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October 14, 2004
Medicaid Planning for Married Couples
When it comes to planning for married couples, there are usually two scenarios. The first is when one of the spouses needs nursing home care immediately or is already in a nursing home, and the other is when both spouses are relatively healthy and there is time to do some planning.
The first thing that a married couple needs to know is how much money they can keep. Historically, if one spouse needed nursing home care, they could keep the first $90,000, plus their home, a car, and their personal belongings. Governor Romney thought that this was too much and as of January 1, 2003, the $90,000 amount was reduced to one-half, up to $90,000. Thus for people who have $90,000, they may only keep $45,000. Although the Governor slashed the asset limit in half for married couples, it is still generous compared with the $2,000 asset limit for a single person. All of the couple’s assets are valued on the snapshot date. This is the date of the first day of institutionalization. For many people this is the day they entered a hospital, prior to entering a nursing home.
The next harsh change in the rules for married couples occurred on September 1, 2003. That was the date that Massachusetts changed from an asset first state to an income first state. Now, this doesn’t sound bad, but if you are an elderly woman who committed your life to raising children instead of working, it’s really, really bad. In a nutshell, this repealed a special allowance to women who have a low monthly income to let them keep some extra assets so that they could continue to afford to live in their home after their husband went to a nursing home.
So what does a couple do if one of them enters a nursing home immediately? Because of the 2003 changes mentioned above, they can’t keep all of their money, so here are some options that are frequently used:
PREPAID FUNERAL – If your excess assets are not that much, you might consider spending them on prepaid funerals for both spouses. Because funeral expenses are one of the three allowable expenses during what is called the “Haley Spend-down period”, these will be treated as though they were paid as of the snapshot date. This means that even though you didn’t spend this money until a couple months after one spouse entered the nursing home, you will be treated as having reduced your assets on the day you entered the nursing home. Medical and nursing home expenses are treated the same way.
PURCHASE A NEW CAR – A couple is always allowed to own one car and it is treated as a non-countable asset. If your current vehicle is not in the best of shape and you were thinking of buying a new car, this is a good time to do it. This doesn’t mean that you can go out and buy the most expensive antique collector car, but getting a new Lincoln Towncar would not be a problem.
PURCHASE A HOUSE – As long as one spouse is living in the home, it is considered non-countable. If you are currently renting, you could convert your excess assets into non-countable assets by purchasing a new home. The only drawback to this is that it usually takes a while to locate and purchase the property, during which time you would be private paying.
PURCHASE AN ANNUITY – For most married couples, purchasing an annuity is the easiest way to reduce their assets to an allowable amount to achieve Medicaid eligibility. Purchase of an annuity converts excess assets into income of the spouse at home that is not counted for purposes of eligibility. This can allow the sick spouse to achieve immediate Medicaid eligibility, but there are some drawbacks. In order for the annuity to be a qualified annuity, it must be irrevocable, non-transferable and non-assignable. The downside to these restrictions is that if the spouse receiving the annuity payments later needs nursing home care, those payments will end up going to the nursing home. Another problem area is when the assets that will be used to purchase the annuity are made up of highly appreciated stocks. These could generate a large gain, and lots of taxes, when converted to cash to pay for the annuity.
This is a sampling of a few of the techniques available to married couples when one of them needs nursing home care immediately. There are many others that are beyond the scope of this article, as well as other planning options for couples who do not need immediate placement in a nursing home. What you should understand is that in most cases a qualified elder law attorney should be able to help you protect your home and most of your other assets when one spouse needs nursing home care.
This article gives general information and not specific advice on individual matters. Persons wanting individualized advice on matters discussed should contact an advisor experienced in those matters. To the extent this article provides information on legal matters, it is based on law in effect in Massachusetts on the date of posting (laws in effect in other states are often quite different).
Ronald H. Surabian is a CPA and attorney who works at the Elder Law Center in Saugus, Massachusetts. He also holds a masters in accounting and a masters in tax law. He currently serves on the board of directors of the Massachusetts Chapter of the National Academy of Elder Law Attorneys. If you have any questions please call me at the Elder Law Center, One Essex Street, Saugus, MA 01906 (781)233-4444. To view this or any prior article, please visit our web site at www.elderlawcenter.org