Co-authored by Joanna C. Feldman

Generally speaking, Medicaid rules require most of one’s monthly income be contributed toward the cost of one’s care in a nursing home. When the spouse of the Medicaid recipient remains at home, however, the impact of losing the other spouse’s additional income can be detrimental. The spouse at home (known as the community spouse), for example, may not receive substantial social security retirement benefits or a pension. To help deter what became known as “spousal impoverishment,” the law evolved to permit the community spouse to retain all or some of the Medicaid recipient’s income if the community spouse’s income falls below a certain amount.

In 2018, if the community spouse’s income falls below $3,090.00 per month, the community spouse is allowed to keep so much of their spouse’s income to raise the community spouse’s income to that level, which is known as the minimum monthly maintenance needs allowance, or MMMNA. If, for example, the community spouse’s income is $1,000.00, and their spouse’s income is $2,000.00, the community spouse would be permitted to keep all of their spouse’s income. But if the community spouse’s income is $1,000.00, and their spouse’s income is $3,000.00, the community spouse would be permitted to keep $2,090.00 of their spouse’s income. The rest would go toward the spouse’s care in the nursing home.

In many cases, a divorce is a traumatic experience for both parties. Usually, neither party has given any thought to the unintended consequences of death or disability during divorce. Until there is a final decree or judgment of separation or divorce, each party remains the spouse of the other.

Upon the death of one party, and without proper planning, the surviving spouse maintains all inheritance rights, whether by Last Will and Testament (“Will”), Revocable Trust or intestacy (meaning you have no Will). Moreover, all beneficiary designations, transfer on death accounts, fiduciary appointments (such as agents under a power of attorney, executors in a Will, trustees of a trust and health care agents under a health care proxy) remain intact until the divorce is complete.

None of us know when we will die or become disabled, but if it happens during the pendency of a divorce, your spouse may receive a windfall and/or be in a position to make your financial and medical decisions. To prevent this from happening, you must follow these instructions.

First, it is imperative that you meet with an elder law and estate planning attorney to redraft your Will or Revocable Trust to disinherit your spouse to the fullest extent permissible under New York State law. In New York, a surviving spouse is statutorily entitled to receive a portion of your estate. This is referred to as the elective share and is equal to the greater of one-third of your estate or $50,000.00. By changing your estate plan, you can redirect some, not all, of your assets to others, such as your children.

Unfortunately, upon the commencement of a divorce, the Court will issue an Order restraining the parties from changing the ownership of their assets. Your Will only pertains to assets in your individual name, with no joint owner or beneficiary designation, and your Revocable Trust only covers assets within it. Thus, these would be the assets that you can redirect. You will not be able to redirect jointly owned assets or assets that have beneficiary designations.

Another reason to redraft is to change your executors, trustees and guardians. If you die, you most likely do not want your spouse administering your estate. If you have minor children, there are opportunities to appoint someone other than your spouse as guardian of your minor children’s property. It is important to consider a trust for your minor children at this point as well. You generally cannot remove your spouse as guardian of the children’s person.

Second, you must remove your spouse as agent under your power of attorney. I am aware of cases where a divorcee spouse continued to use a power of attorney in the face of a pending divorce proceeding to manage assets subject to the divorce. If you lose your capacity during the pendency of the divorce, you need a trusted person who can continue the divorce proceeding and also ensure that your financial matters are handled properly.

Third, and probably the most sensitive topic, if you don’t want your spouse making medical decisions on your behalf, redraft your health care proxy. Depending on the level of animosity in the divorce, you may be giving your spouse the opportunity he/she has been waiting for!

The above planning recommendations should be addressed shortly after the commencement of a divorce proceeding. If you do not have existing documents, then you need to prepare them.
Perhaps you made it through a divorce and never updated your estate plan or have no estate plan at all. A divorce necessitates the preparation of an estate plan, especially where children are involved. If you have an existing plan that was never updated during the pendency of the divorce, it is important to note that while the concern of a spouse unintentionally inheriting property or acting as a fiduciary does not exist, a divorce does not revoke any dispositions or appointments you made in favor of your spouse’s relatives such as an in-law.

Lastly, you cannot neglect beneficiary designations. After your divorce, you most likely will need to redo your beneficiary designations to match your estate planning goals and objectives and any obligations under the divorce decree. The preparation of customized beneficiary designation forms coincides with the drafting of a new estate plan.

Co-authored by Joanna C. Feldman

This is a question we’re continually asked, so we’re glad we have another opportunity to clear things up. The main thing to remember is this: IRS rules are different from Medicaid rules.

Under current IRS rules, you may gift up to $15,000.00 to as many people as you’d like in 2018 (increased from $14,000.00 in 2017) without needing to file a gift tax return. This is known as the gift tax exclusion, and you can think of gifts that qualify as being excluded from needing to be reported to the IRS. If your gift to someone (other than your spouse) is over $15,000.00, you must tell the IRS.

The annual gift tax exclusion, however, does not tie into Medicaid. Under rules concerning Medicaid eligibility for nursing home services, any gifts within the preceding five (5) year period (often referred to as the “look back period”) will be evaluated and may result in a penalty period during which Medicaid will not pay. (It is important to note that currently, there is no look back period for community Medicaid when one stays at home.)

Again – and I can’t stress this enough – do not try to reduce your assets for Medicaid eligibility purposes by making gifts that you do not need to report to the IRS. You will need to report them to the government for Medicaid purposes, and they can have a detrimental effect on eligibility.

While an annuity might serve you well from a financial planning perspective, financial planners and clients must be aware of the treatment of annuities for Medicaid purposes. For Medicaid eligibility purposes, the cash value of an annuity is considered an available resource. This means that an annuity is treated like cash and if you need to apply for Medicaid, something needs to be done with the annuity, such as transferring the annuity to a spouse or in other cases surrendering the annuity. When surrendering or transferring an annuity, there could be penalties imposed by the insurance company, or worse, recognition of ordinary income for tax purposes. What is important to note here is that an annuity is an available asset for Medicaid eligibility purposes.

Fortunately, if you meet with an elder law attorney well in advance of requiring care, there are planning techniques that can preserve the value of an annuity and avoid grief for everyone. You can create the very popular Medicaid Trust that I have written about many times over. In addition to transferring other assets to the trust such as your home, you can also transfer annuities to the trust. The trust provides that you will receive the income from the trust, thus, if the annuity is annuitized (turned into an income stream), the payments can come out of the trust to you. There are no tax consequences to transferring an annuity to a Medicaid Trust. Financial planners should review their portfolios to identify their clients having annuities and educate them about this planning technique.

Figuring out how much to save for retirement and when you can safely stop working can be difficult. A growing number of online retirement calculators, many of them free, are available to help. Although these calculators can yield vastly different results, they can still be useful tools.

Based on information about you and your finances, retirement calculators try to predict how much you need to save to achieve your retirement goals. There are many different types of calculators. Some are web-based while others require you to download a program or an app. The amount of information needed also varies from calculator to calculator.

While retirement calculators can be useful, you need to keep in mind that results can vary significantly and they are not always accurate. A 2009 study found that while such calculators “can provide a rough idea of whether the user is on target for retirement,” they inadequately assess the risk of running out of money. It may be a good idea to use several different calculators to obtain a range of predictions.

Before getting started with any retirement calculator, you will need to gather information about your finances to have at your fingertips. Even the most basic calculator will want to know how much you currently have saved for retirement and how much you are saving each month. More advanced calculators might require more detailed investment information.

To help you find the best calculator for you, below are three sites that evaluate these financial tools. You can decide how much detail you want to provide and receive.

  • Can I Retire Yet? has a long list of retirement calculators with details about cost, platform, and how well it reproduces reality.
  • The Balance provides its own assessment of the accuracy and usability of what it considers the best retirement calculators.
  • Forbes shares information on five free retirement calculators, ranging from simple to more complicated.

For more information about how much money you will need for retirement, click here.

This is Attorney Advertising. This web site is designed for general information only.
The information presented at this site should not be construed to be formal legal advice nor the formation of an attorney/client relationship.

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