to make sure that when they
die their assets will go to their children.
Seniors getting remarried will often enter into prenuptial
agreements. The prenuptial agreement makes the senior more comfortable
that the second marriage will not cause her children to lose their inheritance.
The prenuptial agreement usually provides that each spouse's
assets are their own and that the other spouse has no claim to the assets
of the other. This lets each spouse leave all of his assets to his own
children upon his death. Without the prenuptial agreement, under Indiana
law the surviving spouse has the right to elect against the will of
his deceased spouse and often claim about half of the estate of his
spouse.
However, although the prenuptial agreement will protect
the senior's assets from claims of his surviving spouse when he dies,
the prenuptial agreement does not protect his assets from his spouse's
nursing home expenses. Seniors who have entered into second marriages
are often surprised to learn that the prenuptial agreement that said
their spouse had no claim to their assets does not prevent Medicaid
from counting the assets of the spouse at home in determining Medicaid
eligibility.
Medicaid is the governmental program that pays nursing
home costs when a senior runs out of assets. Until the nursing home
resident has less than $1500 of countable assets, he must pay his own
nursing home costs. But when, on the first of a month, his countable
assets are less than $1500, Medicaid will begin paying the senior's
nursing home costs.
But just because the nursing home spouse has less than
$1500 of assets does not necessarily mean that the nursing home spouse
will be eligible for Medicaid. Instead, despite the prenuptial agreement,
Medicaid looks at the assets of both spouses. The rules for determining
Medicaid eligibility are exactly the same for couples with prenuptial
agreements and those without them.
However, this does not mean that all of the assets of
both spouses must be used up before Medicaid will begin paying nursing
home costs. Congress passed what are known as the spousal impoverishment
rules to keep the spouse at home from having to be completely impoverished
before Medicaid begins paying nursing home costs.
The spousal impoverishment rules base the amount that
the spouse at home can keep on the resources the couple has at the time
one spouse enters an institution. Resources are counted (often referred
to as a "snapshot" of resources) as of the date a senior first
begins a period of continuous institutionalization. This can be either
when the senior enters a nursing home or when he has first entered a
hospital. So if a spouse first enters a hospital, and then a nursing
home, the snapshot is taken based on the date of admission to the hospital,
not the nursing home.
The spouse at home is permitted to keep half of the couple's
countable assets as of the snapshot date up to $90,660, but the spouse
in the nursing home is limited to $1,500 of countable assets. The spouse
at home is also permitted to keep a minimum of $18,132 of countable
assets.
Certain assets are not countable in determining how much
the spouse at home is allowed to keep. The spouse at home can have any
amount of real estate, one car of any value, household goods, furnishings,
and personal effects, and none of these are counted. Most other assets
are counted in determining how much the spouse at home is allowed to
keep.
For example, if a couple had assets of $100,000, a house,
and a car, when one spouse first became institutionalized, the spouse
in the nursing home would be eligible for Medicaid when the $100,000
was spent down so that the spouse at home had less than $50,000 and
the nursing home spouse had less than $1500. The spouse at home would
also be allowed to keep the house and the car.
If the couple had $250,000 of countable assets in addition
to the house and the car, Medicaid eligibility would be established
when the spouse at home had less than $90,660, and the nursing home
spouse had less than $1500. This is because the spouse at home can keep
half of the assets, but only up to a maximum of $90,660.
If, on the other hand, the couple had only $15,000 of
countable assets in addition to the house and car, the spouse in the
nursing home would be immediately eligible for Medicaid. This is because
the minimum allowance for the spouse at home is $18,132, and if the
couple has less, no portion of the countable assets must be spent down
before the nursing home spouse will be eligible for Medicaid.
These rules apply both to couples with prenuptial agreements
and those without them. However, the Medicaid rules do not require the
couple to spend the other half of the funds on nursing home expenses.
The spousal impoverishment rules only provide that Medicaid eligibility
will be established when the couple's assets are reduced to these figures.
The rules do not require that any particular amount must be spent on
nursing home costs.
This allows planning opportunities for a couple when
one spouse enters a nursing home. Although the prenuptial agreement
does not protect the assets of the spouse at home, with proper planning,
most of the assets of the spouse at home can be preserved for that spouse's
care.
An elder law attorney can help a couple work through
these issues. With proper planning, when seniors get married for a second
time, not only can assets be protected upon their death, they can also
be protected from the financial risks of their new spouse having a long-term
nursing home stay.
Doug Hayes is a partner in the law firm of Yoder,
Ainlay, Ulmer & Buckingham in Goshen, Indiana, practicing in the
areas of estate planning, probate, and elder law.
While information in this article is believed to be
accurate, it is educational and general in nature, and should not be
construed as legal advice. Please consult your attorney for specific
legal advice. Yoder, Ainlay, Ulmer & Buckingham, LLP © 2003
Yoder,
Ainlay, Ulmer & Buckingham, LLP