Medicaid Protecting Assets Through Divorce
By Pamela D. Wilson, MS, BS/BA, CSA, NCG
Financial issues, especially those involving health care issues, become more prominent as we age. Divorces due to impending Medicaid or long term care issues due to Alzheimer’s, Parkinson’s, and multiple sclerosis with high costs of care are becoming more common from a sense of practicality.
Caregiving is stressful in situations where health is complicated. Caregiving can become too much. There are times when caregivers become hopeless especially when costs of care skyrocket and concern exists about how to pay for the bills and for health care.
Disability in Early Life
What would you do if your husband became suddenly disabled and the disability was expected to last the rest of his and your life? You find yourself in your fifties with years of expensive care at home or in a nursing home ahead of you.
America’s healthcare system is not friendly toward seniors. Without advocacy skills and knowledge of the caregiving and health care systems, caregivers are challenged to find better than average care for spouses and aging parents.
You Tried to Plan for Retirement
Over the years you and your husband have saved and built a financial nest egg. You had the foresight to purchase long term care insurance, however, when he decided to purchase, he could not qualify because of health issues. Thoughts of a happy retirement are now consumed by thoughts of a Medicaid divorce.
A Medicaid divorce is a divorce on paper to allow the separation of financial assets. Spouses continue to live together. The goal is protecting the money of the healthy spouse so that all funds are not spent for the total care of the sick spouse.
Medicaid Spend Down
You realize that in order to take care of your husband you will have to spend down to a nest egg of slightly over $105,000, the amount allowed you by the government as the “community spouse”.
Investment and property other than the home in which you live will have to be sold. Cash value life insurance policies will need to be redeemed to pay for care.
How do you even begin to estimate the costs of care and divide assets? As a caregiving expert, I have been involved in estimating the costs of care for adults with chronic illness. Medicaid divorces are becoming more common because they offer equity in not placing the future care of the healthy spouse at risk.
Poor Health Derails Retirement Plans
As a spouse, you are angry and concerned about the situation. You both worked hard to prepare for retirement and for your long term care needs.
Now the health care needs of your husband is about to derail the rest of your life. What should you do?
Is it better to divorce now and divide your assets in order to protect the healthy spouse from financial disaster or do you stick together knowing that you’ll spend almost every penny caring for your ill spouse and then have nothing left for yourself? A Medicaid divorce is not an easy decision.
End of Life Care Planning
End of life planning can be challenging. Loved ones disabled in middle age can live long lives with chronic illness. Older adults diagnosed with Alzheimer’s or Parkinson’s disease can require significant care that often leads to nursing home placement.
While many older adults want to avoid nursing home placement, this is not always possible when care in the home becomes too much. With the cost of nursing homes averaging $300 per day or over $100,000 per year, Medicaid divorces become more practical.
Some of you have heard of “Medicaid planning”. While this can be a good idea, it’s only good if you have children that are 1000% trustworthy because through these plans an irrevocable trust is established giving your children all of your assets. Consult an attorney and fully understand your options before making decisions about a Medicaid divorce or Medicaid planning.
While this works in some families, I have personal experience with others where the children refused to use the money for care of parents or placed their parents in substandard care communities for the rest of their lives.
Money complicated family care issues especially if children do not have the same values and character as the parents who raised them. The best plan is a plan that avoids Medicaid by planning for the long term and purchasing long term care insurance early so that health issues do not result in a decline.
© 2012, 2013, 2019 Pamela D. Wilson, All Rights Reserved.