Federal Medicaid Divorce Laws

By Cindy DeRuyter, J.D.

Federal Medicaid Divorce Laws

By Cindy DeRuyter, J.D.

Those who face potential long-term care expenses often have questions about Medicaid qualification requirements, which provides a safety net for low-income Americans who need help paying for medical expenses, including the cost of nursing home stays or other long-term care expenses that could accumulate in their senior years. To obtain Medicaid benefits, recipients must meet income and asset tests. Sometimes, married couples earn too much to qualify for benefits together and consider divorcing in order one to receive benefits without fully depleting the other spouse's assets.

Elderly man using a tablet

Medicaid Qualification Requirements

Medicaid is a benefits program created under the Social Security Act that, as of July 2018, provides health coverage to more than 66.7 million Americans. The program's funding comes from both the federal government and individual states. Each state administers its own program and has its own criteria for determining financial and nonfinancial eligibility.

Generally, applicants must use their own assets and income to pay for medical and long-term care needs first until they spend down resources to the limit allowed by state law. For married couples in which one spouse needs assistance paying for care, the spouse applying for Medicaid must report both spouses' incomes and assets, regardless of whether some of the assets are only in the well spouse's name.

Spousal impoverishment rules help avoid leaving the healthy spouse, or the community spouse, without sufficient assets or income to meet their own expenses when just one spouse needs Medicaid to pay for long-term care. These rules allow the community spouse to keep more of the couple's assets without jeopardizing benefits eligibility for the spouse who needs long-term care.

Lookback Period

Individuals and couples who want to protect assets from being used for future nursing home care sometimes want to transfer assets out of their own names. However, anyone considering giving away or otherwise transferring assets should do so with caution. Applicants for Medicaid must report gifts made or assets transferred for less than full value for the lookback period.

As of October 2018, this period is 60 months from the date of the Medicaid application. If there were impermissible transfers during the lookback period, the state applies a penalty period during which the applicant is not eligible for assistance.

Medicaid Divorce

A Medicaid divorce is generally not the result of irreconcilable differences or spousal problems. Instead, it's a term that describes situations in which otherwise happily married couples end their marriages in order to avoid using all of the couple's accumulated savings to pay for medical care. Because assets transferred from one spouse to the other as the result of a divorce decree generally do not trigger lookback period penalties, this strategy may help one spouse qualify for benefits while protecting the other spouse's financial well-being.

Since each state administers its own Medicaid program, there are differences in the ways states view these types of divorces. In some cases, courts handling such matters may not divide the couple's assets the way the couple wants them divided, even if both spouses agree with the proposed distribution plan.

Medicaid laws and divorce laws are complex. If you and your spouse have thought about divorcing in order to qualify for benefits, first understand your options and the implications of your decisions. If you know you want to file for divorce, review your state's rules and regulations so that you know what next steps are required of you both.

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