Medicaid Rules for Spouses: Will I Lose My Home?
When someone’s spouse needs nursing home care, the first fearful question of the healthy spouse is, “Will I lose my home?”
And, fortunately, the answer is no, You will not lose your home. Why is this the answer? Because Federal Medicaid law has provisions to prevent the impoverishment of the spouse who still lives at home. Connecticut’s regulations follow that law and specifically exempt certain assets which the healthy spouse is allowed to keep.
The primary exemption is the family home. So it is important to transfer the home to the healthy spouse. The only criteria is that the spouse live in that home as the primary residence. There is a restriction in Connecticut that the house cannot later be given to family members, but the healthy spouse can later sell the house and keep the proceeds. This is a beneficial rule because the healthy spouse may need care in the future, or want to sell the house and move to assisted living, or a condominium. There is no restriction on the value of the home when there is a married couple
The second most beneficial exemption is what is called the Community Spouse Protected Amount. The Department of Social Services will allow the spouse of a nursing home resident to retain one half of their non exempt assets, but not more than $109,950. By way of example, if a couple has $180,000 of non exempt assets, the community spouse can keep one half or $90,000. The sick spouse can keep $1,600, and the rest must be spent down. These rules do allow for expenditures on exempt items. Again, by way of example, if the family house needs a new furnace, part of the spend down could be for a new furnace.
Another exempt asset is an automobile, which the healthy spouse uses for transportation. So if you have an 18 year old car that you love, with only 60,000 miles on it, you might consider trading it in for a newer, more reliable model if you have to spend down money. That car will probably have more safety features and need less in repairs than old Bessie.
Although no one likes to think about it, prepaid funeral expenses are an allowed expenditure. In Connecticut, the exemption is $5,400, plus the cost of any burial spare item, which includes casket, vault, and headstone. In effect, anyone in Connecticut can fully prepay their funeral costs as a legitimate expenditure. The funeral home will know how to set up the pre paid contracts to comply with Connecticut law.
If you have life insurance policies, which have a total aggregate face value of less than $1,500, they are exempt. We have seen many older clients who have one or two $500 face value polices, and they are exempt even if the cash value exceeds $1,500, because the total face value is less than $1,500. If you have policies that total more than $1,500, you will have to cash some in or transfer them to get below the $1,500 exemption.
Personal property is always exempt, so a family does not have to worry about the value of the usual personal property they own.
This past year the Department of Social Services has clarified a significant regulation that permits a healthy spouse to annuitize an IRA or 401K, and no longer have that asset counted toward the one half Community Spouse Protected Amount. Again, by way of example, if the healthy spouse has a $50,000 IRA, and annuitizes it, the IRA will no longer count as an asset. This is complicated, because Connecticut will require that the State of Connecticut be named as the primary beneficiary if the healthy spouse dies before the sick spouse, and should not be undertaken without competent legal advice. The good effect, however, is that the healthy spouse will have the benefit of the income from the annuity for the rest of his or her life.
This brief summary of some of the Medicaid Spousal Impoverishment Rules is by no means a thorough explanation of all the Rules, nor does it provide the broader expertise and options that only a knowledgeable elder law attorney can provide.
So the word to the wise is, your home will not be taken if your spouse goes into a nursing home, but competent advice is needed to gain Medicaid eligibility and protect as many assets as possible for that healthy spouse.