Divorce as a Medicaid Planning Option

Divorce is one of the most aggressive Medicaid planning tools. Divorce should not be approached lightly and should not be attempted without an attorney.

Most Medicaid plans can be completed without the necessity of divorce. Even when divorce appears to be the answer, a simpler procedure, commonly known as a “Catholic divorce” (e.g., an action for separate support) can be used in most cases rather than a true divorce. What are the downsides of divorce? Well, there are several. Among them:

• Medicaid does not allow income to be diverted to an EX-Spouse.
• If the Medicaid applicant was a veteran and the Community Spouse is not, the Community Spouse will lose access to future VA benefits.
• If the Medicaid applicant was planning on being buried in a VA cemetery, the couple will not be buried together.
• The Social Security survivors benefit may be lower for an ex-spouse depending on the length of the marriage.
• Wills previously made in favor of a Community Spouse become invalid following a divorce.
• Powers of Attorney and Health Care Advance Directives naming the Community Spouse as agent are no longer effective following a divorce.
• The ex-spouse is no longer a decision-maker under default medical decision-making statutes.
• The ex-spouse no longer has priority when a Probate Court selects a guardian or conservator.
• The emotional turmoil of divorce, including guilt, can be devastating.
• In cases where the marriage resulted in a blended family, there may be disputes among children from prior marriages over care and over finances.

When would you consider divorce? Most often divorce is considered as a Medicaid planning tool when one or more of the following factors exist:

• The marriage is fractured and the couple no longer wants to remain together.
• The marital estate consists of numerous illiquid resources that would be difficult to protect without divorce, where liquidating resources would turn into a “fire sale,” or where liquidating them would result in significant tax expense.
• The couple has children from previous marriages who do not get along.

The factors listed here are just a few of the items you should consider before using divorce as a Medicaid planning tool. That is why we say that you should speak with a qualified elder law attorney first.

The following video describes part of the divorce process and is available on youtube.