The Blunders of a Blended Family: The Medicaid-Marriage Issue
Contributed by Caroline Currier
Marriage can feel like a new beginning for many young couples, while elderly individuals who are entering into second or third marriages will bring many things into this marriage—their children, their lifetime worth of assets and earnings (including that of their former spouse), and their health problems.
In another article on our blog, entitled “Keeping It Separate,” we discussed some basic protections that an individual can put into place to preserve their property in a new marriage such as a Prenuptial Agreement and a separate estate plan. However, most people are surprised to find out that neither a Prenuptial Agreement nor a separate Revocable Trust will protect your loved one’s estate from the long-term care expenses of their new spouse. This article discusses this unavoidable element of senior marriages that we refer to as: The Medicaid-Marriage Issue.
Medicaid is the only public insurance program that provides funding for room and board at a nursing home. Medicaid is a needs-based benefit, so individuals will only qualify if they have assets and income below a stringent threshold. When determining the financial eligibility of a married person, the Medicaid program will generally factor in the assets of both spouses, despite the fact that couples might have a valid prenuptial agreement or separate revocable trusts. If the combined assets of a married couple exceed the financial limitations, then the couple will have to pay for nursing home care privately, which can end up costing over $6,000 per month.
For a married couple, the financial threshold is around $126,420.00. This is true for ALL assets of both spouses other than their home and one vehicle. So the Retirement Accounts, Checking and Savings Accounts, Investment Accounts, certain Life Insurance Policies, as well as additional Real Estate and Vehicles, of both spouses must be spent down to $126,420.00 before Medicaid will begin paying the expenses of the ill-spouse.
For example, Tom and Betty are both in their mid-70s, and have been widowed. Tom and Betty each have three children by their former spouses. Tom is a retired U.S.P.S. Driver and Betty’s former husband was the C.E.O. of a fortune 500 company. Tom and Betty fell in love and were recently married. At the request of their respective children, Tom and Betty sign a premarital agreement stating that their assets shall remain separate throughout their marriage, and they honor that prenuptial agreement throughout their marriage, each maintaining their own separate bank accounts, investment accounts, real estate, etc. Shortly after their nuptials, Tom fell ill and required 24/7 care at a nursing home.
Although Betty and Tom have kept their assets separate, the Medicaid office will deny Tom benefits until their marital estate is spent down to $126,420.00. Even after Tom’s personal retirement and savings account has been spent down, Betty will have to continue financing Tom’s care month by month. After 24 months of Tom’s nursing home stay, Betty and Tom have spent over $160,000 ($7,000 per month).
Needless to say, Betty’s nest egg, intended for her retirement and long-term care needs, are rapidly depleted, whereas, had Tom and Betty planned for this event, Tom’s nursing home expenses would be paid by Medicaid within a shorter period of time.
If you have a comfortable relationship with your aging loved one, you might suggest that they simply cohabitate with their significant other rather than be legally wed. But since this generation grew up in a more conservative era than we live in today, cohabitation is less than appealing for an alternative to holy matrimony. If your loved one insists on tying the knot, then you should insist that they engage in some asset protection planning.
An attorney well-versed in elder law understands the Medicaid-Marriage problem well, and how to protect a family’s legacy from the associated pitfalls. Asset protection planning is similar to basic estate planning; however, it is designed for elderly individuals who want to protect a portion of their estates from the expenses associated with long-term care. This type of planning protects assets from the long-term care expenses of both an elderly individual and their spouse, meaning that an individual with an asset protection plan will not be forced to pay the nursing home expenses of their sick spouse. Family Trusts are often used in this planning, which allows children or loved ones of an elderly individual to manage property for their elderly family members. Not only do these Trusts provide protection from nursing home expenses, but they also provide greater protection of the assets from fraudulent dealings or mismanagement should their elderly loved one develop Alzheimer’s Disease or Dementia. The greatest benefit of asset protection planning, however, is that it gives elderly people an opportunity to choose the type of care they receive should they fall ill. If an elder can preserve their assets efficiently, then they have funds to pay for good care and comfort in their older years.
Because a bride and groom of any age are focused on their newfound happiness, loved ones are often looked to for sound guidance on the potential pitfalls of tying the knot after age 65. A failure for an elderly newlywed to plan could drain the individual’s own life-savings at a rapid rate. If you or an elderly loved one is considering or has already been married in recent years, consider discussing your situation with one of our elder law attorneys to learn more about your options for enhanced asset protection.