Last month the Connecticut Supreme Court handed down a favorable decision in a case argued by attorney Carmine Perri of Czepiga Daly Pope & Perri.
Why this matters
For married couples who intend to apply for Medicaid for one of the spouses, it is now possible to protect as much of the ill spouse’s income as is necessary for the healthy spouse to remain safely in the community , even if it exceeds the Medicaid cap.
What was the situation up until now?
Due to another case brought by Czepiga Daly Pope & Perri in 2010 and decided by the Federal Court of Appeals in 2012, it became possible, in married couple situations, for substantial assets to be protected and made available to the healthy spouse by purchasing an irrevocable annuity that paid income to the healthy spouse for a fixed period of time. But the state took the position that there were severe limitations on the amount of the ill spouse’s income that could be protected for the healthy spouse.
General Medicaid rules for married couples
For married couples, there are 3 basic protections for the healthy spouse:
- The principal residence is an exempt asset and protected for the healthy spouse.
- Of all of the combined assets of the married couple, the healthy spouse is allowed to keep approximately $123,000. Assets above that are at risk but can, in certain situations, be protected by use of the annuity strategy pioneered by Czepiga Daly Pope & Perri or, if modest in amount, spent down for the benefit of the healthy spouse.
- The healthy spouse is allowed to keep all of his or her own income, regardless of amount, but if the healthy spouse’s income is modest, the state will allow the healthy spouse to get as much of the ill spouse’s income as is necessary to bring the healthy spouse’s income up to a certain amount, but not to more than $3,000/month in total combined income.
An example of what this all means.
For a married couple with significant assets, the main goal is to protect those significant assets that are at risk over the $123,000 maximum that the state allows. The 2012 Federal Court case and annuity strategy pioneered by Czepiga Daly Pope & Perri largely solved this problem.
But what of the couple with modest assets where one of the spouses has significant fixed income and goes to a nursing home?
Say, for example, the husband has pension and social security income of $5,000/month combined, the wife has social security of $1,200/month, and their combined assets, exclusive of the personal residence, are $200,000.
The couple’s standard of living is reliant upon husband’s fixed income, so the goal is to protect the ill spouse’s income. Prior to Czepiga Daly Pope and Perri’s favorable Connecticut Supreme Court decision last month, the state would, at most, allow the wife to keep $1,800 of the husband’s income to give her the maximum monthly income amount the state would allow of $3,000. The wife’s income plummets from $6,200/month to the $3,000/month cap and she may very well not be able to afford to stay in her home any longer.
As a result of the Connecticut Supreme Court decision, for married couples who intend to apply for Medicaid benefits, it is now possible for the healthy spouse to keep as much income as is needed to remain safely in the community, even if means keeping more than the State’s $3,000/month cap or even keeping the entire $6,200/month of income.
It’s all about timing
To take advantage of this income protection strategy for the healthy spouse, timing is of utmost importance. And it is necessary to establish a conservatorship (even a voluntary one) over the ill spouse ahead of time. Embarking on this strategy is something that should only be done with the assistance of a qualified attorney.
If you are a professional and would like an in-service on this income protection strategy, give us a all. If you or a loved will be needing to apply for Medicaid benefits now or at some point in the future, contact us today. We’ll work hard to protect what you’ve work hard for.