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The Elderlaw Forum -- Contemplating divorce: "Medicaid Style"
Professor Michael Myers
Wednesday, June 3, 2009
Marriage is expensive. It can be impoverishing, particularly when a spouse, at age 61, enters a nursing home for life.
The financial drain can lead to divorce, “Medicaid Style.”
A call to the senior legal helpline probed the divorce option. “I still love her,” said the husband, also 61. “At nearly $6,000 per month, her care will leave me virtually bankrupt within a couple of years. We still owe $120,000 on the house. I’m making $440-a- month car payments, and we have two kids in college. She says we should divorce, put her on Medicaid.”
“Should I? What happens if I do?” he asked.
He earns about $95,000 a year. His wife hasn’t worked since 1995 after suffering a stroke. If she applied for Medicaid they would first have to spend down their assets to qualify for long-term care assistance. Exempt assets include the home, $2,000 in assets, a reasonable burial fund, a car, jewelry, and clothing.
State law requires spouses to pay for each other’s “necessaries” -- e.g., housing, food, clothing, medical costs, and, as in this case, nursing home expenses. If they remain married, he will be entitled to use community spouse anti-impoverishment protections. He can retain his earned income and, for 2009, non-exempt assets totaling as much as $109,560 (or as little as $21,912), depending upon the state.
Their home will remain exempt as long as he lives there; however, their home will be subject to Medicaid’s recovery provisions upon his death or in the event he leaves their home. Their jointly owned investments would be subject to the $2,000 asset spend-down for her share. Any transfer of her share of assets to him would be a “transfer of property for less than fair market value” and subject to a penalty period.
The caller is four years from retirement and Medicare eligibility. He had planned to withdraw a lump sum from his retirement fund to pay off the mortgage. “This has ruined our plan to leave the house, or at least its value, to our daughter, a single mother who will need a home to raise our two grandchildren,” he said.
The 2009 divorce rate, comparing the number of marriages to the number of divorces, is 60%, yielding hundreds of thousands of dissolved marital contracts. Baby boomers find less disgrace in divorce. Divorce, “Medicaid Style,” is expected to increase.
(Pro bono legal information and advice is available to persons 55 and older through the USD Senior Legal Helpline, 1-800-747-1895; firstname.lastname@example.org. Opinions are solely those of the author and not the University of South Dakota.)