Financial Protection When Your Spouse Needs Nursing Home Care – Part 1
Nursing home bills usually turn a person’s world upside down when his or her spouse requires nursing home care (the average Indiana nursing home bed costs $7,167 per month in 2022). This article begins a two-part series about state and federal law can save a nursing home resident’s spouse from poverty, and how an experienced elder law attorney can help the spouse increase the amount of assets that can be saved from expensive long-term care.
Spousal Impoverishment Law
Medicaid helps people pay for nursing home care when their income and assets cannot pay the entire cost. Congress passed the Medicare Catastrophic Coverage Act (MCCA) in 1988 to protect a nursing home resident’s spouse from poverty. The law guarantees that the spouse living independently in the community (called the “community spouse”) may keep certain “resources” (resources are certain assets that are not exempt from being counted) and amounts of income to be able to live independently after the spouse in a nursing home (called the “institutional spouse”) qualifies for Medicaid.
Resource Allowances
Medicaid eligibility requirements limit an institutional spouse’s allowable resources ($2,000 in Indiana and Illinois in 2022). The spousal impoverishment law sets minimum and maximum resources values that the community spouse can keep in addition to the institutional spouse’s $2,000 allowance (this article abbreviates the institutional spouse’s resource allowance as “ISRA” and the community spouse’s resource allowance as “CSRA”). Assets that are exempt from treatment as resources include the community spouse’s home, personal belongings and household furnishings, one vehicle, and certain other assets.
An Indiana community spouse can keep 50% of the couple’s resources up to the maximum CSRA (the 2022 Indiana maximum is $137,400, a value that is increased sometimes by cost-of-living adjustment factors similar to Social Security retirement income increases). An Illinois community spouse’s CSRA is the larger value of the Illinois maximum CSRA or the federal minimum CSRA, instead of keeping only half of the couple’s resources up to that value (the 2022 Illinois maximum CSRA is $109,560, a value that is set by an Illinois statute, and the 2022 federal minimum CSRA is $27,480, a value that is adjusted for cost-of-living sometimes like the Indiana maximum CSRA).
An Indiana community spouse can keep at least the federal minimum CSRA even if that value is more than 50% of the couple’s resources (for example, a couple with resources worth $30,000 can keep $29,480 ($27,480 plus the $2,000 ISRA), because the minimum value is less than the community spouse’s $15,000 one half share of the resources).
Community Spouse Income Allowance
The MCCA also protects a community spouse from poverty with a minimum income allowance (the 2022 minimum income allowance is $2,289). If the community spouse’s countable income is less than the minimum income allowance, the community spouse can as much of the institutional spouse’s income as it takes the community spouse to receive the minimum income allowance. For example, if the community spouse’s countable income is $500 per month and the institutional spouse’s countable income is $2,000 per month, the community spouse can keep $2,289 of the couple’s combined monthly income.
To Be Continued
The second part of this article (Financial Protection When Your Spouse Needs Nursing Home Care – Part 2) describes the Indiana and Illinois spousal impoverishment record keeping requirements and important dates for married couples in both states. We will also describe some basic concepts that elder law attorneys use to help community spouses remain financially secure by maximizing asset protection.
Jeff R. Hawkins and Jennifer J. Hawkins are Trust & Estate Specialty Board Certified Indiana Trust & 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 Fellow of the American College of Trust and Estate Counsel; a member of the Illinois State Bar Association; and he was the 2014-15 President of the Indiana State Bar Association.
Find more information about these and other topics at www.HawkinsElderLaw.com, like us on Facebook, follow us on Twitter @HawkinsElderLaw or call us at 812-268-8777. © Copyright 2022 Hawkins Elder Law. All rights reserved.
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I qualify for the spousal impoverishment law. My husband is in a nursing home and was on medicaid before going there. There isnt an issue with assets and such, we have none. He went into a nursing home a year ago and i contacted ss to let them know and everything was fine, i continue to receive his benefits as rep. Payee due to the spousal impov. Law, but I got the annual rep. payee form to fill out the other day. He no longer lives here and his SSDI benefits are mine minus $52 a month for his personal expenses. His living expenses are no longer paid from his SSDI benefits. Medicaid pays that now. When i called them, the lady seemed clueless as to what i was trying to explain to her and insinuated i was misusing his benefits. She seemed unaware of the spousal impoverishment law. I went ahead and filled out the form showing just the $52 a month going to him and i put $00 for the rest. I did an explanation on the back of the form, I know by law I am entitled to his benefit and I have done nothing wrong. But still concerned, why would they even send me that form now that he is no longer at home and I am entitled to his benefits. I am unable to work and his benefit amount is only $1308 a month. Thank you for any help you can give.
Mrs. Allman, you did not indicate whether you are an Indiana resident, but this response will presume that you reside in Indiana.
It seems that you are asking why you would have received the annual representative payee form from the Social Security Administration (SSA). The SSA sends that form to every representative payee and requires each representative payee to account for how the SSD beneficiary’s benefits have been used each year.
A sample form is not available to review at the moment, but you should be able to complete the form similarly to the way you completed it when your husband lived at home. You indicated that you have a spousal income allowance, Which could only happen because your annual income is less than the minimum spousal income allowance of $2,030 (Effective January 1, 2017), as that value is stated in the Indiana Health Coverage Program Policy Manual (IHCPPM) at section 3010.20.10 (Post-Eligibility Standards (MED 1)) of Chapter 3000. Hopefully, your explanation on the back of the form will satisfy the SSA’s routine inquiry. If you have a problem with it, you may want to visit your local SSA office and take copies of your Medicaid documentation showing Medicaid’s income budget allocation for you and your husband so that you can explain the mattered directly to an SSA official in a face-to-face meeting.
Mrs. Allman, a colleague with whom we share your question gave this additional response:
Send copies of the webpages at https://www.medicaid.gov/medicaid/eligibility/spousal-impoverishment/index.html andhttps://www.medicaid.gov/medicaid/eligibility/downloads/spousal-impoverishment/2017-ssi-and-spousal-impoverishment-standards.pdf with the Representative Payee report. I would put on the report funds are allocated to her as a spousal allocation under Medicaid. I would also have her send in the Medicaid notice with the listing of both their incomes and the spousal allocation amount.
We hope this helps.
Thank you so much, yes I live in Indiana. I just seen this today, I also received a letter today from SS, wanting me to fill out the rep payee “correctly”. Apparantly they didnt read my note on back explaining things. I will take your advice and send the documents showing the law and the income calculation. Talking to them on the phone doesnt seem to help, how in the world can they not know about the spousal impoverishment law? Anyway thanks again, and if you think of anything else that can help me, I would appreciate it. Gwynna
Hello, thanks again for helping me with the spousal impoverishment issue. I think it is now straight. I have a new question I hope you can help me with. My mother in law passed away last week and left her son an inheritance in her will. He is set to inherit 35% of anywhere between 100k to 140k. I have POA over him. Is there a legal way for me to keep his inheritance away from medicaid since he is in the nursing home long term? Thank you for your time. Gwynna Allman
It may be possible to protect some of the inheritance, depending upon how the power of attorney is written. Most powers of attorney are inadequate to use an effective asset protection strategy in this kind of case, but we would not be able to say what would happen in your brother-in-law’s case without examining the power of attorney.
Even if the power of attorney contains the typical limitations that we see in most powers of attorney, you may be able to preserve the inheritance for your brother-in-law’s benefit through a strategy involving an irrevocable trust commonly known as a “self-settled special needs trust.” A self-settled special needs trust is a trust established with a disabled person’s funds for the purpose of managing the funds for the trust beneficiary’s benefit. A properly established trust prevents the funds from disqualifying the disabled person from Medicaid benefits, but any balance remaining in the trust upon the death of the beneficiary must be paid to the state.
You may also be able to use the inheritance for his benefit by coordinating with Arc of Indiana to establish a fund for him in Trust II of the Arc of Indiana Master Trust. For more information about Arc Trust II, visit the Trust II webpage at http://www.thearctrust.org/our-trusts/trust-2/.
Thank you for your reply, however the situation is a little different than I first thought. My mother in law has left me an inheritance, beneficiary to two annuities and part of a savings account. Her son my husband is in a nursing home on medicaid. My understanding thus far is they cant take my inheritance as long as it is under 120k. As a community spouse I am allowed some assets. I plan to take one annuity out in payments. The smaller one I would like to cash out and along with my portion of the savings pay off credit cards and put back some for when I need to replace my older vehicle. Thanks for any help you can give. Originally my husband was in her will, but since it was a handwritten change that was not witnessed, I was told it would not be valid, Indiana is my state.
Gwynna, if your husband is in the nursing home and is already approved for Medicaid assistance (that is to say that his Medicaid application was approved and Medicaid is sharing the cost of his nursing home care), then your resources are no longer relevant for his Medicaid eligibility. Your question prompts us to update information in the article to which he responded with your comments, and its follow-up article,Financial Protection When Your Spouse Needs Nursing Home Care – Part 2, to explain what happens after a married nursing home resident’s Medicaid application is approved.
The community spouse’s resource value is only relevant on two specific dates: (1) the first day on which the nursing home resident begins receiving institutional care (any combination of hospitalization and nursing home care without returning home)for a continuous period of 30 consecutive days or more, and (2) the date upon which FSSA evaluates the nursing home resident’s Medicaid eligibility (generally, the first day of a month). The first date, which articles identify as the “snapshot” date, is the date on which FSSA evaluates the couple’s household resources as one big total value, of which the community spouse is entitled to retain the smaller value of 50% or the maximum value to which you are referring as $120,000 ($123,600 as of January 1, 2018). After the community spouse and institutional spouse spends their resources down to their respective resource allowance values (again, the community spouse’s share of the snapshot value plus the institutional spouse’s $2,000 allowance), the community spouse’s resource value is no longer relevant for any reason.
The bottom line concerning the potential inheritance that you are expecting is that you should be under no restrictions concerning the inheritance if you receive it personally, instead of it being distributed to you and your husband. In fact, current law would allow you to inherit millions of dollars without disrupting your husband’s Medicaid eligibility. Therefore, you may want to reconsider tying your hands with an annuity that only pays a fixed payment amount with no access to the principal, because you may have a financial need in the future that would make it very convenient to be able to withdraw funds from the inherited money.
You should consider updating your estate plan with a specially designed will to protect her husband from Medicaid eligibility disruption in case you predecease your husband. If you enter “testamentary trust” into the search window at the top of our website, you will see links to five articles that we have written that refer to wills with testamentary trusts designed for community spouses’ assets to be protected for the benefit of institutional spouses. Indiana Medicaid law can impose a transfer penalty against a nursing home resident if the community spouse dies and does not make adequate provisions for the surviving institutional spouse. Also, if the community spouse’s estate plan (or lack thereof) causes the institutional spouse to receive the deceased community spouse’s assets, that transfer to the institutional spouse will disrupt the institutional spouse is Medicaid eligibility. A testamentary trust enables a community spouse to provide adequately for the institutional spouse without exposing all of the assets to the institutional spouse’s nursing home costs, and without disrupting the institutional spouse’s Medicaid eligibility.
A testamentary trust is not a common estate planning tool for most people, even among estate planning lawyers. Therefore, it is important to have an experienced elder law attorney prepare your will with testamentary trust language to make sure that the plan serves your husband and other family members adequately if your husband outlives you.
Thank you so much for your reply. My plan is to list my son as beneficiary on my savings account and my one remaining annuity payment plan. If I did a lump sum on this annuity, the taxes will be too high, even though I know its only taxed on the interest earned. If I leave it and draw from it monthly, I can still earn some interest. I plan to get a second vehicle this week, but want to keep my older 2002 van which is paid for and the one I am buying will be paid in full as well. . It says I can only have one vehicle, what can I do?
What kind of annuity are we discussing, and who established it? If you purchased the annuity as a deferred annuity, then you should be able to draw from it to satisfy your needs, and only pay income tax on the income portion of your withdrawals. If someone else established the annuity, you should confer with a tax advisor and a representative of the company that holds the annuity to find out all of your options and the tax consequence of each option. In the long run, you are probably best served by leaving the annuity in place and allowing it to earn income on a tax-deferred basis if that is possible for you.
If the assumption of our first paragraph of our January 12 response is correct about your husband’s approved Medicaid status, you are no longer under any asset ownership restrictions as the community spouse. You can own a whole fleet of vehicles of unlimited value, and you could win millions of dollars from Powerball without affecting your husband’s Medicaid eligibility. The only relevance of the number of vehicles that you own was that a second vehicle counted among your resources for his initial eligibility determination, but a single vehicle was exempt from being counted just like your home was exempt from being counted.
The key now is to manage your assets wisely so that they will serve you for many years to come. Your decision about retaining the 2002 Van and purchasing a new vehicle may relate to a particular need that you have two own two vehicles, but you should consider the sales tax advantage that you would enjoy if you would trade the 2002 Van as part of your purchase of the new vehicle because you would get credit against the sales tax for the trade-in value of the 2002 Van.
Thank you for your quick response, you all have been so helpful. The one larger annuity that I am a beneficiary on belonged to my mother in law, it is a non qualified annuity. She deposited a large lump sum into it in 2006 or 2007, and never touched it for over 10 years. So I am deciding between the 5 year payout versus the stretch. One more question, please….I am 54 and my nursing home spouse/husband is 47. As stated in an earlier post, due to the spousal impoverishment law, I receive all of his SSDI benefits. If he were to pass away, would I lose all his benefits? I know I would lose at least part right? I am confused on this. I read that I had to be 62 in order to collect from his SS, maybe I am not understanding?? Thanks again for being so helpful.
If you go to the Social Security Administration webpage titled: Survivor’s Planner: Survivor’s Benefits For Your Widow Or Widower, the webpage explains that you can begin drawing reduced Social Security Survivor’s Benefits as early as age 60 if you are not disabled, or as early as age 50 if you are disabled and your disability started before or within 7 years of your husband’s death. A small blue box on the right side of that webpage indicates that you can switch to your own retirement benefit as early as age 62. The Survivor’s Benefits publication, a link to which appears on the webpage just below that blue box, provides more detailed information about Social Security Survivor’s Benefits that you may find helpful if you have not already seen it.