Preventing Spousal Impoverishment

In many households across the country, couples are facing the problem where one spouse requires long-term nursing care while the other remains independent. As discussed earlier, providing this long-term care can drain away a couple's assets. As a result, many couples are threatened with the spousal impoverishment of the "community spouse," the one who remains in the home.

Because almost all of a couple's assets must be spent or disposed of before Medicaid kicks in, the community spouse is left with very little on which to live. In response to this dilemma, Congress established criteria that allow the community spouse to retain an even greater monthly income and a greater share of the couple's assets than before.

With the "community spouse resource allowance," the non-institutionalized spouse may keep an additional percentage of the couple's assets beyond those a couple can own and still qualify for Medicaid. Each state can decide a dollar figure for the community spouse allowance, but this amount must be equal to or lower than the maximum amount established by federal law. Therefore, the amount of allowance provided in each state varies.

The maximum amount of assets that may be protected in a shelter is determined by Congress, and is increased annually to reflect rising costs of living. In addition to this protection of assets for the benefit of the community spouse, a monthly income may likewise be retained. Allowances may also be made for dependents (including children, parents, or siblings) who are living with the community spouse. Because these amounts increase annually and may vary from state to state, it would be advisable to contact an attorney early in the estate planning process to ensure that the amount of the client's income and assets protected will be optimized.

Despite these allowances for income and assets, nursing care may still deplete too large a percentage of a couple's assets, leaving feeling threatened by poverty. Early asset distribution and increasing equity in exempt assets are typical responses to these concerns. The purchase of long-term health care insurance is another. Still others opt for divorce. Obviously this is not a popular alternative due to the emotional turmoil it causes for all parties concerned. However, where incapacity is imminent or has occurred, it is an option that merits consideration. If the couple proceeds with an uncontested divorce, the community spouse by agreement can retain a larger portion of the couple's assets, without concern for the applicability of asset transfer restrictions. The institutionalized spouse also can decline alimony or other support.

Due to the turmoil surrounding the institutionalization of a partner, the needs of the community spouse may be ignored. The different needs of both spouses must be determined and met to help ease this inevitably difficult transition in a couple's life. Contact our office to discuss these important issues.

Legal advice varies depending on the facts; for that reason, the information contained in this bulletin should not be acted on without consulting a lawyer.

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Craig Westfall

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