Medicaid Protecting Assets Through Divorce
By Pamela D. Wilson, CSA, MS, BS/BA, CG
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.
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. 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.
You realize that in order to take care of your husband you will have to spend down to a nest egg of only slightly over $100,000, 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?
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 would 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? It’s not an easy decision.
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. 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.
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