Medicaid Planning for Married Couples

An elderly couple spending time together with their dog.

As explained in past newsletters, the Medicaid rules often cause a lot of confusion. Rarely does a day go by that someone will assume that they cannot do anything to protect their assets. In fact, clients are often surprised to learn that the Medicaid rules actually do provide a number of legal strategies to protect assets. This newsletter focuses on planning options for married couples when one spouse requires nursing home care.

Recently, a client was seeking help because her husband had entered a nursing home after suffering a severe stroke. He had retired from General Motors and they had lived in the same home for decades. Their assets consisted of their home, one vehicle and approximately $150,000 in checking, savings and CD accounts. Like so many clients, she was terrified she was going to lose their life savings as well as their home. Fortunately, the Medicaid rules allow the client to legally protect their assets and continue to live in their home. Here are a few of the options available to the client:

1. Pre-pay funeral expenses. Under the Medicaid rules, it is permissible to prepay funeral expenses. This is often referred to as converting countable assets into exempt assets. If done correctly- typically through a life insurance policy or irrevocable funeral contract, the prepaid funeral is an exempt asset.

2. Home maintenance/repairs and new car. The client’s home was in need of some updates and their car was 12 years old. Because a home and one vehicle are exempt assets, it is permissible to spend money on these items.

3. Medicaid annuity. The Medicaid rules permit an annuity be used to protect assets. For example, with $150,000 in countable assets, one-half or $75,000 would be protected for the at-home spouse – this is called the Community Spouse Resource Allowance (CSRA). The remaining $75,000 would be subject to a spend down. Instead of actually spending the $75,000, an irrevocable Medicaid annuity could be purchased for $75,000. Provided that the $75,000 is distributed to the at-home spouse over a period not less than the client’s life expectancy, the monies will be protected in addition to the $75,000 CSRA. In other words, the client can keep all of the money without any spend down!

4. Burial space items. The Medicaid rules permit the purchase of burial space items for children and their spouses without incurring any penalty. Burial space items include burial plot, casket, crypt, vault, headstone, etc.

Please keep in mind that Medicaid planning is very fact-specific and not all of the strategies are advisable in every situation. Before spending down all of your hard earned assets, be sure to consult with an experienced elder law attorney.

This blog post is written by Brett A. Howell, Certified Elder Law Attorney. The blog is written as a service of The Elder and Estate Planning Law Firm, P.L.L.C. This information is for general informational purposes only and does not constitute legal advice. For a consultation to address specific questions, please call (810) 953-3846.