Medicaid Divorce and Asset Protection

As more elderly couples face the need for significant medical care, they are also looking to protect their assets in the event one of them becomes incapacitated and requires nursing home care. This has spawned a new term: “Medicaid divorce.”

A Medicaid divorce usually occurs when one spouse becomes seriously ill and both partners try to prevent the assets of the well spouse from being completely depleted caring for the ill spouse. The couple can use divorce to get around some of the stringent Medicaid requirements. For example, the rules forbid couples from living under the same roof and caring for each other without utilizing both couples’ resources. A divorce decree would involve the separation of assets and the dissolution of the marriage, which would then not require the healthier spouse to support the ill spouse. The Medicaid spouse would not get the benefits if both of them were still together. If the two were to divorce, they could still cohabitate and the non-Medicaid spouse would be able to preserve his/her own income and assets, as well as spend down the assets of the ill spouse.

Further, a divorce would also protect the primary residence from the Medicaid Estate Recovery program, because the primary residence could be transferred to the healthy spouse as part of the property settlement agreement. Thus, for former surviving spouse can enjoy the assets until he or she dies; after the spouse’s death, he/she can transfer the assets to the intended beneficiaries. By divorcing, the surviving spouse can keep the real property without it being subject to recovery.

Divorce laws differ in each state, and how the distribution of assets is handled also differs. If you should need Medicaid planning, going through a divorce may protect your assets. Speak with a skilled divorce attorney who can advise you regarding your legal rights. The attorneys at Hunziker, Jones & Sweeney, P.A. have the experience necessary to provide clients with the best possible outcome for their situation. Call (973) 256-0456 for a consultation.

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