MEDICAID: SHIELDING ASSETS

First published in Newsday Ask the Expert column on September 22, 2007.

The Problem: My husband is ill and may need to go into a nursing home. I have separate assets from my first marriage. Will they count when Medicaid makes a determination as to my husband’s eligibility for benefits?

The Expert: Linda M. Toga, estate planning and elder law attorney, East Setauket, N.Y.

The Rules: Yes. When a married individual applies for Medicaid, the assets and the income of the applicant and his or her spouse are taken into consideration. That is because spouses have a financial obligation to support each other if they have the means to do so. The fact that the assets in question are held separately by you, rather than jointly with your spouse, does not negate your obligation.

How It Works: As the “community spouse,” your husband may qualify for Medicaid even if you retain up to $101,640 in assets and up to $750,000 in equity in your primary residence.

The Strategy: If you have assets above the spousal limit, you may want to pre-pay certain expenses such as your mortgage, taxes, utilities and funeral expenses. Another option is to exercise your right of “spousal refusal.” This means electing legally not to contribute to the cost of your spouse’s care.

However, while spousal refusal may protect your assets during your lifetime, upon your death Medicaid would have the right to attempt to recover benefits from your estate. This right would exist even if you and your husband had entered into a pre-nuptial agreement in which your he waived his rights to any claim against your estate. Private agreements between spouses cannot trump a spouse’s financial obligation.

The Results: Once your husband’s Medicaid application has been approved, you might investigate placing your assets in a trust. Medicaid’s ability to recover benefits paid on your spouse’s behalf is limited to recovery against your probate estate. Transferring your assets into either a revocable or an irrevocable trust would remove those assets from your probate estate and potentially shield them.

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