Divorce and Medicaid – Part 2

Last week I wrote about the recent calls we’ve received regarding couples in unhappy marriages where one spouse now needs care.  Even though they may have kept their finances separate for many years, under Medicaid rules the healthy spouse’s assets will be counted as well as the ill spouse’s assets when determining eligibility.

When we tell callers this they often are angry and/or disappointed, however, it doesn’t necessarily mean the assets all must be spent down.   Let’s first go over the basic rules.  In the case of a married couple the healthy or what is referred to as the community spouse can keep the home he/she lives in no matter the value and 1/2 of the countable assets up to a limit of $130,380 in 2021.

With respect to the income, Medicaid only considers the Medicaid applicant’s income for eligibility purposes.  The community spouse’s income does not factor into the equation.  Understanding these basic rules gives us opportunities to protect more than the minimum for the healthy spouse while qualifying the ill spouse for benefits.

For example, if the couple has a mortgage, paying down that mortgage converts countable assets to non countable assets, preserving them for the community spouse.  Selling the home and buying another primary residence is also an option.  The new home can be of greater value than the home that is sold, further protecting asset by, again, converting countable assets to non countable ones.

Selling the home and buying a new one does, however, is often not practical.  Next week we’ll talk abut some other options.