This session examines the intersection of Medicaid long-term care eligibility and divorce planning for financial professionals working with aging or ill clients and their spouses. Participants will review the two-prong Medicaid eligibility test (functional and financial), how marital assets are treated when one spouse requires nursing home or in-home care, and the risks associated with using divorce as an asset-protection strategy, including how courts have invalidated "sham" divorces where the couple continued to live together as married.
The session covers spousal impoverishment protections under federal law, including the treatment of income versus assets, the Community Spouse Resource Allowance (CSRA), and the extension of these protections to home- and community-based care under the Affordable Care Act.
It also addresses alternative planning strategies, including spousal refusal (currently available in New York and Florida) and Medicaid-compliant annuities, along with the risk that ERISA-governed retirement plans may not follow a divorce decree without a Qualified Domestic Relations Order (QDRO), potentially jeopardizing Medicaid eligibility.
Learning objectives: upon completion, participants will be able to
- Distinguish between Medicaid's functional and financial eligibility requirements for long-term care benefits;
- Explain how a "Medicaid divorce" is intended to work and identify the fact patterns that lead courts to invalidate it as a sham transaction;
- Describe how Medicaid treats a married couple's income differently from their assets, including community spouse income protections and the CSRA;
- Identify how spousal refusal and Medicaid-compliant annuities function as alternative planning strategies and the legal requirements each must satisfy; and
- Recognize the risk that a divorce decree alone cannot reassign interests in an ERISA-governed retirement plan, and explain the role a QDRO plays in avoiding unintended Medicaid consequences.
Program level: Intermediate.
Prerequisites: None.
Field of study: Divorce Financial Planning / Retirement & Estate Planning.
Delivery method: Group Internet-Based (Webinar).
- Teacher: Julian Terry