Divorce Will Not Help to Pay the Nursing Home

Married clients have been coming to me for long-term care (nursing home) financial planning for over 20 years. Of hundreds of couples, there was only one case where I assisted in a divorce. I do not consider divorce a viable strategy to help the healthy spouse save the couple’s assets, but many less-experienced attorneys suggest divorce. Here is why it is a bad idea: Unless the attorneys hoodwink the judge, divorce usually results in a 50/50 split of assets. In most states, an Elder Law attorney is able to preserve most or all of the combined estates for the spouse who is not in a nursing home.

The one client who divorced his wife did so because he genuinely wanted to be out of his marriage. The situation was similar to the “Harry’s Law” episode of November 2, 2011, “The Rematch.” Katherine Helmond, playing Gloria Gold, wanted a divorce from Abe, her husband. Although Tommy, played by Christopher McDonald, offered to pay for Abe’s care at home, Gloria refused. The financial aspect was only Gloria’s excuse for divorcing her husband. She said, “For 60 years I’ve had to hear those jokes.” Gloria wanted desperately to get away from Abe and his wisecracks. Like Gloria, my client wanted a divorce even though I told him that it would be in his financial interest to remain married.

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I explained to my client that a divorce, at best, would result in half the marital estate being awarded to the spouse in the nursing home. Many judges would look at the nursing home spouse’s situation and give him or her more than half. There are various reasons for this – sympathy for a vulnerable person being abandoned by a spouse, financial support due to high living expenses, or concern about the high, cost to the government of nursing care. A pre-nuptial agreement might help reduce the share awarded to the nursing home spouse, but divorce rarely results in the community spouse walking away with more than half the assets and no alimony obligation. Despite the financial disadvantages, my client went through with the divorce.

More often, clients come to me heartsick at the thought of getting a divorce. They are greatly relieved when I tell them that I can protect all their money without putting them through a divorce. It is unfortunate that so many attorneys think divorce is necessary when Medicaid rules allow less catastrophic plans.

A competent Elder Law attorney can usually achieve a much better result. Unlike a divorce property settlement, the Medicaid asset allocation for a married couple excludes the home and one car. After that, the community spouse (the one who is not in the nursing home) is allowed to keep half of the couple’s assets up to $113,640, plus funeral agreements. Many states’ Medicaid programs also exclude a community spouse’s retirement funds. If Sam and Hazel have a $200,000 home and $200,000 in savings, a divorce judge would give each spouse half of their $400,000, but Medicaid would allow the community spouse to keep the home and half of the savings, a more comfortable $300,000.

Because Sam and Hazel have $200,000 in countable assets, Hazel would have $100,000 too much if Sam entered long-term care. This $100,000 excess can be preserved for Hazel. Getting a divorce would not improve her financial security and would probably impair it.

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There are four ways that excess funds can be preserved for Hazel, the community spouse: 1) Home improvement or purchase, 2) Single premium immediate annuity, 3) Irrevocable sole-benefit trust, or 4) Small business investment. Each of these methods of protecting assets has advantages and disadvantages. Furthermore, not all four can be done in all states.

The above four techniques for protecting a community spouse of a person in a nursing home will be discussed in the next four columns:

Home Sweet Home Investment
White-Water Rafting on the Income Stream
Trust Me, But Not in the Third Circuit
Risky Business

Each column will describe one of these strategies, explaining the pros and cons, how they work, and in what states they are available. This is not a comprehensive discussion, but it will give the reader some insight into ways that an Elder Law attorney may help the spouse of a nursing home resident maintain his or her financial security. For more information about these Medicaid devices, or for a referral to an Elder Law attorney in your state, please call either of the numbers below or visit my website and click on the “contact” button.


John B. Payne, Attorney
Garrison LawHouse, PC
Dearborn, Michigan 313.563.4900
Pittsburgh, Pennsylvania 800.220.7200
©2011 John B. Payne, Attorney

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