Elderly Spouse Talking to a Lawyer on the PhoneMost states consider a married couple's combined assets and income when calculating Medicaid eligibility. New York and Florida are the only states allowing spousal refusal—the right of a healthy spouse to make their assets unavailable to pay for the other spouse’s long-term care. However, there are drawbacks to spousal refusal, and it should never be done without the help and advice of a Medicaid planning attorney.

How Does Spousal Refusal Work?

Applicants must meet certain income and asset requirements to be eligible for Medicaid. All of a married couple’s assets and income will be counted even if one spouse needs care and the other doesn’t. In New York, the healthy spouse (known as the community spouse) can keep about $3,000 in income and $137,000 of the couple’s joint assets. In addition to these limits, New York law requires the community spouse to contribute 25% of their excess income toward their spouse's long-term care.

These limits can place significant restraints on community spouses. Fortunately, spousal refusal can ease the burden on a community spouse. If a couple has assets exceeding the Medicaid eligibility limit, we can make the most of spousal refusal by:

  • Moving excess assets to the community spouse. The ill spouse can meet the asset limit by transferring all their assets to the community spouse. This will not violate the five-year lookback period because Medicaid allows applicants to transfer assets to their spouses without penalty.
  • Signing a spousal refusal. The community spouse signs a document indicating that they refuse to contribute to the care of the ill spouse since they will need all the income and assets for their own care.
  • Filing the application. The application and the spousal refusal document must be filed promptly with the Department of Social Services (DSS). As long as the ill spouse is otherwise eligible, Medicaid cannot legally deny care to the ill spouse, allowing the community spouse to keep significantly more assets.

Who Should Consider Spousal Refusal for Medicaid Planning?

The ability to be approved for benefits in months instead of years makes spousal refusal a key strategy in Medicaid crisis planning. Spousal refusal is also helpful when the community spouse has a high monthly income.

There are some drawbacks to spousal refusal. For one, DSS may file a lawsuit against the community spouse (or their estate) to recover the cost of care. The spousal refusal also removes the community spouse’s right to receive a spousal income or resource allowance from the Medicaid beneficiary.

Depending on your situation, you might benefit from additional planning tools such as:

  • Spending down excess assets. There are many ways to turn your constable assets into exempt assets without violating Medicaid’s lookback rules. A few standard methods include paying off debt (such as the mortgage on your home or credit cards), making modifications and updates to your home, or buying medical devices that are not covered by insurance (such as canes, wheelchairs, or hearing aids).
  • Pre-paying funeral costs. Applicants and spouses can lower their countable assets by purchasing burial plots, urns, funeral services, and other funeral and burial expenses.
  • Medicaid Asset Protection Trusts. A Medicaid trust offers all of the benefits of spousal refusal without the threat of a lawsuit or lien to recover care costs. Keep in mind that the trust must be created and funded at least five years ahead of time to protect your property and life savings.

Start Medicaid Planning Now While You Still Have Options

Medicaid planning can be done at any point in the benefits process, but pre-planning is always the best way to keep as much of your assets as possible. The elder law attorneys at Landskind and Ricaforte Law Group, P.C. have years of experience helping people get Medicaid benefits and protecting their loved ones’ inheritances. Contact us today through our online form to get started or order our free guide, Estate and Medicaid Planning in New York: What Everyone Needs to Know.