Division of Assets is the name commonly used for the Spousal Impoverishment Provisions of the Medicare Catastrophic Act of 1988. It applies only to couples. The intent of the law was to change the eligibility requirements for Medicaid where one spouse needs nursing home care while the other spouse remains in the community. The law, in effect, recognizes that it makes little sense to impoverish both spouses when only one needs to qualify for Medical assistance for nursing home care. As a result of this recognition, Division of Assets was born.
Basically, in a Division of Assets, the couple gathers all their countable assets together as of the first date that the spouse enters the nursing home. Countable assets include checking accounts, savings accounts, Certificates of Deposit, brokerage accounts (stocks, bonds, and mutual funds), savings bonds, second homes, timeshares, IRAs, 401K, 403B, TSP, annuities, and cash value of life insurance policies. All assets are counted that are titled in both names or in individual names. Exempt assets, such as the primary residence, term life insurance, and vehicles, are not counted.
The countable assets are then divided in half, with the at home or community spouse allowed to keep up to one-half of all countable assets to a maximum amount of $115,430.00. The other half of the countable assets must be “spent down” until less than $2,500.00 remains. The amount of the countable assets which the at-home spouse gets to keep is called the Community Spouse Resource Allowance (CSRA). For example, if the countable assets total $100,000.00, then the community spouse keeps half or $50,000.00. If the countable assets total $300,000.00, then the community spouse keep $115,430.00 not $150,000.00 because $115,430.00 is the maximum amount a community spouse can keep.
Clients are often confused as to what they can do with their assets during the ”spend down” period. After a spouse is admitted to the nursing home, the next step is to figure out how to pay for their care. There are three options: pay privately, use long term care insurance, or apply for Medicaid. The application for Medicaid can cause tremendous confusion and concern that the community spouse will be broke very quickly. Along with the Community Spouse Resource Allowance, there are several options for a community spouse during the “spend down” process.
Stay tuned for a future podcast discussing how to spend down the assets to qualify for Medical Assistance.
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