SPOUSAL IMPOVERISHMENT RULES
by
Attorney John Cashman
For additional information: link to Radosevich, Mozinski, Cashman & Olson LLP
One of the most difficult times in life happens when a spouse can no longer be cared for at home, and must be placed in a nursing home. This is a traumatic event for everyone. It is particularly difficult for the spouse remaining at home (the "Community Spouse"), who often is dealing not only with the loss of his or her lifetime companion and the guilt of placing that person in a nursing home, but also the significant financial pressure of paying for the care, yet, retaining sufficient income and assets to live on themselves.
Medical Assistance rules, administered through the Manitowoc County Department of Human Services, determine when a person may be eligible for long term care benefits under the Medical Assistance Program. Those rules, when there is a community spouse involved, are commonly called "Spousal Impoverishment Rules." The intent of those rules is to allow a community spouse to retain enough assets and income to live on, keeping the community spouse out of poverty. In general, the basic rules allow the community spouse to keep the following: (1) a house of any value; (2) a car of any value; (3) $1,500 cash value life insurance; (4) his or her own IRA, 401K, or other retirement plan; and (5) an exempt burial trust or fund.
The community spouse is also allowed to keep the first $50,000 of non-exempt assets (cash, stocks, bonds, etc.), or one-half of the assets up to a maximum of $109,560 (as of 1-1-09). This is called the Community Spouse Resource Allowance (CSRA). The nursing home spouse can keep only $2,000. Any assets over the allowable amount must be spent down before Medical Assistance eligibility is obtained. There are various methods of spending down including paying for nursing care, paying legitimate debts, making household improvements, etc. Also, it may be advantageous to look at transferring excess assets into income by placing the assets into an annuity and immediately annuitizing for the benefit of the community spouse. There are specific rules and regulations governing annuities. Each situation is different and must be individually reviewed.
In addition, the community spouse is allowed to have income in his or her name. If the community spouse does not have the amount of income allowed (i.e., their own social security, pension, etc.) he or she can be allocated some of the income of the nursing home spouse. This means some of the nursing home spouse's social security or pension benefits could go to the community spouse. The amounts allowed the community spouse are adjusted each year for inflation. For 2009, the minimum income allocation is $2,333.33 per month. If a community spouse has high housing costs (qualified monthly expenses exceeding $700), then he or she may be able to receive an allocation up to $2,739 per month.
With people living longer, it is important to retain the maximum amount of assets and income for a community spouse, to provide for his or her future. This allows the community spouse to look at various living options such as remaining in the home, moving to an apartment, duplex or condo, or possibly a senior living community or assisted living.
For additional information: link to Radosevich, Mozinski, Cashman & Olson LLP