Medicaid/Medical Assistance Crisis Planning for Married Couples

by Brian J. Hinkle, Esquire

With the cost of skilled nursing care exceeding $100,000 per year in some parts of Pennsylvania, a married couple's assets can be quickly consumed by the cost of one spouse's care in the event they become institutionalized in a skilled nursing facility. Assuming that a crisis plan is not implemented when one spouse enters skilled nursing care, an "institutionalized" spouse will become financially eligible for Medicaid/Medical Assistance only when the couple's "available" resources are reduced below a certain level. This process, known as "spend down," often leaves the healthy spouse, known as the "community spouse," with only a fraction of the resources they once had. The end result is an increase in the odds that the community spouse will become dependent on others in the future should they no longer have sufficient resources to support themselves.

Although certain resources are deemed unavailable and therefore exempt for purposes of spend down, many resources are not. For example, resources such as bank accounts, investment accounts and the institutionalized spouse's retirement accounts, are considered to be available resources. Currently, half of these available resources, up to a maximum of $119,220, are automatically protected from spend down and may be retained by the community spouse. This is known as the "Community Spouse Resource Allowance." A nominal amount, known as the "Institutionalized Spouse Resource Allowance," of either $2,400 or $8,000, is also exempted from spend-down. The remainder of the available resources, however, must be spent down prior to the institutionalized spouse becoming financially eligible for Medicaid.

This harsh reality can be avoided, however, if a crisis plan is put into place. The follow scenario illustrates the benefit of implementing an appropriate Medicaid crisis plan:

Jim, 75, and Jane, 68, own a home worth approximately $350,000; two cars, each worth $35,000; have $250,000 and $200,000 in their respective IRAs; and they have an additional $200,000 in a brokerage account. Both of their wills provide that their assets shall become the property of the surviving spouse upon death and that their two children will receive what is left after both have passed. However, Jim suddenly develops severe dementia, can no longer live at home, and enters a skilled nursing facility that costs $10,000 per month.

The home, one car and Jane's IRA are unavailable resources and do not need to be spent down on Jim's care. Conversely, Jim's IRA, the value of one car, and the brokerage account, the value of which totals $485,000, will be deemed to be available resources. If no crisis plan is implemented Jane will merely be able to keep $119,220 of the available resources. She will be required to spend the remaining available resources, $355,780, on Jim's care before he will become eligible for Medicaid/Medical Assistance. However, if Jane consults an experienced attorney and implements a crisis plan when Jim enters the skilled nursing facility, all of the available resources can be protected from spend down and Jim will immediately become financially eligible for Medicaid/Medical Assistance.

In my next article I will focus on pre-planning strategies for individuals and married couples that reduce or eliminate the need for crisis planning.

This article does not constitute legal advice and the transmission of information contained herein is not intended to create, nor does its receipt constitute, an attorney-client relationship between Mette, Evans & Woodside and the recipient.

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