The Family Caregiver Alliance has reported that spousal caregivers over age 66 who experience caregiving-related stress have a 63 percent higher mortality rate than non-caregivers of the same age.

Accordingly, when one spouse moves to a nursing home, the family may expect that the spouse residing in the nursing home will be the first to die, but statistics show this isn’t always the case. What happens if a Medicaid recipient's spouse dies first? If planning steps aren't taken as part of the Medicaid planning process, the death of the caregiver spouse will affect the nursing home resident's assets and eligibility for Medicaid.

To be eligible for Medicaid benefits in Rhode Island, a nursing home resident may own no more than $4,000 in assets. The Medicaid applicant's spouse (called the "community spouse" who I will assume is female) may keep the lesser of half of the couple’s “countable” assets or $120,900 in 2017. In Rhode Island, “countable” assets for Medicaid purposes include cash, stocks, bonds, real estate, other than the primary residence, and more. (Notably, Rhode Island, at least for now, does not count retirement assets when assessing a person’s Medicaid qualification.)

Often when one spouse seeks to qualify for Medicaid, he or she transfers assets to their community spouse. The five-year look back rule does not apply to transfers of assets between spouses and no penalties apply to such transfers. Federal law also permits additional Medicaid planning that can result in saving additional assets for the spouse at home. As a result, after working with an elder law attorney, once an individual is qualified for Medicaid, the community spouse typically ends up owning all of the couple’s assets.

If the community spouse owns all of the family assets and dies, the next question is, “What does her will say?” If the will leaves the caregiver’s estate to her Medicaid-qualified husband, the additional assets will disqualify the husband from Medicaid. To avoid this, the community spouse must revise her will as part of the Medicaid-planning process to state that her assets will not distribute directly to her husband.

The couple's house can also become a problem. If, like most couples, the home is owned jointly, when the community spouse dies, the Medicaid recipient will own the house. If the resident sells the house, the proceeds from the sale will make the resident ineligible for Medicaid. If the resident states an intent to return home, the home should be an exempt asset for Medicaid purposes. But, when the nursing home resident dies, Medicaid will place a lien on the property sufficient to repay the state for the Medicaid resources expended on the nursing home care.

To prevent a community spouse's death from affecting her spouse’s Medicaid eligibility, it is important that she update her estate plan as part of the Medicaid planning process. There are steps the community spouse can take to protect the spouse in the nursing home, including setting up a testamentary trust for the spouse in her will. I will discuss this type of planning in a future article.

Attorney Macrina G. Hjerpe is a partner in the Providence law firm Chace Ruttenberg & Freedman. She practices in the areas of Estate Planning, Probate, Estate Administration, Trust Administration, Trust Litigation, Guardianship, Business Succession Planning, Asset Protection Planning, Elder Law and Estate Litigation.