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Medicaid divorce is the dissolution of a marriage in which one spouse requires long-term care. Medicaid divorce is intended to protect assets for the non-applicant spouse, also called the healthy spouse or community spouse. By divorcing, a healthy spouse may be able to receive a greater portion of the couple’s assets. Without Medicaid assistance, some couples could quickly deplete their assets on long-term care, leaving the healthy spouse with little to support themself.

Spousal Impoverishment Rules.

Medicaid Divorces are not as common as in the past. Unfortunately, some couples may feel this is the only solution when one spouse requires long-term care. Spousal Impoverishment Provisions were enacted by the federal government in 1988. These provisions were enacted to prevent poverty of healthy spouses, which had been a real issue prior to 1988.

So Why Do People Get a Medicaid Divorce?

Medicaid divorces happen because the financial burden of long-term care can be too significant for a couple. Medicaid divorce continues to be used for preservation and to protect assets of more than $500,000 for future inheritance.

Which States Allow a Medicaid Divorce?

The answer to, “Which states allow a Medicaid Divorce?” is not a simple one. The divorce laws in the State you reside must be considered and the topic of separate property states versus marital property states must be discussed. It is advisable to consult with a Medicaid Planning professional to learn of other available options when considering a Medicaid divorce.

Alternatives to a Medicaid Divorce.

While in some situations, Medicaid Divorce may be the most plausible solution, there are other planning strategies that can be considered. Consider a Medicaid-compliant annuity, which converts a lump sum of cash into a monthly stream of income. Or an irrevocable funeral trust which allows you to pay for funeral and burial expenses in advance, providing another way to convert assets into exempt ones.

If you have excess assets, your spouse requires long-term medical care and you are considering a Medicaid Divorce…It can be extremely beneficial to consult with a Medicaid Planning professional to learn what options are best for your family. These professionals are skilled in restructuring and protecting assets for the best chance of Medicaid eligibility without the need of a Medicaid Divorce.

Thank you for this content! Provided by the American Council on Aging