Divorce can impact Medicaid eligibility, especially for a spouse needing long-term care or a child with special needs. Without proper planning, benefits may be lost and assets depleted.
G. Mark Shalloway of Shalloway & Shalloway, PA explores strategies like Special Needs Trusts and spousal protections to help families preserve financial security during and after divorce.
Medicaid planning is a crucial strategy for families aiming to manage the financial burdens associated with long-term care, especially in situations involving special-needs children during divorce or when one aging spouse requires extensive care. Proper planning can help preserve assets and ensure that the cost of care is covered by Medicaid, thereby preventing financial strain on the family.
Medicaid Planning for Special-Needs Children Amid Divorce
Divorcing parents of a special-needs child must carefully structure their agreements to safeguard the child’s eligibility for benefits like Medicaid and Supplemental Security Income (SSI). Direct child support payments can be considered income, potentially disqualifying the child from these benefits. To prevent this, parents can establish a Special Needs Trust (SNT), where child support payments are directed, ensuring the child maintains benefit eligibility. This approach allows the trust to cover expenses not provided by Medicaid, enhancing the child’s quality of life.
Medicaid Planning to Prevent Spousal Impoverishment
When one spouse requires long-term care, Medicaid’s Spousal Impoverishment Rules protect the community spouse (the one not receiving care) from financial hardship. Without planning, as of 2025, the community spouse can only retain up to $157,920 of the couple’s combined assets, known as the Community Spouse Resource Allowance (CSRA). Additionally, a portion of the institutionalized spouse’s income can be allocated to the community spouse to ensure they have sufficient funds to live on.
Strategies for Asset Protection
To qualify for Medicaid while preserving assets, families might consider:
Asset strategy Spend-Down: if assets are marginally over asset caps, utilizing excess assets for necessary and high-value expenses, such as home modifications or mortgage pay down or pay off or a motor vehicle handicapped equipped, to meet Medicaid’s asset limits might work adequately.
Income Diversion: Allocating a portion of the institutionalized spouse’s income to the community spouse to ensure they have sufficient funds, thereby reducing the amount paid to the nursing home
Establishing Trusts: Creating Medicaid asset protection trusts to hold assets, which may not be counted towards Medicaid eligibility, depending on state laws and trust structure.
Conclusion
Medicaid planning is essential for families facing the dual challenges of providing for a special-needs child during divorce or managing long-term care for a spouse contemplating divorce or not. By implementing strategies like Special Needs Trusts and understanding Spousal Impoverishment Rules, families can preserve their assets while ensuring that their loved ones receive the necessary care without undue financial hardship.
Written by G. Mark Shalloway, Esq.
Shalloway & Shalloway, P.A.
FL Bar Board Certified Elder Law Attorney
Certified Elder Law Attorney by the National Elder Law Foundation
VA Accredited Attorney
