By Regina Kiperman and Naomi Levin.
Factors to Consider When Converting Excess Resources Into an Income Stream for Purposes of the Institutional Medicaid “Snapshot”
Jack and Alice are married. Jack is 80 years old. He is sick, requires institutional care, and is about to enter a nursing home. (Jack is the “Institutionalized Spouse.”) Alice is 75 years old. (Alice is the “Community Spouse.”) Jack and Alice have a house, free and clear of mortgage and $750,000 worth of investable assets, generating de minimis annual income in the form of dividends (estimated at $4,000 a year). Each spouse also has their own separate IRA in payout status. The Institutional Spouse’s required minimum distribution is $750 a month. The Community Spouse’s required minimum distribution is $200 a month. The Institutional Spouse receives $2,000 a month from Social Security while the Community Spouse receives $510 a month from Social Security.
Jack and Alice come to you for Medicaid planning. You know that transfers between spouses are exempt.1
If Jack transfers all of his assets to Alice, Jack can there- after apply and be eligible for Medicaid. You also know that the Community Spouse may execute a “Spousal Refusal” advising the Local Department of Social Services (“DSS”) that the community spouse refuses to fulfill his/her obligations, as the legally responsible relative, to support the institutionalized spouse.2 DSS will provide the necessary medical assistance to the institutionalized spouse, notwithstanding the commu- nity spouse’s refusal to contribute to the cost of the insti- tutionalized spouse’s care. However, the filing of the “spouse refusal” may create an implied contract with DSS, authorizing DSS to commence a claim for spousal contribution from the community spouse for the cost of care paid by DSS for the benefit of the institutionalized spouse.3,4 When initiating a claim for spousal contribu- tion, DSS will look to the community spouse’s income and/or resources in excess of applicable limits…
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