Elder Law Issues In Filing For Divorce In Contemplation Of Long Term Care In A Nursing Home Inn Of Court

What type of care is needed?

Medicaid is only available for in home care in the community under Waiver and for long term care in a Nursing Home. It does not pay for care in a Personal Care Facility. Private payment is required. There are VA (Veterans’ Benefits) available, subject to VA guidelines and requirements.

Effect of Pre-nuptial or Post Nuptial Agreements and Assets of the Couple:

1. An Applicant for Medical Assistance seeking Medicaid benefits to pay for their long term care in a nursing home, must make reasonable efforts to make non-excluded assets available, absent of showing of good cause for not doing so. 55 PA Code § 178.1 (g).
2. Assets include those owned both jointly and individually by husband and/or wife!
3. Examples of non-excluded assets include the right to receive an inheritance, equitable distribution in a divorce, or a spouse’s elective share. There is no published case law on the effect of prenuptial agreement or postnuptial agreements on a divorcing nursing home resident’s application for long term care benefits from Medicaid. In this context, when applying for Medicaid, the Applicant’s obligation is to vigorously pursue his or her rights to income and resources, subject to the limitations and provisions of a valid prenuptial agreement. However, the CAO (County Assistance Office) caseworkers will thoroughly review all the assets of both the husband and wife. The CAO caseworkers are required to do so to determine whether an individual qualifies for Medicaid Benefits for long term care in a nursing home facility.

Is a divorce necessary?

A divorce might not be needed to protect the assets of the Community Spouse (CS) because Medicaid provides for rules to prevent Spousal Impoverishment by not counting certain resources or the income of the community spouse (the spouse not entering the nursing home) in determining both the eligibility and private payment, if any, due a Nursing Home.

1. A divorce may not always be necessary, when a spouse enters a nursing home and applies for Medicaid due to the spousal impoverishment protections enacted to protect the Community Spouse, pursuant to 55 PA Code § 178.

IRAs, etc.

Therefore, a party contemplating divorce so as to preserve the maximum assets for the spouse not entering the nursing home, should know that their IRA is exempt and the CS is allowed to retain it. Conversely, the IRA of the Institutionalized Spouse (IS) (spouse entered the nursing home), is a countable asset and must be spent down or dealt with through other options such as being liquidated and used to purchase a DRA compliant Medicaid Annuity.

Home of the CS

To prevent Spousal Impoverishment the residence (one home and one home only), is preserved for the Community Spouse.

1. An elder law attorney should be consulted to plan and protect assets of the CS from Medicaid Estate Recovery by updating and drafting various estate planning documents including Wills, deeds, etc.

Resources of the Community Spouse

There are Minimum and Maximum Community Spouse Resource Allowances that may protect the community spouse in lieu of a divorce. (CSRA).

Retaining Income of the Community Spouse

There is a Minimum Monthly Maintenance Needs Allowance and a Maximum Monthly Maintenance Needs Allowance (MMMNA) plus a shelter standard and standard utility allowance that protect the community spouse. They are based on the income of the parties to prevent spousal impoverishment. There are, however, minimal and may not encompass all the needs of the community spouse for example, the funds may be insufficient to pay for the maintenance of a large suburban home since ancillary expenses such as tree surgeons and landscaping, etc. may not be affordable and may exceed the maximum monthly maintenance needs allowance (MMMNA).

Separated Spouses

Separated spouses are still considered to be “a spouse” under the Medicaid Spousal Impoverishment Rules set forth in 55 PA Code §178.2. The Pennsylvania Department of Human Services Long Term Care Handbook will disregard the assets of a separated spouse only under limited, extenuating circumstances, including, but not limited to domestic violence situations and separations where divorce proceedings have not been filed. The caseworkers at the CAO’s may require strict proof and evidence, for example, if the applicant for Medicaid benefits is unable to locate the spouse, but spousal refusal is unlikely.

Who is your client?

An Elder Law Attorney’s client is the senior or parent or husband and/or wife, subject to ascertaining conflicts. The children of the seniors are not the clients. Our Elder Law representation letters and fee agreements must identify the client. Our duty is to act in the best interest of the parents, not the children, and we represent the parent or parents.

Elder Law Ethics

Representation of a client with diminished capacity: Can we represent the client under Pennsylvania Rules of Professional Conduct Rule 1.14, Client with Diminished Capacity:

1. Although this Rule indicates that the Lawyer shall, as far as reasonably possible, maintain a normal Client – Lawyer relationship with the Client, if a Client’s capacity is diminished, the Rule indicates that the Lawyer may take reasonably necessary protective action, if the Lawyer reasonably believes that the Client has diminished capacity, is it risk of substantial physical, financial or other harm, unless action is taken and the Lawyer cannot adequately act in the Client’s own interest.
2. The Rule sets forth guidelines that a Lawyer should consider in determining the extent of the Client’s diminished capacity. An Elder Law Attorney can and should, in appropriate circumstances, seek guidance from an appropriate diagnostician. “Evaluation of such circumstances if a matter entrusted to the professional judgement of the Lawyer, with regard to whether the appointment of a Guardian or a Guardians Ad Litem is necessary to protect the Client’s interest.
3. In considering alternatives, the Lawyer should be aware of any law that requires the Lawyer to advocate the least restrictive action on behalf of the Client which is included in the Guardianship statute.
4. Emergency legal assistance can and should be rendered, by the Lawyer if the Lawyer reasonably believes that the person has no other Lawyer, Agent or other Representative available.
5. An Elder Law Attorney can decline representation if the Client does not have sufficient capacity to maintain a normal Client/Lawyer relationship. In conclusion, a Lawyer can and should decline representation of a Client whose capacity is too diminished to have the ability to understand, deliberate upon, and reach conclusions about matters effecting the Client’s own wellbeing. It may not be possible to maintain the ordinary Client/Lawyer relationship in all respects, in particular, if a severely incapacitated person does not have power to make legally binding decisions. Instructive information is contained in the comments to this RPC.

Timing is Everything

Clients with capacity may be seeking to file a divorce for the purposes of receiving Government entitlements such as Medicaid, Waiver, etc., on the door step of needing them. In that case, it would be too late to initiate divorce proceedings since the County Assistance Offices may determine that they are seeking to impoverish a spouse, solely for the purpose of qualifying for Medicaid. The filing for divorce must be contemplated well in advance of filing an Application for Medicaid benefits. The divorce should be concluded well prior to a nursing home admission, even if there is a period of private pay, and prior to filing a Medicaid Application.

Equitable Distribution

In the event of a divorce, the CAO will make sure that the divorce is not in contemplation of Medicaid. Therefore, there must be equitable distribution by the parties in a property settlement agreement and optimally, a finalized divorce Decree incorporating the property settlement agreement.

1. PSA: The terms of the property settlement agreement must be equitable so one spouse is not impoverished for the sole reason of obtaining Medicaid Benefits. The Medicaid Law permitting the community spouse to retain their IRA would be an equitable distribution of the assets of the parties if included in one spousal’s Schedule in a Property Settlement Agreement.
2. The Schedules attached to the property settlement agreement can be artfully prepared so that it does not appear and prevents the future Institutionalized Spouse from being impoverished. The institutionalized spouse, the spouse that will be entering the nursing home in the future, will then have assets they will have to spend down prior to qualifying for Medicaid since they can only retain assets within permissible amounts for an individual.
3. Generally speaking, the most an individual can retain is $8,000.00. If an individual’s income is over $2,058.00, they can only retain $2,400.00 maximum. However, the amount retained by the divorcing spouse of a spouse who may need a nursing home, may still be better than subjecting all of the resources of both the husband and wife to being spend down to applicable resource limits in order to be eligible for Medicaid.

No other options exist to protect sufficient assets for the community spouse, than divorce

Elder Law Attorneys do have other options to divorce to maximize the resources retained by the Community Spouse, such as converting resources into a Medicaid Annuity, which will pay an income stream to the community spouse that does not have to be paid to the nursing home, or entering a Continuing Care Retirement Community (CCRC). All other available options should be reviewed in lieu of filing a divorce solely for the purpose of obtaining Medicaid Benefits for the institutionalized spouse. Also, the placement options are extremely limited for a prospective nursing home resident on Medicaid or Medicaid eligible.

Filing for Guardianship in light of Berry v. Berry and Orphans’ Court Practice and Procedure

1. Durable Powers of Attorney: A Power of Attorney is the most important tool of an Elder Law Attorney that every client should have. The Guardianship statute indicates that the least restrictive means should be utilized in lieu of filing for Guardianship. Consultation with an Elder Law Attorney for guidance with regard to the existence, efficacy and utilization of a Durable Power of Attorney is always a vitally important first step in lieu of or prior to filing a Petition for Guardianship. In appropriate circumstances most Guardianships can be avoided.
2. Appointment of Independent Counsel for the Alleged Incapacitated Person: Orphans’ Court Judges will almost automatically appoint independent counsel for the alleged incapacitated person, in the event of any contested Guardianship, issues they perceive, and in a divorce situation, even if the parties are already divorced and a Guardianship is subsequently filed. The Court appoints the independent counsel but the alleged incapacitated person must pay for counsel out of their own funds!
3. Appointment of a Guardian for an Incapacitated Person: The Orphans’ Court Judge can also appoint a neutral Guardian in lieu of the Petitioning party who may be the alleged incapacitated person’s spouse or child. If there is any potential for conflict or in contested matters, the Orphans’ Court Judge may instead appoint a neutral Guardian such as a Care Management Organizations, Geriatric Care Managers, or Guardian Support Agencies.
4. Guardian Fees: The services are paid for by the incapacitated person out of the incapacitated person’s funds, subject to Court approval, even if the family member who filed the Guardianship Petition and/or Consent to serve as Guardian would not have charged a fee for serving as Guardian, had they been appointed. The Guardian of an Incapacitated Person on Medicaid is paid $100.00 per month maximum.
5. Qualification of Guardian: Recently enacted Guardianship statutes and local Rules now require Criminal Records Checks and credit checks of all individuals petitioning to become Guardians.

Guardianship and Divorce matters to be aware of

1. The Guardianship Order should be crafted to allow for the Guardian to engage in Medicaid Planning. The Guardianship Order should allow the Guardian to expend principal as well as income, although that is highly unlikely to be approved by a Judge.
2. IME: The Orphans’ Court Judge may, sua sponte, order an independent medical examination of the alleged incapacitated person. This must be paid for by the alleged incapacitated person.

Considerations for a divorce to obtain Medicaid Benefits

If all of the foregoing concerns are satisfied, a divorce to obtain Medicaid Benefits may be desirable in the event of the following:

1. It is an ill-considered marriage of relatively short, recent duration;
2. A second, third or subsequent marriage, late in life;
3. A marriage where all of the above two categories are met and/or there is a great disparity between resources of the parties and desire by both parties to preserve their assets for the children of their prior marriages, subject to meeting all of the criteria established in Berry v. Berry and Syno v. Syno.
4. There are responsible Agents pursuant to valid Powers of Attorney in place to guide and work with the Family Law Attorneys, in the event of diminished capacity of one or both of the parties.
5. There are no alternatives. Elder Law Attorneys have other resources available for asset protection such as purchasing a Medicaid Annuity, Elder Care placement alternatives such as CCRCs, facilities with benevolent plans, etc., life estate Deeds, utilizing a Care Giver’s Exception to protect a home for a Care Giver Child of one of the parties, Caregiving Contracts, planned gifting, use of Trusts, etc. Asset Protection is usually the motivation to obtain a divorce prior to entering a nursing home and applying for Medicaid Benefits.