Medicaid Redeterminations – Part 4

In this week’s 4th blog post on Medicaid’s annual redetermination process I address how the death of a spouse can create issues.  In the case of a married couple where only one spouse has been approved for Medicaid, the non-Medicaid or “community spouse” is entitled to keep a home if residing in it and as much as $154,120 in other countable assets (sometimes more because of exceptions to the Medicaid rules).  But, what happens if the healthy spouse dies first?

As I have written in the past, one thing the community spouse should do is change his/her will so as not to leave everything to the surviving spouse who is now on Medicaid.  These assets will certainly cause the surviving spouse to exceed Medicaid’s strict asset limit of $2000.  But there also is a New Jersey law called the elective share that entitles the surviving spouse to a minimum of 1/3 of the deceased spouse’s estate.  So it isn’t as simple as cutting the Medicaid spouse out entirely.

Medicaid requires that the spouse assert his or her right to the elective share.  Failure to do so results in a Medicaid penalty.   A right by law not exercised is no different in the eyes of Medicaid than giving the money away.  Both are transfers for less than fair value.

On the other hand, asserting the elective share is problematic because New Jersey’s statute is complicated and not very well understood by most, including Medicaid’s caseworkers.  Miscalculating it can cause an interruption in Medicaid benefits.  Receiving the assets under the elective share will obviously push the Medicaid recipient over the $2000 asset limit with a limited amount of time to spend it down or otherwise claim it as exempt.  Receiving less than the elective share is also a problem and will result in a loss of benefits.  On top of that the calculation is complicated and often open to misinterpretation.

I’ll explain what I mean next week.