News & Insights

It is common for a client whose spouse is receiving Medicaid to lack adequate estate planning to protect those Medicaid benefits in the event the client dies before their spouse. Yet, after all of the time and energy spent to qualify for Medicaid, it would be awful to see those benefits lost simply because proper estate planning was not done.

In order to be eligible for Medicaid benefits the spouse receiving Medicaid (the “nursing home spouse”) may have no more than $2,000 in assets. The Medicaid applicant’s spouse (the “community spouse”) can keep additional assets. In general, the community spouse may keep up to a maximum of $126,420 (in 2019) in assets (sometimes more with proper planning). During the process of qualifying for Medicaid, assets are typically transferred from the nursing home spouse to the community spouse.

Typically, the community spouse has a will leaving everything to the nursing home spouse, which means that when the community spouse dies, the nursing home spouse will inherit the community spouse’s estate. This inheritance will cause the nursing home spouse to have more than $2,000 in assets; thus, causing the nursing home spouse to lose his or her benefits.

Even if the community spouse has a will that does not leave everything to the nursing home spouse, if the couple’s estate planning is not done properly, their nursing home spouse’s Medicaid may still be in jeopardy, since the nursing home spouse has a claim to a share of the community spouse’s estate. With proper estate planning, however, the community spouse can leave assets to enhance the nursing home spouse’s care and not jeopardize Medicaid benefits.

In conjunction with the updated estate planning, steps must be taken to make sure the couple’s home does not become a problem. Most often couples own their home jointly, if the community spouse dies, the nursing home spouse may have trouble classifying the home as an exempt asset that should not count towards his or her $2,000. In addition, if the community spouse sells the home, the nursing home spouse, as joint owner, must receive half of the proceeds from the sale. Depending on the value of the home, the proceeds may be too much for the nursing home spouse to transfer to the community spouse without jeopardizing his or her Medicaid benefits.

So, after you have gone through the hard work to get Medicaid benefits in place, your next step should be to contact an elder law attorney.  They can discuss your planning options and assist with the next steps to make sure those benefits will remain in place if something unexpected happens.