When one spouse is in a nursing home and applying for Medicaid, planning has to take into account the possibility that the “community spouse” (spouse not in the nursing home) may pass away first. This is because assets in the community spouse’s name at death passing to the nursing home spouse (the “institutionalized spouse”) will exceed the Medicaid limit for the institutionalized spouse.
To qualify for Medicaid, a recipient can only have assets of minimal value; in Virginia, that limit is just $2,000.
Careful planning allows the community spouse to maintain very substantial assets while the institutionalized spouse receives Medicaid.
Example: A husband suffers a stroke, becomes institutionalized, and his wife remains at home. In this case, the husband is the institutionalize spouse, the wife the community spouse.
The couple’s home and some or all of their other assets can be protected for her while he is receiving nursing home care, paid in whole or part by Medicaid. In addition, some or all of his income can be paid to her to support a dignified life.
However, suppose the wife dies first. Things will change for the worse unless that occurrence is part of the plan.
If she leaves those assets to her husband, her assets become his assets. They cause ineligibility for him, usually in the month following her death. If this happens, there are few ways to avoid ineligibility for the rest of his life. Worst of all, if there are assets remaining at his death, the Commonwealth claims the funds as a “super creditor” under complicated estate recovery rules.
What should the wife do to avoid this?
While she can write a will that disinherits him, Virginia (and most states) have laws that allow surviving spouses to claim a portion of the deceased spouse’s estate regardless of what the will says. This is called the elective or statutory share. The amount the spouse can claim varies from state to state, and in Virginia, depends on the length of the marriage.
The husband could disclaim his elective share, but then he lands in the fire from another rule: the “uncompensated transfer of assets”. Medicaid would penalize him by denying payment of his nursing home bill based on a complicated formula.
To avoid this, the wife could (and almost always should) write a will that leaves the husband’s elective share in a special trust, which is held by someone else, often a child or other family member, and used to provide for the husband’s needs that Medicaid will not discharge. When there are minor or disabled children (and even non-family members) there are additional options.
Just as every life is unique, so is every challenge. Our elder law attorneys have more than a century of combined experience in public benefits and related estate areas. Let us help you meet the challenges – you don’t need to walk alone.