When people marry for the second time (or more), losing assets to pay for their new spouse's serious illness is probably the last thing on their minds when they say “I do.” But that could happen. Current costs for nursing home care in Michigan are $8,469.00 per month or $101,628.00 per year. Studies show that 70% of Americans will need that kind of care, perhaps for three years or longer.
If one spouse in a marriage becomes ill, the assets of both spouses are, by and large, required to be spent on the ill spouse's care before Medicaid benefits become available, regardless of how long the couple have been married. In Michigan, Medicaid also does not consider in whose name the assets are titled or which spouse earned them. This could be a big problem, especially if money that the well spouse had saved for her children's inheritances goes to pay for the ill new spouse's care instead.
With careful planning, this need not happen. Financial arrangements can be made to protect the estate of the well spouse and to ensure that the spouse who needs care will be responsible to pay his or her own way.
The benefits rules do provide that the spouse who does not need care yet may keep an allowance of a certain sum for that spouse's benefit. This is known as the “Community Spouse Resource Allowance” (CSRA) or protected spousal amount. In Michigan, the protected spousal amount in 2019 is one half of the countable assets, but no more then $126,420.00. But many find that the CSRA is too small to permit the well spouse to maintain her standard of living, pay for her retirement, and still leave enough for her children to inherit.
Any planning or shifting of assets must be done very carefully and only after consulting with an experienced elder law attorney. The Medicaid rules penalize transfers of assets made without receiving value in return. Gifts, in other words.
Assets can be protected, though, by a number of strategies that are permitted by the Medicaid rules. Some or all of the well spouse's assets could buy a Medicaid-compliant annuity. This would provide an income stream for the well spouse, without the assets being otherwise deemed available to pay for the ill spouse's care. We can also go to court to adjust the protected spousal amount.
In turn, the assets of the spouse needing care could be transferred to people whom that person especially trusts: a trustee, or an agent for financial affairs, or a family member or beneficiary. That kind of transfer would be subject to penalty, but planned-for, using the strategies permitted under the Medicaid rules. Some relief from penalties can be achieved using existing Medicaid rules.
There are also insurance products available to provide for long-term care coverage, which any newly married couple – or everybody, really – ought to consider. Some forms of long-term care insurance do not have the use it or lose it feature of traditional policies.
The best strategy of all, though, is to consult an experienced elder law attorney as soon as possible. The sooner the consult, the more options are available and the more money can be saved.
When we embark on the adventure of marriage, nobody can tell what the future has in store. But with thoughtful planning, assisted by a qualified elder law attorney, you can relax and let the nuptial celebrations begin.