A lawyer asked us recently to explain how Indiana Medicaid treats prenuptial agreements. The lawyer’s question referred to our blog comments on the subject in the April 2017 article titled: “Getting married? Get a prenuptial Agreement First!” We figured that our explanation of the matter may be good information for the blog, so we are circling back to the topic. This article begins a two-part explanation of how Indiana Medicaid deals with a remarried couple’s assets when one spouse requires nursing home care and the couple made a prenuptial agreement before they married.
Most experienced elder law attorneys understand how Medicaid law treats prenuptial agreements. Lawyers that do not practice elder law sometimes hire us as advisors to guide them when their clients required nursing home care. Our advice explanation to the lawyer that asked about our prenuptial agreement blog article began with an explanation of how Medicaid treats married couples.
Medicaid has special rules for helping a married person pay for nursing home care. Federal law refers to the ill or injured spouse as the “institutional spouse,” and it refers to the spouse living outside of the nursing home as the “community spouse.” The law requires the state Medicaid system to measure the total value of the couple’s money and other assets in two steps. This measurement of the couple’s wealth includes most assets that the couple owns jointly and separately.
In the first step, Medicaid measures the couple’s asset values that existed on the first day of the institutional spouse’s unbroken 30-day stay in one or more health care facilities. For example, the institutional spouse may go to the hospital after a stroke, and then transfer to a nursing home or rehab facility. If the institutional spouse goes directly from the hospital to the nursing home, the time spent in each facility counts toward the 30 days. Medicaid refers to this first asset management date as the “snapshot date,” and to the couple’s asset value as the “snapshot value.”
Medicaid exempts some assets from the snapshot value. For example, Medicaid disregards real estate owned by the community spouse, one vehicle, and the community spouse’s IRA accounts.
Medicaid counts all other assets, including joint accounts, life insurance policies, and the institutional spouse’s IRA accounts.
After Medicaid determines the snapshot value, the couple begins what some people call the “spend down.” The spend down is a process for the couple to reduce their asset values until the institutional spouse qualifies for Medicaid.
The Medicaid eligibility targets differ for the community spouse and institutional spouse. The institutional spouse can only keep $2,000, but the community spouse can keep more assets. The community spouse can keep the exempt assets that we previously mentioned in this article. The community spouse can keep up to 50 percent of the remaining assets, but not more than a maximum value ($126,420 in 2019). The federal government provides the same kind of cost-of-living increase in the maximum value that the community spouse can keep that the government provides for Social Security cost-of-living adjustments.
This simple example shows how the process works: Bill (the institutional spouse) and Sue (the community spouse) have a house, a $20,000 car, a $20,000 truck, $50,000 in the checking account, Sue’s $50,000 IRA and Bill’s $100,000 IRA. The house, one car, and Sue’s IRA are exempt, but the truck, the checking account funds, and Bill’s IRA are part of the $170,000 snapshot value. Bill can keep $2,000 and Sue can keep $85,000 (50 percent of $170,000), but they must reduce the snapshot value by $83,000 ($170,000 - $85,000 - $2,000 = $83,000). Once they reduce the asset value to $83,000, Bill should qualify for Medicaid.
We will explain the rest of the Medicaid eligibility process for Bill and Sue next month. The explanation will also explain how the prenuptial agreement that Bill and Sue made before their marriage affects Medicaid.
Jeff R. Hawkins and Jennifer J. Hawkins are Trust and Estate Specialty Board Certified Indiana Trust and Estate Lawyers and active members of the Indiana State Bar Association and National Academy of Elder Law Attorneys. Both lawyers are admitted to practice law in Indiana, and Jeff Hawkins is admitted to practice law in Illinois. Jeff is also a registered civil mediator, a Fellow of the American College of Trust and Estate Counsel and the Indiana Bar Foundation; a member of the Illinois State Bar Association and the Indiana Association of Mediators; and he was the 2014-15 President of the Indiana State Bar Association.
Find more information about these and other topics at www.HawkinsLaw.com, like us on Facebook, follow us on Twitter @HawkinsLawPC or call us at 812-268-8777. © Copyright 2019
Hawkins Law PC. All rights reserved.
About the Authors
Jeff R. Hawkins and Jennifer J. Hawkins have practiced in the areas of trusts, estates, and elder law for over 26 years. Both lawyers are Trust and Estate Specialty Board Certified Indiana Trust and Estate Lawyers and active members of the Indiana State Bar Association and National Academy of Elder Law Attorneys. Both lawyers are admitted to practice law in Indiana, and Jeff Hawkins is admitted to practice law in Illinois. Jeff is also a registered civil mediator, a Fellow of the American College of Trust and Estate Counsel and the Indiana Bar Foundation; a member of the Illinois State Bar Association and the Indiana Association of Mediators; and he was the 2014-15 President of the Indiana State Bar Association. Find more information about these and other topics at www.HawkinsLaw.com. © Copyright 2019 Hawkins Law PC. All rights reserved.