I had an interesting meeting recently with Marcia, who had made an appointment to talk about payment for her father Robert’s care in a skilled nursing facility. She was interested to learn how her father could qualify for Medicaid after having spent $250,000 privately paying for skilled nursing care from retirement and other savings accounts. We quickly realized that by prepaying funeral expenses for himself, his children and their spouses, Robert’s assets would be under the Medicaid resource allowance and he could be eligible for Medicaid the following month.

As we were wrapping up the meeting, however, Marcia off-handedly mentioned that her father was getting a divorce, initiated by his wife when he was admitted to the skilled nursing facility, in order to protect her assets. The presence of a current spouse could radically change the whole analysis. Robert had remarried after the death of his first wife and has a pre-nuptial agreement that splits the property in accordance with the assets each owned at the time of the marriage. They never commingled funds, so it was fairly easy to determine what each person owned.

In 2014, after Robert was admitted into a skilled care facility, Robert’s wife, Alison, moved to Rochester to be near her three children. She has $300,000 in available assets and her income is $600 a month from Social Security and a small pension. I explained that DSS will need to see all of her assets in regard to Robert’s Medicaid eligibility for the last 60 months and if she made any gifts there would be a sanction for those gifts since they are still legally married. I also explained that Medicaid laws allow her to keep $120,900 in assets, and she can buy funeral accounts for herself and her children and their spouses. She has not made any gifts in the last 60 months.

Deducting the $120,900, her funeral account of $9,100 and $45,000 in funeral accounts for her 3 children and their 3 spouses, she has $125,000 in excess resources. If she could get a divorce today, then she could keep those excess resources. The problem is that a divorce takes many months and a Guardian would have to be appointed to represent her husband. All of it will take time and money and the nursing home will be owed $12,000 for every month that goes by without resolution.

What can be done? I spoke with Alison’s attorney and suggested the following:

  1. Alison can buy the home from the child she is living with in Rochester for its Fair Market Value of $125,000.
  2. Because the cost of the home ($125,000) and her resource allowance ($120,900) are less than $300,000 she can use the difference ($54,100) to buy funeral accounts for herself and her children.
  3. By taking these two steps before June 1, she will have spent down her resources in such a way thatRobert will be eligible for full Medicaid coverage as of June 1.
  4. As a bonus, becauseAlison’s income is only $600 a month, she will get income of $2,422 a month from Robert to raise her income to $3,022 which is the 2017 Minimum Monthly Maintenance Needs Allowance for a Community Spouse in New York.

Everyone was greatly relieved to know that a divorce can be avoided, Robert will receive full Medicaid coverage immediately, the Community Spouse provisions will preserve all of her assets and she will receive an income supplement that she would have lost if there had been a divorce.

My only regret was that they hadn’t come to see me when Robert was first admitted to skilled nursing care. Using other planning options, Robert could have preserved all of the money in his retirement accounts and spent only a total of $50,000 on his care instead of the $250,000, saving $200,000 as a legacy for his children.