It is probably the last thing on the minds of couples who are getting married for the second (or third) time that they think about losing assets because their new spouse is ill. But that could happen. Costs for long-term care have been rising significantly for years and are continuing to rise. Studies show that 70% of Americans will need some form of long-term care, which can last for three years or longer.
Paying for Long-Term Care While Protecting Assets
If one spouse becomes ill, the assets of both spouses are, by and large, required to be spent on the ill spouse’s care before Medicaid benefits become available. This could be a big problem, especially if the money that the healthy spouse had saved for their children’s inheritances goes to pay for the ill spouse’s care instead.
With careful planning, this need not happen. Financial arrangements can be made in advance to protect the estates of both spouses to ensure they can retain the assets they brought with them to the marriage.
Medicaid Community Spouse Resource Allowance
Medicaid rules allow the healthy spouse to keep an allowance of a certain amount for their benefit. This is known as the Medicaid Community Spouse Resource Allowance (CSRA). But many find that the CSRA is too small to permit the healthy spouse to maintain their standard of living, pay for their retirement, and still have something for their children to inherit.
Any planning or shifting of assets must be done very carefully and only after consulting with an attorney who has experience with Medicaid planning. Medicaid heavily penalizes transfers of assets made as gifts.
Assets can be protected, though, by using strategies that are permitted by the Medicaid rules. Some, or all, of the healthy spouse’s assets could buy a Medicaid-compliant annuity. This would provide an income stream for the healthy spouse, without the assets being otherwise deemed available to pay for the ill spouse’s care.
In turn, the assets of the ill spouse could be transferred to people whom that spouse trusts, such as a trustee, an agent for financial affairs, a family member, or a beneficiary. That kind of transfer may be subject to a penalty, depending on when the transfer is made in relation to when the spouse needs to begin receiving long-term care. Planning well in advance, at least five years, will help mitigate Medicaid penalties.
There are also long-term care insurance products available to provide for long-term care coverage, which every newly married couple – or everybody, really – should consider.
The best strategy of all, though, is to consult an attorney experienced with Medicaid as soon as possible. The sooner you start planning, the more options are available to you and the more money you can save. Contact us today to schedule a consultation to learn how we can help you plan for your future.
Our law firm is dedicated to keeping you informed of issues that affect seniors who may be experiencing declining health. We help you and your loved ones prepare for potential long-term medical expenses and the need to transition to in-home care, assisted living care, or nursing home care.
This article offers a summary of aspects of estate planning law. It is not legal advice, and it does not create an attorney-client relationship. For legal advice, please contact our office today at (954) 315-1169 to schedule a consultation.