For many families facing long-term care, a Medicaid spousal refusal strategy can be an effective way to protect assets and qualify for benefits. Unfortunately, there are many misconceptions about spousal refusal that can mislead seniors and their families. In this article, a New York elder law attorney offers insight into this controversial strategy.
Some of the common myths about spousal refusal include that it is illegal or unethical and that it is an easy way to get around Medicaid rules. However, spousal refusal is not against the law, and it is an entirely legitimate strategy that can be used in conjunction with other strategies for asset protection such as long-term care insurance policies or Medicaid asset protection trusts.
Moreover, the fact that it is common for middle-class families to tap into this government benefit in order to avoid financial ruin because of long-term illness should give us all pause. If these families are not paying their fair share for this expensive public service, we should all be concerned about the potential impact on future generations.
It is important to understand that spousal refusal is only an option for spouses who have adequate income and assets to support themselves after a divorce. Those who need assistance with living expenses should consider applying for a supplemental needs allowance through Social Security or another source of income-based benefits.
Spousal refusal is not a guaranteed way to avoid a transfer penalty or qualify for Medicaid, and it can also be expensive for community spouses who have executed the strategy. This is because local Departments of Social Services have different approaches to pursuing reimbursement for care paid on behalf of an applicant, ranging from aggressive pursuit of recovery to sporadic or nonexistent efforts. Therefore, it is essential to consult with an experienced New York elder law attorney regarding your individual situation and goals.
A recent proposal by the state’s Medicaid Redesign Team would eliminate a decades-old practice that allows one spouse to legally refuse to pay for their ill partner’s nursing home care and instead pass the bill to Medicaid. Known as spousal refusal, this strategy has become increasingly popular among middle-class families struggling with skyrocketing healthcare costs. Advocates for the strategy say it protects spouses from having to sell or give away assets in order to qualify for Medicaid and prevents them from having to get a divorce just to preserve their family’s wealth.
According to the proposal, eliminating spousal refusal could save the state about $100 million a year. While saving public funds is an obvious priority in tight budget times, it’s important to consider the impact of such a decision on many families. Elder law attorneys across the state have expressed strong opposition to the proposed changes and the state’s Department of Health is predicting an outpouring of public support to halt the elimination of the strategy.
The current Medicaid program allows married individuals with certain income and asset limits to qualify for long-term care benefits. New York state law requires that the spouse at home (known as the “community spouse”) may keep $3,850 per month of the couple’s combined income and up to $150,000 of the assets or “resources” owned solely by the community spouse. This includes the primary residence, one automobile, and some personal items. The asset limit excludes the spouse’s IRA, life insurance policies and annuities, and the spouse’s separate property.
Spousal refusal allows the community spouse to sign a letter declining to use their assets in the application process, which can be effective for five years. The non-applicant spouse can then use their share of the combined applicant asset limit and the community spouse resource allowance for whatever purposes they wish, including paying off debt, making home modifications, or buying necessary items such as hearing aids. The only catch is that if the community spouse makes gifts or transfers of countable assets over the course of five years before applying for Medicaid, they will be penalized and their eligibility will be delayed.
While there is a risk that the county will sue the community spouse to recover the cost of the institutionalized spouse’s care, the reality is that such lawsuits are rarely filed and are usually settled for significantly less than the amount claimed. For this reason, spousal refusal is an extremely valuable tool that many elder law attorneys recommend their clients consider.
When a spouse needs long-term care, it can become very expensive. Couples’ savings can be depleted very quickly. A long-term care Medicaid planning strategy known as spousal refusal can help them avoid the need to spend down all their assets to qualify for benefits and keep their remaining life savings.
The spousal refusal option allows a non-applicant spouse, sometimes called the “community spouse,” to lawfully refuse to contribute their income or assets towards the cost of the Medicaid applicant’s care. By submitting a spousal refusal, the community spouse is turning over responsibility for paying for their spouse’s care to the state, which may then sue them to recover costs at a much lower rate than private pay.
In exchange for the community spouse’s acceptance of responsibility for payment, the Medicaid agency will treat the applicant as a single individual when it evaluates their eligibility. This means that any assets and income belonging to the community spouse will be excluded from the applicant’s eligibility calculation. It should be noted that this approach does not protect against a transfer penalty, which is an assessment period that can be applied by the Medicaid agency to anyone who has transferred countable assets for less than fair market value in the five years prior to applying for Medicaid benefits.
Exploring the Benefits of Spousal Refusal in New York
The legal basis for spousal refusal is based on the concept that married couples are legally obligated to financially support one another. While the spousal refusal option does not prevent this obligation, it does shield a community spouse from the risk of having to pay for their spouse’s long-term care costs.
Elder law attorneys can explain the complexities of spousal refusal and the other asset preservation strategies that are available to seniors who require long-term care. These include pooled trusts, spend-down options, funeral trusts, and more.
When Is Spousal Refusal Appropriate?
Spousal refusal is a good option for couples with substantial assets who require long-term care. However, it is important to consult with an attorney specializing in elderly care and Medicaid planning before pursuing this option. An attorney can ensure that you’re not putting yourself at risk of a penalty period or lawsuit and help you explore other options to help with the cost of long-term care. To learn more about the options available to you and your family, speak with a skilled New York elder law attorney.
Schlessel Law PLLC | Long Island Elder Law Attorney
34 Willis Ave Suite 300, Mineola, NY 11501, United States
(516) 574-9630