A recent New York Post article featured the tale of a man who was accused of taking advantage of spousal refusal in order to avoid paying for his wife’s nursing home care. Unfortunately, this type of scheme is far from uncommon, and it is critical that all seniors understand how spousal refusal works as part of their overall Medicaid planning strategy.
In New York, married couples can keep about $3,850 of their combined income and up to $150,000 of their assets or “resources.” The spouse at home, also known as the community spouse, may use her own resources to pay for long-term care without being required to contribute to the cost of her husband’s or other family member’s care. However, the combined applicant asset limit and Community Spouse Resource Allowance must be considered carefully when deciding on how to preserve assets.
The cost of nursing home care is a major concern for many seniors and their families. It is not uncommon for a married couple to lose their entire savings through the payment of the ill spouse’s long-term care. Therefore, a key aspect of a comprehensive long-term care plan is preserving the assets of the healthy spouse in order to ensure that they are able to obtain coverage for their own care.
Spousal refusal is one of the most important tools that is available to assist in this planning. It allows a healthy spouse to transfer their assets into the name of the non-applicant spouse prior to applying for Medicaid so that those assets are not considered in meeting the applicant’s asset and income limits. These transfers are done without penalty and do not count against the applicant’s Medicaid eligibility.
This is a very important Medicaid planning tool that should be used in conjunction with other strategies when trying to preserve assets. A qualified elder law attorney can assist in calculating the exempt assets, determining the amount of money that is in excess of the Community Spouse Resource Allowance, and weighing whether or not Spousal Refusal might be a good fit for the client’s individual circumstances. A qualified professional can also assist in avoiding the pitfalls of using this strategy by providing guidance on avoiding Medicaid penalties and/or negotiating and settling Medicaid reimbursement claims at the most favorable terms possible.
While the term spousal refusal may sound selfish and uncaring, it is in fact, a positive step that will help the well spouse maintain some of their own wealth for future use. The ability to use this planning strategy is not available in every state, but New York is one of the few states that recognize it outright as a legal option. This year, in fact, New York elder law attorneys successfully lobbied to retain the spousal refusal option and repeal expanded Medicaid estate recovery rules in the final budget passed in late March.
With the high cost of long-term care in New York, many seniors are considering divorce as a means to preserve their assets and qualify for Medicaid. However, before pursuing a divorce it is important to understand the options available for preserving your assets by way of Spousal Refusal.
When married couples divide their property in New York, courts are required to do so according to the principles of "equitable distribution." As such, when deciding how to divide marital property, a judge will consider many factors in order to ensure that all assets are distributed fairly, but not necessarily equally. This is particularly true in cases where some assets are considered separate property by the court (e.g., real estate or a business owned before marriage).
In addition, the court will also look at assets that were acquired during the course of the marriage, including those that were gifted to one spouse by a parent. However, even though a gift from a parent may be deemed separate property by the court, it can be considered marital property if the spouse acted in good faith to give the asset away and/or if the gift was intended to support the spouse during the marriage.
Additionally, the court will evaluate the length of the marriage and each spouse's ability to earn income to determine if alimony is appropriate. This is the reason that determining alimony awards can be so complex, and why it is important to have experienced legal counsel who can assist you with your case.
Spousal Refusal is a federal Medicaid law that allows for the protection of a community spouse from becoming impoverished as a result of Medicaid's income limits for nursing home benefits. By pursuing a spousal refusal, the community spouse can refuse to have their income included when evaluating the limits for Medicaid eligibility, and as such, can retain significant assets.
Because of the numerous nuances and considerations regarding property division and spousal refusal, it is always recommended to speak with a divorce attorney who can review your individual situation and provide you with the best legal advice. The attorneys at our firm are experienced in these areas of the law and can help you navigate the process as efficiently and effectively as possible. Contact us today to schedule a consultation. We look forward to hearing from you.
Spousal Refusal sounds mean-spirited and selfish, but for many couples with a spouse who requires long-term care, this planning option may be critical to their financial survival. Long-term care is extremely expensive. In fact, the national average cost of a private room in a nursing home is $7908 a month ($94,896 a year). Paying for that type of care can easily deplete a couple’s nest egg. This is why the government has created Medicaid, which can help pay for the majority of an individual’s long-term care costs. But in order to qualify for Medicaid, an individual must meet certain income and asset limits. The federal law known as Spousal Refusal was enacted in the late 1980s to protect individuals who are married from being forced to spend down all their assets (except the marital home and a vehicle) just to qualify for long-term care benefits.
Spousal refusal allows a community spouse, also called the “well spouse,” to refuse that their individual income be considered in evaluating the spouse’s eligibility for Medicaid long-term care benefits. This provides a mechanism to prevent the good spouse from being impoverished just to qualify their husband or wife for Medicaid coverage.
New York is one of the few states that still recognizes spousal refusal as a legitimate planning tool for elderly couples with substantial amounts of assets. This article reviews when a community spouse may want to consider signing a spousal refusal and how the strategy compares to other asset preservation options, including long-term care insurance or Medicaid asset protection trusts.
Although a spousal refusal may seem counter-intuitive, it is an important tool to consider for those who wish to maximize their Medicaid benefit potential and protect their savings. It is critical to seek the advice of an experienced law attorney in New York before considering a spousal refusal or any other Medicaid planning techniques.
Although a spousal refusal is not necessary in all cases, it can be used as an effective tool for many married couples who are seeking eligibility for Medicaid long-term care benefits. To learn more about how to protect your assets against high long-term care expenses, contact us to schedule a consultation with an estate planning attorney. We serve clients throughout New York.
Schlessel Law PLLC | Long Island Elder Law Attorney
34 Willis Ave Suite 300, Mineola, NY 11501, United States
(516) 574-9630