When one spouse is in a nursing home and applying for Medicaid, planning has to take into account the possibility that the spouse who is not in the nursing home (the "community spouse") may pass away first. This is because the community spouse’s death may cause assets to pass to the nursing home spouse and render him or her ineligible for Medicaid.
In order to qualify for Medicaid, a nursing home resident’s assets cannot exceed $2,000. The community spouse, however, may keep some assets. In 2022, a community spouse in New Jersey can retain 50% of the couple’s assets up to a maximum of $137,400. If the community spouse’s half of the assets is less than $27,480, the community spouse may keep all of those assets. As a result, if the community spouse passes away first and leaves those assets to the Medicaid recipient, the nursing home spouse’s assets would exceed the Medicaid limit.
While the community spouse can write a will that disinherits the Medicaid resident, most states have laws that allow the surviving spouse to claim a portion of his or her deceased spouse’s estate regardless of what the will says. This is called the elective share.
In New Jersey, the elective share is equal to one-third of the deceased spouse’s “augmented estate." The “augmented estate” is made up of the deceased spouse’s estate decreased by the funeral costs, estate administration expenses and valid claims and increased by the value of certain assets transferred by the deceased spouse.
The nursing home spouse will be subject to a Medicaid penalty if he or she gives or transfers assets to others within five years of applying for Medicaid. This means a spouse can waive his or her elective share in writing, but such a disclaimer is considered a transfer of assets resulting in a penalty period for Medicaid eligibility. To mitigate this risk, the couple can engage in planning whereby a spouse waives his or her elective share more than 5 years prior to applying for Medicaid. Other alternatives include the community spouse creating a will leaving the nursing home spouse the amount of the elective share or establishing a trust containing the elective share.
It is advisable to consult a qualified elder law attorney when navigating the Medicaid process, particularly when there is a possibility of a nursing home spouse inheriting assets from a community spouse. If you or your loved one is contemplating Medicaid and has concerns about possible disqualification due to an inheritance, we encourage you to contact the Elder Law attorneys at Mandelbaum Barrett PC to address your questions and develop a plan to achieve your family’s goals.