Sometimes, a couple can work their entire life – earning salaries, investing wisely, acquiring assets – and building up a small fortune through that hard work and smart money management. Then, one of them becomes impoverished. What happened? A string of bad choices? A sudden urge to spend wildly? One kicks the other to the curb? No. In these particular cases, one spouse intentionally becomes impoverished because having very few assets will actually benefit them.
How can having fewer assets be more beneficial than having many high-worth assets? When certain types of medical care are needed, a person may want to apply for Medicaid to cover their medical costs. When long-term in-home care, disability care, and especially nursing home care are needed, applying for Medicaid may be a good idea. The cost of nursing home care can be $5,000-$8,000 per month – and even well-off couples can struggle to afford this sort of monthly expense. A person may need long-term care for a number of years, and the cost of nursing home care over several years or more can drain the savings of many older couples. Once their life savings are gone, the spouse who isn’t in a nursing home may be left with very little to live on. This is why some aging couples consider not only estate planning and retirement planning, but also what spousal impoverishment means for their medical planning.
Spousal impoverishment is a Medicaid planning measure that couples may use when one spouse needs placement in a nursing home or other long-term care services, and the other spouse intends to continue living at home. There are spousal impoverishment rules that allow some of the income and assets of one spouse, or the joint assets a couple owns jointly, to be transferred to the spouse who stays at home (also known as the community spouse), while the spouse applying for Medicaid is no longer considered the owner of those assets. When a spouse applies for Medicaid, they may choose to make use of spousal impoverishment rules and apply for spousal impoverishment as well.
By utilizing spousal impoverishment when applying for Medicaid coverage, both spouses can benefit. The community spouse can retain income and assets, allowing them to live independently in their home. The applicant spouse who needs long-term care can qualify for Medicaid by not surpassing Medicaid’s asset limits.
Who qualifies for spousal impoverishment?
People generally qualify for Medicare at age 65. They may also qualify for Medicaid if they have certain conditions and financial needs. But who qualifies for spousal impoverishment? First of all, if a couple’s income level and countable assets are not too high to qualify for Medicaid, applying for spousal impoverishment would not be necessary. Medicaid does not consider certain assets when determining eligibility – namely, a home that is a primary residence, a car, and some end-of-life purchases such as burial plots, as well as some savings. Couples who have a monthly income that is too high to get Medicaid coverage, and those who have assets that put them above Medicaid’s asset limits, may want to think about spousal impoverishment. Individuals who need long-term care can learn more about Medicaid’s income limits, asset limits, and spousal impoverishment standards here.
What is the spousal impoverishment rule?
The spousal impoverishment rule exists to protect one spouse from indigence while providing the other spouse with needed medical care through the federal Medicaid program. When a person needs medical care but cannot afford it, they may apply for Medicaid. When someone needs long-term care, most commonly nursing home or assisted living care, they are expected to pay for a portion of it. This portion is based on what they can reasonably afford to pay.
With Medicaid – since they will have few assets in order to qualify for it in the first place – the person who needs care will pay a minimal portion of the cost. Without Medicaid, long-term care can be more expensive and over time can add up to several hundred thousand dollars or more. A couple who has not applied for Medicaid and spousal impoverishment may end up shouldering the cost of long-term care until their savings are depleted. Then, the spouse who needs care will likely be able to qualify for Medicaid, but the other spouse will be left with an empty bank account and household bills still coming in. By using the spousal impoverishment rule as a proactive Medicaid planning tool, the spouse who applies for Medicaid can get the level of care they need while letting the spouse who stays at home keep more of their income and assets.
To qualify for spousal impoverishment, a person must:
Qualify for Medicaid and have a condition requiring long-term care
Need long term care for more than 30 days
Have a spouse who is NOT enrolled in Medicaid
How to apply for spousal impoverishment
When it is determined that a spouse will need long-term care, they can apply for Medicaid and apply for spousal impoverishment as well. Assessing the assets that a couple shares, and determining which assets are countable towards Medicaid limits and which are not is a good step to take when long-term care is needed.
Estate Planning and Spousal Impoverishment
You can’t always know what life will throw your way. Some people are able to live independently at home until their final days, others may require months or even years of nursing care and medical assistance. Planning ahead for spousal impoverishment is not always possible – you might not know that you’ll need that type of care until something happens. But planning ahead for the future of your Estate is possible, and it’s always a good idea. When you plan ahead by putting a financial plan in place, you can take stock of your assets, itemize your valuables, name your Medical and financial powers of attorney, name your heirs and beneficiaries, and make your wishes known in legally binding, state-specific documents.
Here at Trust & Will, we simplify the Estate-planning process. Our estate planning documents are customizable and can be done online from anywhere, quickly and easily. Make sure that your Estate is in order for the sake of your spouse, your family, and your heirs with help from Trust & Will. Get started today!