Ask the Expert: Staying Eligible for Medicaid after the Death of a Spouse

Q. My mother, Rose, is a Medicaid recipient who has been in a nursing home for the past eight months due to Alzheimer’s. My father, William, has been living in the home where he and my mother lived for over 25 years in Fredericksburg, Virginia. They bought the house together when they moved from Stafford, VA down to Fredericksburg.  The mortgage is paid off and the house is worth about $200,000.  My dad also owns a car and has some other personal assets that were allowed under Medicaid, plus about $50,000 in CDs that Medicaid let him keep.  My dad was recently diagnosed with cancer, and because of his age, he doesn’t want to get any treatment for it. It was a difficult discussion, but my brother and I recently suggested to dad that maybe he should update his estate planning documents in case he dies before mom.  Does this make sense?  Are there planning options for my father that will not affect my mother’s eligibility for Medicaid? Would it be wise for my father to remove mom as a beneficiary altogether?

A.  It would definitely be wise for your father to update his entire estate plan. He probably has your mother named as his primary agent for all of his documents, and as his primary beneficiary of his estate if he dies first.  They probably also still own their house jointly. A huge issue arises if your father predeceases your mother. Because your mother is receiving benefits under Medicaid, she cannot own assets totaling more than $2,000. These are a few scenarios to describe what can happen if you father includes your mother as a beneficiary:

  • If your father were to predecease your mother and leave the house and his $50,000 in financial assets to your mom, then she will be knocked off of Medicaid until the house is sold and she has spent down (or legally protected) your father’s entire $250,000 estate until her countable assets are back below $2,000.  And she will have to reapply for Medicaid once her countable assets are again below $2,000. 
  • If your father disinherits your mother, then she will also be disqualified from Medicaid for a period of time.  This is because, as the surviving spouse, she is entitled to claim a one-third portion of her deceased husband’s estate (one third of $250,000 would be about $83,333). As a result, if your mother (or someone on her behalf) fails to claim that one-third portion of her deceased husband’s estate, Medicaid will assess a penalty — which is a period of ineligibility for Medicaid — against your mother because Medicaid would treat her failure to make the claim the same as a gift.  In your mother’s situation, by failing to claim one-third of your father’s $250,000, she would incur a penalty period of around 14 months!
  • If your father leaves your mother one-third of his estate, she will be knocked off Medicaid until she has spent down (or legally protected) that one-third of his estate.

To prevent your father’s death from affecting your mother’s Medicaid eligibility, it is important you’re your father update his estate plan. There are various steps that your father can take to protect these assets, including setting up a trust. If your father creates a trust, it could provide that if your father were to predecease your mother, the assets will bypass your mother and instead pass directly to you and your brother, either outright or in trust. In this case, the assets contained in the trust will not replace the government benefits, and will not affect Medicaid Eligibility. To find out more about strategies specific to your situation, be sure to set up an appointment with a Certified Elder Law Attorney, such as Evan H. Farr.

Evan H. Farr, CELA, is one of the leading Elder Law Attorneys in Virginia and foremost legal authorities in the Country in the field of Medicaid Asset Protection and related Trusts. The Fairfax and Fredericksburg Medicaid Asset Protection Law Firm of Evan H. Farr, P.C. is dedicated to helping protect seniors and their families by preserving dignity, quality of life, and financial security. Please call us or ask your father to call us at 703-691-1888 to make an appointment for a no-cost consultation to discuss your father’s situation and explore his options.

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About Evan H Farr, CELA, CAP

Evan H. Farr is a 4-time Best-Selling author in the field of Elder Law and Estate Planning. In addition to being one of approximately 500 Certified Elder Law Attorneys in the Country, Evan is one of approximately 100 members of the Council of Advanced Practitioners of the National Academy of Elder Law Attorneys and is a Charter Member of the Academy of Special Needs Planners.

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