A legal question and answer line for Seniors.
DEAR SENIOR LEGAL LINE:
I am married and love my spouse, but I worry that the costs of long-term care will eat up our savings. My financial planner told me to do a legal separation instead of a divorce. Should I do a legal separation or divorce?
Signed, Betty
DEAR BETTY:
Medical Assistance (MA) is the program that pays for long-term care. Legal separation does not help at all for long-term care reasons like protecting assets for MA. With MA rules protecting assets for the well spouse, that answer is usually to stay married for most couples. So, without knowing more, my answer is that you should do neither a legal separation nor a divorce to satisfy your goal of protecting assets from long-term care.
Usually, legal separation is used for a couple to stay married for religious reasons, or if there is a chance of reconciliation, and not so much anymore for financial reasons. Legally separated people are still considered married under the laws of Minnesota. Legal separation, like pre-nuptial agreements, are not recognized by MA, and does not affect treatment of assets owned by either spouse because the MA rules still treat the separated people as married. For example, the MA rules define “community spouse” as the spouse of the institutionalized spouse, and further defines the “institutionalized spouse” as the person in a nursing facility and is married to a spouse not in a nursing facility. 42 USC 1396r-5(h). In Minnesota, being legally separated still means that you are married. Minnesota Statutes 518.06 subdivision 1 says “A decree of legal separation does not terminate the marital status of the parties”. Thus, the MA rules will consider legally separated couples as married and will count any assets they own individually or jointly in determining MA eligibility, so getting a legal separation will not protect any assets from MA.
The next question is - does divorce make sense to protect assets under MA rules? The short answer is usually no. In the past, before the MA rules were changed to protect community spouse’s assets and income, it could make sense to divorce and divide up the assets, even for couples that are not wealthy. Now, it makes little sense for most couples that have less than $500,000 in assets. Some of those assets are “non-counted” assets, such as their home and one car. These assets are not counted in figuring out eligibility for MA. The couple can also keep $137,400 and $3000 in countable assets – these do not have to be spent down to qualify for MA. (Note: these figures change each year). A MA divorce can make sense for those couples with more than $500,000 in assets or there is some other future inheritance protection goal in mind for your family. If the couple has an IRA that has more than $137,400, it could make sense to divorce. However, there are other options besides divorce for these situations of large amounts of non-protected assets, including:
- MA-compliant annuity – converts a lump sum into an immediate annuity (a stream of income each month) for the community spouse. This is tricky and needs to be done by someone who specializes in these in to be as safe as possible.
- Irrevocable funeral trusts.
A good way for couples to figure out which option is best, is to go to a private elder law attorney to do MA planning – attorney fees are allowed spending under MA. MA is such a specialized area that no one should take any large step like a divorce without seeking out advice from an elder law attorney, and ideally, a family law attorney.
This column is written by the Senior Citizens’ Law Project. It is not meant to give complete answers to individual questions. If you are 60 years of age or older and live within the Minnesota Arrowhead Region, you may contact us with questions for legal help by writing to: Senior Citizens’ Law Project, Legal Aid Service of Northeastern Minnesota, 302 Ordean Bldg., Duluth, MN 55802. Please include a phone number and return address. To view previous articles, go to: www.lasnem.org. Reprints by permission only.
