Blog Series Part 6: Community Spouse Planning

Over the past few weeks this blog series has discussed many of the complex and varying rules that apply to obtaining Medicaid coverage for nursing home care.  Today’s post will hone in on one particularly complicated application scenario – when one spouse requires nursing home care, but the other spouse is healthy enough to continue living in the community.  Such situations offer several opportunities for financial planning, even after one spouse has already been admitted to the nursing home.  However, costly mistakes can occur if the financial strategies are approached without the advice of a knowledgeable elder law attorney.

The Basic Rules:

  • Federal and State law provides certain protections for a Medicaid applicant’s spouse who continues to live in the community (the “community spouse”). Those protections are designed to prevent the community spouse from total impoverishment.
  • The first protection is the “community spouse resource allowance” or CSRA. The State considers certain assets to be exempt from the Medicaid spend down process.  Examples of some of those assets are:  the couple’s residence, household goods and furniture, one vehicle, the community spouse’s IRA and several other items.  However, other assets are deemed NOT exempt from spend down, including checking and savings accounts, mutual funds, CD’s, and certain other financial resources.  Of the assets that are deemed “non-exempt,” the community spouse is permitted to keep ½, up to a maximum of $119,220 in 2015.  The remainder of the assets must be spent down by the institutionalized spouse before he or she can obtain Medicaid coverage.
  • The second protection afforded by law for the community spouse is something called the “monthly maintenance needs allowances” or MMNA.  As a general rule in Pennsylvania, the community spouse is permitted to retain income which is in his or her own name, instead of putting that money toward their spouse’s nursing home care.  However, in situations where the community spouse’s individual income is below a certain amount, a formula incorporating “shelter costs” such as mortgage and utilities expenses is calculated to determine an amount of additional income that will be allowed to that community spouse.  This MMNA can range from $1,992 to $2,980.50 (in 2015).  If it is determined that the community spouse’s income falls below their calculated MMNA, then income can either be shifted from the institutionalized spouse to the community spouse to bring their income up to the MMNA, or the couple’s non-exempt assets can actually be converted to an additional source of income for the community spouse.

Planning Opportunities

The most common financial planning strategy for the community spouse is to convert joint assets into a source of income.  Generally this is done by taking assets and using them to purchase a Medicaid compliant annuity in the name of the community spouse.  Bear in mind that the use of annuities in Medicaid planning is a frequently-changing area of law and should not be attempted without the advice of an elder law attorney.  Another common planning option is to use non-exempt assets to purchase exempt assets.  For example, non-exempt assets could be used to make home repairs, pay off a mortgage, purchase a new car, or create a prepaid funeral account, just to list a few examples.  Many people rush into making such purchases in anticipation of one spouse needing nursing home care thinking that it will help that spouse qualify more quickly.  What they often don’t realize is that they may be better off waiting to purchase non-exempt assets until one spouse has already been institutionalized.  The “snapshot” of assets used to determine the community spouse’s resource allowance isn’t taken until the other spouse has been admitted.  So, if assets are prematurely depleted prior to admission, it may result in the community spouse’s calculated resource allowance being lower than it would have been had the couple retained those assets up until they were actually admitted to the facility.

Proceeding with any of the above strategies can be treacherous without the advice of an elder law attorney who has specific knowledge about current Medicaid law.  The bottom line is that paying for nursing home care has become very complex, but solutions exist if you know the right questions to ask and plan accordingly.

This blog post was originally created by Joellen Meckley while she served in an “Of Counsel” position in our firm. While she no longer does that, we do maintain a  professional relationship and if you have any Elder Law needs, I’d recommend you reach out to her firm Meckley Law. If you need Estate Planning, please reach out to us.

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