Medicaid and the Death of a Spouse

By Ronald A. Fatoullah, Esq. and Stacey Meshnick, Esq.

When one spouse moves to a nursing home, it is often expected that this individual (the "institutionalized spouse") will be the first to die, but that is not always the case. There are ramifications if a Medicaid recipient's spouse ("community spouse") dies first. If proper steps are not taken, the death of a community spouse can lead to an increase in the institutionalized spouse's assets, thereby jeopardizing Medicaid eligibility.

In order to be eligible for Medicaid benefits, a nursing home resident may have no more than $14,850 in non-exempt assets. The community spouse is permitted to retain additional assets. In general, the community spouse may keep one-half of the couple's total "countable" assets up to a maximum of $119,220. Often, when one spouse seeks to qualify for nursing home Medicaid, he or she transfers assets to the community spouse.

The death of a community spouse can affect the amount of assets to which the Medicaid recipient is entitled, thereby negatively impacting Medicaid eligibility. An example would be a community spouse who dies and whose last will and testament leaves her estate to her husband, who is in a nursing home and receiving Medicaid. The additional available assets will make the institutionalized husband ineligible for Medicaid. Even if the community spouse's will did not name her husband as a beneficiary, New York State Law does not permit spouses to disinherit one another, and the surviving spouse is entitled to his/her "elective share" (the greater of $50,000 or one-third of the estate). Medicaid can require the recipient to assert this right and can assess a penalty if the survivor on Medicaid does not claim his share.

The couple's house can also become a problem if appropriate steps are not taken. Most spouses own property jointly. When a home is held jointly and the community spouse dies, the Medicaid recipient will own the house. The nursing home resident may have to prove an intention to return home in order for the house to be a noncountable asset that does not jeopardize Medicaid eligibility. (While eligibility may be maintained, a lien will be placed on the home in such a case.) If the resident sells the house, the proceeds from the sale will bring resources above the allowable level, making the resident ineligible for Medicaid.

To prevent a community spouse's death from affecting the institutionalized spouse's Medicaid eligibility, it is important that the community spouse update his or her estate plan. There are steps the community spouse can take to protect the spouse in the nursing home, including, but not limited to, setting up a trust. To find the plan that would work best for you, it is prudent to contact a knowledgeable Elder Law Attorney.

Ronald A. Fatoullah, Esq. is the principal of Ronald Fatoullah & Associates, a law firm that concentrates in elder law, estate planning, Medicaid planning, guardianships, estate administration, trusts, wills, and real estate. Stacey Meshnick, Esq. is a senior staff attorney at the firm who has chaired the firm's Medicaid department for over 15 years.

The law firm can be reached at 718-261-1700, 516-466-4422, or toll free at 1-877-ELDER-LAW or 1-877-ESTATES. Mr. Fatoullah is also the co-founder of JR Wealth Advisors, LLC. The Wealth Management Firm can be reached at 516-466-3300 or 800-353-3775.