HOW TO PAY FOR CARE FOR SPOUSES OR CHILDREN WITH DISABILITIES IN A FAMILY LAW SETTING

by Thomas D. Begley, Jr., Esquire, CELA

Levels of Care

            Frequently, in divorce situations one spouse has a disability or the couple has a disabled child who requires some form of care on a long-term basis.  There are generally four types of care:

• Home Care. Either an outside provider comes to the home and provides care, or a family member does so. The cost of his care is expensive.  It typically runs anywhere from $28 to $35 per hour for an outside provider.
• Assisted Living. The cost of assisted living facilities ranges from roughly $8,000 to $12,000 per month depending on the facility and the level of care being provided.
• Nursing Home. The cost of nursing homes ranges from $12,000 to $18,000 per month depending on the facility.
• Group Homes. Group homes are available for individuals with physical disabilities as well as people with mental illness. The cost varies considerably, but usually ranges from $170,000 to $240,000 per year.

Five Ways to Pay for Care

There are five ways to pay for this type of long-term care:

• Private Pay. The individual or family member simply writes a check to the caregiver or institution.
• Long-Term Care Insurance. Studies show that only 10% of Americans have long-term care insurance.  Most people do not purchase this insurance until they are nearing retirement age.  Individuals considering applying for long-term care insurance have to be in reasonably good health to be approved by the carrier.
• Coverage of long-term care services is extremely limited.  Most long-term care services are for personal care needs.  It is not medical care.  It is usually assistance with the “activities of daily living.”  Medicare will only pay for skilled medical care.  It is not a good long-range solution for most individuals. To be eligible for Medicare, an individual must be 65 years of age or older or receiving Social Security Disability Income for two years.
• Veterans Administration (VA). The VA offers long-term care to qualified Veterans.  Both the federal and state governments operate nursing homes, but not all Veterans are eligible.  The VA also offers long-term care services through the Housebound and Aid and Attendance programs.  Benefits are limited and not all Veterans are eligible.
• Medicaid pays the bulk of the costs for long-term care services.  If an individual is eligible, Medicaid would pay for home care, assisted living, nursing home care, group homes, care management, home and vehicle modifications, home delivered meals, respite care, personal emergency response systems, mental health and addiction services, residential services, and a broad array of programs provided by the Division of Developmental Disabilities (DDD).  To be eligible for Medicaid, an individual must be a U.S. citizen or qualified alien and a resident of the State of New Jersey.  In addition, the individual must meet a clinical eligibility test, which generally means that the individual needs assistance with three of the five activities of daily living or suffers from dementia and requires such assistance.  The six activities of daily living are:  bathing, dressing, feeding, transferring (moving from bed to chair and chair to bed), toileting, and continence.

Basic Income and Asset Rules for SSI and Medicaid

• Assets of a Marriage. Assets of a marriage for purposes of Medicaid are not the same as “marital property” in the Family Law context.  For Medicaid, generally a principal residence occupied by the individual, one car if used by the individual, and personal effects are not counted as assets.  In the individual is single, he or she is only allowed to have $2,000 of countable assets.  If they are married, generally the healthy spouse, also known as the Community Spouse, is allowed to have $148,620.  Medicaid takes all of the assets in both spouses’ names and combines them into one for determining asset limits.  In a Family Law context, if a Community Spouse inherits a vacation home and the home is not commingled, generally Family Law courts will not consider it marital property.  However, Medicaid will consider that vacation home to be a countable asset.  The home owned by the Community Spouse and some of his/her siblings would not be considered available for Medicaid eligibility purposes of the sick spouse (usually called the Institutionalized Spouse).

• Prenuptial Agreements. Medicaid does not recognize Prenuptial Agreements in making an eligibility determination.  The exception is if the parties divorce and the Prenuptial Agreement is enforced, Medicaid will recognize that.  Most Prenuptial Agreements are not recognized by Medicaid.

• Unfair Equitable Distribution. If the parties are divorced and the Institutionalized Spouse receives less than he or she is legally entitled to, Medicaid may determine that there has been an uncompensated transfer of assets and pose a Medicaid transfer of asset penalty or denied benefits.  An uncompensated transfer occurs when an individual transfers assets for less than fair market value.  There is a five-year lookback from the date of the application for Medicaid.  Therefore, it is good practice for a Family Law attorney to ensure that the divorce is fair and equitable and have findings to that effect in the decree.  At a hearing the Court listens to the evidence and makes a finding based on that evidence, it could be important.

It should be noted that transfers to a spouse are not subject to a transfer of asset penalty.  An analysis should be made as to whether transferring assets to the healthy spouse aren’t more beneficial than obtaining a divorce.  In most cases, the divorce is a wiser course of action, but an analysis should, nevertheless, be made.  Factors that must be considered include:

• Retirement Assets of the Healthy Spouse. If the retirement assets are significant, the Community Spouse could consider using them to purchase a Medicaid-compliant annuity.  Transferring retirement assets to children comes at a considerable cost,  because the income tax would have to be paid at the time the funds are withdrawn to effectuate the transfer.
• Primary Residence. If the primary residence is transferred to the unhealthy spouse and that spouse later requires Medicaid benefits after age 55, the home would be subject to Medicaid estate recovery on the death of that spouse.
• Transfers to Disabled Child. If the divorcing couple has a disabled child and one of the divorcing spouses may require care, transfers to the disabled child are not subject to the Medicaid transfer of asset penalty.  However, an analysis must be made as to the impact of the transferred assets on the public benefits eligibility of the child with disabilities.  If the child is receiving only Social Security Disability Insurance (SSDI) and Medicare, there is no asset limit.  However, if the child is receiving Supplemental Security Income (SSI) and Medicaid, the disabled child is only entitled to $2,000 of assets and the transferred assets would cause a loss of those important benefits.
• Estate Recovery. New Jersey Medicaid has a right to recover all payments made through the Medicaid program for services received on or after age 55.  This applies to assets owned by the sick spouse but not the healthy spouse.  The definition of “estate” in New Jersey is broad and includes a decedent’s home or share of a home, bank accounts, whether solely or jointly held, trusts and annuities, stocks and bonds, and any other real or personal property.  Medicaid will not seek recovery immediately upon death if the decedent is survived by a child under age 21, or is blind or permanently and totally disabled, or survived by a spouse.  Medicaid’s estate recovery should be considered in planning for a divorce.