If either you or your spouse is facing a long-term serious illness or disability, you probably have a multitude of concerns. Serious health issues are one of the most difficult challenges anyone can face. Mounting health care costs can add worries about the well spouse being left impoverished or children being left without resources. Becoming eligible for Medicaid assistance might help alleviate some of these concerns, but Medicaid eligibility is based on strict criteria that many married couples are not able to meet. In some cases, even happily married spouses consider divorce as a possible tool to help manage the financial burden of a serious health crisis.
What is Medicaid?
Medicaid is a federal needs-based health care program administered by the states. Eligibility is based on income and available financial resources. Individuals who are over 65, or are blind or disabled, and have income or resources too high to qualify for regular Medicaid, may qualify for limited health coverage as “medically needy” individuals, and in some cases this coverage will include the cost of placement in a long-term care facility. The medically needy program includes a “spend down” provision that allows income to be reduced by documented medical expenses in calculating eligibility requirements.
More information on Medicaid eligibility is available from your local Orange County Social Services Department. Although the requirements are complicated and differ based on individual circumstances, the income and resources of both spouses is always included in determining eligibility for married persons.
Financial Preservation and Medicaid Eligibility
If long-term care is a possibility for either you or your spouse, you may be concerned about protecting assets for the use of family members, particularly if you have younger children. A couple cannot meet Medicaid eligibility requirements for an ill spouse simply by transferring away assets for less than fair market value, as the Medicaid eligibility determination includes a “look back” over a certain period of time prior to an application, and there may be a penalty period of ineligibility if any such transfers were made during this time. Other options are available that may allow a couple to preserve assets acquired during marriage and still allow an ill spouse to become Medicaid eligible. One of these options is restructuring assets by way of divorce.
Divorce as a Medicaid Planning Tool
State laws differ both with respect to the handling of Medicaid assistance in general and with respect to the treatment of divorce as a tool for Medicaid eligibility. If you are considering divorce to allow a disabled spouse to become eligible for Medicaid, it is very important to consult with an attorney who is familiar with the laws of your state.
Current Florida law permits a couple to transfer assets to a well spouse for purposes of establishing Medicaid eligibility only incident to the entry of a court order by a Family Part Judge. A Family Part order transferring one spouse’s income or assets to the other spouse will supersede the Medicaid regulations requiring consideration of spousal resources in determining Medicaid eligibility. This is sometimes referred to as a “Medicaid Divorce,” as couples choosing this process may be very happily married but faced with no choice other than to divorce or face financial disaster.
If you are considering this option, proceed with great caution and only with attorney assistance. There are many factors involved, including the possibility that the ill spouse’s needs may not allow equitable property distribution and payment of alimony to be based on the standard of living enjoyed during the marriage. Sometimes a “Special Needs Trust” will need to be established and funded to preserve assets received by an ill spouse in the equitable distribution. There may be additional financial considerations as well; including whether or not the divorce would impact other benefits one or both spouses may be eligible for, including future benefits such as social security.
There is no guarantee that a judge will order the division of property in accordance with a spousal agreement, nor is there a guarantee that Medicaid won’t assess a penalty. Medicaid will scrutinize the distribution for fairness to the ill spouse. Capable and highly skilled attorney assistance can maximize the chances of a beneficial outcome for everyone.
Although spouses considering Medicaid Divorce commonly consult an attorney together, the process is best handled with separate attorneys for each spouse. This is especially true where one spouse has diminished capacity or anticipates having diminished capacity in the future. Even where both spouses are fully capable of understanding everything involved in the proceeding, separate attorneys should be engaged due to the possibility that the agreement will appear to be financially unbalanced in favor of the well-spouse. If the ill spouse obtains representation from an elder law or disability law attorney, the process may be conducted as a collaborative venture outside of court while still ensuring that the interests of both spouses are fully protected.
If you and your spouse are wondering if a Medicaid Divorce might help your family, you may have to sort through some very mixed and complex emotions. The attorneys at CPLS can provide you with the information needed and will help answer all of your questions. If you believe that a collaborative process might fit your needs, we can help you explore this possibility. Contact us today at 407.647.7887 or 877.647.7887 for an initial consultation.