Could Qualifying for Medicaid Require a Gray Divorce?

 Posted on July 30, 2024 in Divorce

Although most divorces result from two spouses no longer wanting to live together, there are exceptions, most notably among gray divorces, when one spouse needs long-term nursing home care. A gray divorce is one between older spouses, usually 60 and up. Although Medicaid requirements have changed over the years—to some extent—there are still situations that could benefit from divorce. In other situations, divorce is desired by both parties, and Medicaid eligibility is simply a by-product.

As of July 2023, Medicaid was the primary payer for more than 62 percent of nursing home facility residents. Medicare pays for about 13 percent—but only for up to 100 days—and the remainder of nursing home costs are paid out-of-pocket or through private insurance. Since the average cost across the United States for a nursing home is about $8,000 per month for a shared room and $9,000 per month for a private room, few can afford to self-pay. Having an experienced Northville, MI divorce attorney help you sort out the details of your specific situation and determine the best solution can be invaluable.

 Do You Have to Divorce So One Spouse Can Receive Medicaid?

It is important to note that for many people, marriage is much more than finances, and divorcing a spouse they have been married to for decades for financial reasons can seem unconscionable. There is also always the chance that a judge will not order a division of property according to the wishes of the spouses—or even in accordance with a written agreement between the spouses.

If a judge determines the divorce is only for Medicaid eligibility, they could refuse to agree to the asset division. If there is a prenuptial agreement in place that you feel would allow the asset division to go as planned, you should know that for Medicaid eligibility purposes, prenuptial and postnuptial agreements are not considered.

How is Medicaid Eligibility Determined?

When Medicaid is determining eligibility for one spouse, the assets of both spouses are added together to determine the resources left for the healthy spouse as well as the amount the ill spouse must spend on their own medical care. Since the late 1980s, federal laws have protected against "spousal impoverishment," which allows the healthy spouse to retain a modest monthly income and to keep half the couple’s assets (capped at almost $120,000).

Medicaid "spend-down" is another option that can potentially help a couple remain together while the ill or disabled spouse still qualifies for Medicaid. This allows those with income or assets above the Medicaid eligibility limits to "spend down" those resources on healthcare-related expenses. Excess assets can also be used to pay off outstanding debts and to prepay burial and funeral expenses. Certain home modifications and repairs may be eligible under the spending down of assets, and specific trusts may also be able to contribute to the "spend down."

Is a Medicaid Divorce the Best Option?

Suppose your divorce is for multiple reasons—as most are. You want a divorce so that you can move on with your life, but you also want to ensure your spouse is able to qualify for Medicaid nursing home costs. In such situations, a gray divorce that allows an ill or disabled spouse to qualify for Medicaid while still allowing the healthy spouse to have their own future may be the best option for all concerned.

For example, if the spouse who needs nursing home care has a much higher income, while the healthy spouse has a very low income, a divorce can help shift some of the higher income to the lower-income spouse. If the ill or disabled spouse has a significant amount in his or her retirement fund, a divorce could shift some of that money to the lower-income spouse. These scenarios assume the ill spouse would rather the healthy spouse receive the assets than Medicaid, which may not always be the case.  

Contact an Oakland County, MI Divorce Attorney

An experienced Novi, MI divorce lawyer is ready to help you through any divorce, mediation, or child custody issue you may have. Together, our skilled attorneys have been serving clients throughout southeastern Michigan for more than 23 years. We have a comprehensive understanding of the challenges inherent in divorce and other family law matters, so we offer compassionate, customized representation when you need it most. Contact Elkouri Heath, PLC at 248-344-9700 to schedule a free consultation.