Family law solutions for elder law problems that plague some senior couples are becoming very important in Indiana and Illinois. Elder law attorneys are adapting prenuptial agreements, divorces, and legal separation proceedings to protect some nursing home residents’ spouses from financial ruin. This article describes special problems challenging some older married folks, and explains how elder law attorneys are using family law tactics to help solve those problems.
When Family Law and Elder Law Overlap
Family law involves legal matters about family relationships that include marriage, divorce, paternity, and adoption. Elder law concerns people’s health, legal, and financial issues that arise as they age into and during retirement years. Family law and elder law issues overlap sometimes when older single parents marry, and then one or the other spouse requires nursing home care costing more than $80,000 per year. Those expensive long-term care costs can press even first-marriage couples need to consider protecting IRAs and other hard-earned retirement assets with family law concepts.
Three Family Law Solutions For Elder Law Problems
Family Law Solution For Elder Law Problems: Prenuptial Agreement Estate Plan Protection
Family law solves elder law problems for couples that make prenuptial agreements before marriage. We always encourage engaged parents to protect their children’s inheritance by making prenuptial agreements before marrying (see our previous articles about prenuptial agreements: https://www.hawkinselderlaw.com/best-intentions-paving-material-for-a-bad-road/ and https://www.hawkinselderlaw.com/getting-married-get-a-prenuptial-agreement-first/). Prenuptial agreements can’t solve all long-term care issues, but they make important estate plan adjustments possible (see our two-part explanation of prenuptial agreement limits and benefits: https://www.hawkinselderlaw.com/medicaid-prenuptial-agreements-part-1/, and https://www.hawkinselderlaw.com/medicaid-prenuptial-agreements-part-2/).
Family Law Solution For Elder Law Problems: Legal Separation to Save Nursing Home Residents’ IRAs
Family law solves elder law problems for some married nursing home residents that own IRAs. Indiana Medicaid caps a married applicant’s total non-exempt asset value at $2,000, but the healthier spouse can keep IRA, other retirement assets, and many other valuable assets.
2020 UPDATE: Indiana now counts IRAs owned by the healthier spouse (called the “community spouse”) in the initial resource assessment of Medicaid eligibility for the disabled spouse/applicant (called the “institutional spouse”).
Although applicant cannot normally an IRA to the spouse without triggering tax liability on the entire IRA, federal tax law provides a family law exception to that rule. The exception requires that a judge declare that the couple’s health-related physical separation is a legal separation, and then order the IRA transferred as a property settlement to the healthier spouse. The disabled spouse or the disabled spouse’s legal representative can then transfer the IRA to the healthier spouse without triggering income tax liability.
Family Law Solution For Elder Law Problems: Marriage Dissolution for Big Medicaid Problems
Family law solves elder law problems in two kinds of spousal behavior that disrupt an applicant’s Medicaid eligibility if the spouse is unwilling or unable to help pay nursing home costs. The first kind of disruption is a spouse’s refusal to provide written records of assets, income, expenses, and asset transfers that Medicaid requires of each spouse. The second problem occurs if the spouse’s large asset transfers as gifts or undervalued sales disqualify the applicant for Medicaid benefits for a long time as a transfer penalty. An Indiana applicant may be able to appeal the disqualification with great effort, but divorce may be an Illinois Medicaid applicant’s only hope.
Indiana Limits on Legal Representatives’ Use of Family Law Solutions
Indiana court decisions and legislation in the past decade have increased the necessity of expert estate planning for engaged or married people in blended families. The Indiana Court of Appeals ruled in one case that an incapacitated spouse’s guardian couldn’t petition to dissolve the person’s marriage. Jeff Hawkins and some colleagues proposed legislation in response to that case that allows a guardian to seek guardianship court authority to petition for marriage dissolution, but the judge can deny the petition. Then, a recent appellate case ruled that an incapacitated spouse’s power of attorney without specific dissolution authority does not permit the attorney-in-fact to petition for marriage dissolution.
Plan for the Worst and Hope for the Best
The maxim, “plan for the worst and hope for the best,” describes our estate planning philosophy. We encourage all engaged people to make prenuptial agreements authorizing family law solutions while hoping never to need those solutions. We also encourage all married people consult with expert estate planning lawyers about making powers of attorney with advanced asset protection authority that includes authority for unlimited gifts and appropriate family law solutions for elder law problems.
About the Authors
Jeff R. Hawkins and Jennifer J. Hawkins are Trust & Estate Specialty Board Certified Indiana Trust & Estate Lawyers. They are also active members of the Indiana State Bar Association and National Academy of Elder Law Attorneys.
Jeff is a Fellow of the American College of Trust and Estate Counsel and the Indiana Bar Foundation. He is also a member of the Illinois State Bar Association and the Indiana Association of Mediators. He served as the 2014-15 President of the Indiana State Bar Association, and he is a registered civil mediator.
Find more information about these and other topics on YouTube and at www.HawkinsElderLaw.com. Facebook users can like @HawkinsElderLaw on Facebook. Twitter users can follow @HawkinsElderLaw. The LinkedIn crowd can follow us at https://www.linkedin.com/company/hawkinselderlaw. You can also call us at 812-268-8777.
© Copyright 2019 Hawkins Elder Law. All rights reserved.
[See our Disclaimers page about relying on this website’s contents.]