Is Gray Divorce Necessary to Qualify for Medicaid?

In the mid-1980s, young Jennifer was shocked when her grandparents divorced after 60 years of marriage, around the same time her grandfather became sick with ALS. She was convinced that her grandparents’ love was enduring, which is why Jennifer couldn’t believe that when her grandfather was suffering, that her grandmother would desert him like that. Her mother explained to her that nursing home bills would consume her grandparent’s entire life savings and all their income, leaving her grandmother penniless if they stayed married, and that they had no choice but to end their marriage. She understood, but couldn’t believe it had to come to that.

The divorce, as Jennifer recalls it, allowed her grandfather to qualify for Medicaid and her grandmother to stay solvent. Jennifer’s mother, Anne, recalls that in those years divorcing was one of the few ways to keep elderly people’s assets and income within their family’s control while still qualifying them for Medicaid. (Luckily, things have changed.)

Now, Anne is in a similar situation with her second husband, Rick, who has dementia which is getting worse. She is not sure how much longer she can care for him in the home, and is looking into nursing home care for him. However, she was shocked at the price tag of $12,000 a month, and knows there is no way her family can afford that for very long. She is pondering whether she will have to divorce the husband that she loves very much, who she promised she would be with “in sickness and in health,” as her parents did thirty years ago, because they had to.

Is Gray Divorce is a Bad Idea? 
  • Marriage is More Than Just Finances: For many people, including Anne and Rick in our example, marriage involves more than just finances, and the idea of divorcing a loving spouse of many years is unconscionable.  The healthy spouse, as was the case with Anne, may feel as if she is deserting her sick husband, and the couple will have to deal with the public nature of the divorce proceedings. 
  • Divorce May Not Go As Planned: In a divorce, there is also always the possibility that the judge will not order a division of property in accordance with the parties’ desires or even in accordance with the parties’ written agreement.  A divorce may be worthwhile only if a judge grants all of the assets to the healthy spouse.  Yet a judge may be unwilling to do so if he feels that the sick spouse with high medical costs deserves more.  The judge may also view the parties’ agreement as an act intended for Medicaid eligibility only and may be unwilling to use court authority to help the healthy spouse engage in Medicaid Asset Protection. 
  • What if your loved one is no longer competent?: There is also the issue of incompetence.  Getting a divorce is much more complex when a guardian ad litem has to be appointed by the court for the spouse who is no longer competent.  Legally, it would be the guardian ad litem’s duty to report to the court as to what is in the best interest of the incompetent spouse, and the guardian ad litem might not be concerned about the best interests of the healthy spouse. If this is the case, it could be difficult for the couple to obtain their desired financial outcome. 

What about prenuptial agreements and second marriages? 

With increased frequency, older people are getting married or remarried later in life. In such cases, prenuptial agreements are often used to preserve assets for children of prior marriages. However, even when formal prenuptial agreements are not created, the spouses often have informal agreements and arrangements for segregating at least some of their assets. Unfortunately, all such agreements are ignored for Medicaid-eligibility purposes. The assets of both spouses are pooled together and totaled to determine:
  • The spousal resource allowance
  • The amount that the institutionalized spouse must spend on his or her own medical care 

You CAN qualify for Medicaid WITHOUT Divorce 

Since the late 1980s, federal laws have included protections against “spousal impoverishment,” allowing the healthy spouse to retain a modest income — depending on the state of residency, currently between $1,991.25 and $2,980.50 per month for all states except Alaska and Hawaii. Spousal protection laws also allow the healthy spouse to keep half the couple’s assets – but this is currently capped at $119,220. Such changes allow seniors to keep more assets and income and still qualify for Medicaid. However, by doing Medicaid Asset Protection with an experienced Elder Law attorney such as myself, almost all married couples can protect 100% of their assets and still obtain Medicaid, without needing to get divorced.

Sometimes a Medicaid Divorce is the Best Option 

Despite the fact that divorce is not necessary for most married couples in order to protect assets and get Medicaid, sometimes a Medicaid divorce is the best option. For example, if the spouse who is in a nursing home has very high income and the healthy spouse has very low income, getting a divorce in order to shift some or all of the income to the healthy spouse may be the best way to protect the healthy spouse.  Another reason for getting a Medicaid divorce may be to shift retirement account money.  In some states, and in the District of Columbia, IRAs and other qualified retirement accounts are considered exempt assets for purpose of Medicaid qualification. Let’s say a husband has $500,000 in an IRA and needs nursing home care in DC.  Through a Medicaid divorce, we can have some or all of the husband’s $500,000 IRA turned into an IRA belonging to the wife through the entry of a Qualified Domestic Relations Order.  Once the IRA belongs to the wife, it is then exempt.  These are two instances where a Medicaid divorce can be extremely beneficial financially.  And just because a couple gets divorced doesn’t mean that the healthy spouse is abandoning the ill spouse.  On the contrary, the divorced couple will typically stay “together” for all intents and purposes, and the healthy spouse will hopefully remain by the side of the ill spouse till “death does them part.

Did you know that as an expert to the experts in Elder Law, I train other attorneys on Elder Law issues including divorce and Medicaid?  At the Farr Law Firm, we help couples such Anne and Rick obtain Medicaid assistance without having to deplete their life savings. With proper planning, a spouse who is able to stay at home can retain all of the couple’s assets and most or all of the income while Medicaid takes care of the nursing home.  We aim to ensure that the spouse who is remaining at home is able to maintain his or her dignity and standard of living. Since Medicaid is extremely complex and confusing, this is NOT something you can do on your own. Read more about the services we offer to help couples in similar situations.

If you have a spouse or other loved one who is nearing the need for assisted living or nursing home care, or already receiving assisted living or nursing home care, please call us for a no-cost initial consultation for Medicaid Planning and Medicaid Asset Protection in Virginia, DC, and Maryland:

Fairfax Medicaid Planning: 703-691-1888 
Fredericksburg Medicaid Planning: 540-479-1435 
Rockville Medicaid Planning: 301-519-8041 
DC Medicaid Planning: 202-587-2797

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