Spousal Impoverishment Rules

Years ago, Congress, passed laws to protect a husband and wife family unit from being totally wiped out financially if one of them needed expensive long term care, at home or in a nursing home. Then Medicare and Medicaid regulations were adopted to implement those laws. Ironically, they are called spousal impoverishment  regulations, but the purpose is the exact opposite, which is to avoid  total impoverishment.

First, the family home is exempt as long as it is below the value of $906,000. That limit changes over time. The healthy spouse can be rest assured that owning the house won’t prevent eligibility for Medicaid and no lien is put on the house. But that is not the end of the story, because if the healthy spouse dies before the sick spouse, and the house is sold, the money will count against the sick spouse’s limit of $1,600 and could be lost if proper legal planning is not done. The healthy spouse needs a special will with a trust inside in case the healthy spouse dies first so the sick spouse can remain in the house, but will substantially protect the proceeds whenever the house is sold. Next, the healthy spouse can own a car, and can replace it with a newer model, if desired. Sometimes the newer models have electronic features that can confuse elderly drivers who are used to that favorite 20 year old car with only 30,000 miles on it, so that is a tradeoff between ease of use and safety and reliability.

A most important rule is for money and investments. The healthy spouse can keep one half of those, but not more than $130,380. That number goes up each year with inflation. So what happens if the countable assets are $300,000 or $600,000 or more? Here is where getting accurate advice is critical because there are provisions in the law that allow “spend downs” which does not mean you lose your assets. For example, credit card debt or mortgages can be paid down. Prepaid funeral contracts. can be bought. If the parents have a disabled child, any amount can be transferred to the disabled child and that will not prevent the parent from qualifying for Title 19. But this could cause problems for the disabled child if the child is on Social Security Income because the child can only have $2,000 to qualify for that. This requires careful and thorough planning. The healthy spouse can also do any repairs or
improvements to the family home or buy clothes or appliances.

After all desired items are purchased, and if there is still money above the limit, it is possible for the healthy spouse to buy a financial investment called a Single Premium Immediate Annuity, and the moment it is purchased it no longer counts as an asset against the sick spouse. This sounds too good to be true, right? Here is the catch. The annuity must name the State of Connecticut as the beneficiary if there is any money left in the annuity at the time the healthy spouse dies. That is so the state gets reimbursed for what Medicaid paid to take care of the sick spouse. Given this rule it is critical to do careful planning, taking into account the age and health condition of both spouses, the size of the assets, and all other options before buying the annuity. It is an option to use if there are no other viable options.

Deciding how to use the spousal impoverishment rules to the family’s best advantage requires thorough knowledge of the rules, and then applying those rules to the specific family situation. That is where the services of an experiences elder law attorney can be invaluable, because even if the Connecticut Medicaid Home Care Program could pay for 24 hour care in some circumstances, the family still needs
enough money to pay for the house, utilities, real estate taxes, home and car repairs, and let’s not forget food.

Getting thorough and competent advice that takes into account the family’s health, wealth and care needs is the path to not only getting the care needed, hopefully at home, but also to keeping out of the proverbial “poor house.” `