If My Spouse Needs Medicaid, Will I "Lose" Half of My Assets?
In most cases, probably not. However, in some cases, a couple may end up spending more than half of their assets. By consulting with an elder law attorney, however, no assets should need to be consumed by nursing home care costs.
Let's start with an example of Bob and Jan. Their assets are as follows:
1. Real Estate (residence) valued at $100,000.
2. Checking account valued at $5,000.
3. Savings account valued at $20,000.
4. CD valued at $100,000.
5. Jan's IRA valued at $100,000.
6. Automobile valued at $10,000.
In 1988, Congress developed a formula for ensuring that the spouse remaining at home after the other spouse entered skilled nursing home care did not need to become impoverished to qualify for Medicaid. These spousal protection rules are important, and differ somewhat from state to state.
Let's assume that Bob enters skilled nursing home care, and the assets above represent the couple's assets as of Bob's date of admission.
To start, some of the couple's assets are exempt for Medicaid purposes. Their primary residence, their automobile, and the IRA or retirement accounts of the spouse remaining at home are all exempt, and are not counted towards Medicaid eligibility. The rest of their assets are countable. As such, Bob and Jan have $125,000 in countable assets.
The spousal protection rules require that half of these assets (up to approximately $120,000) are also exempt. As such, $62,500 of their assets will need to be spent (on something) prior to Bob qualifying for Medicaid, for purposes of financial eligibility.
Without any further planning, Bob and Jan could spend these assets on nursing home care, and once their countable assets fell below the cut-off amount, they would qualify for Medicaid (upon successful application). However, doing so would leave Jan with reduced assets for her future care, so they may want to consider other options.
Some basic options would include spending those countable assets on exempt purchases, such as home improvements or burial reserves. Even doing this should be done only under the guidance of an elder law attorney.
There are also more aggressive options, such as placing a sufficient amount of their countable assets into a Medicaid-Compliant Annuity, which converts the countable assets into an exempt stream of income to Jan. Any planning such as this really must be done under the guidance of a knowledgeable elder law attorney.
Thus, the formula above is what has given rise to the notion of needing to spend "half" of a couple's assets on nursing home care. However, with good planning, it can absolutely be avoided.