DOMA repeal expands Medicaid planning options and disparitiesArticle added by Mike Anthony, JD on July 10, 2013
Ranked: #94 (652 pts)
I’m sure you heard that the Supreme Court of the United States (SCOTUS) recently repealed the Defense of Marriage Act (DOMA). Same-sex couples can now be legally married if state law allows it.
I wanted to put out an apolitical article letting advisors know how the DOMA repeal will have both positive and negative effects on Medicaid planning. There are several areas of Medicaid planning that will be affected.
Community Spouse Resource Allowance (CRSA)
One of the major advantages in the Medicaid spend down is the ability for a married couple to shield a certain amount of funds under the spousal impoverishment statute (the CRSA). For 2013, the maximum amount that a community spouse can keep is $115,920. This is over and above the amount the nursing home patient can keep, which in most states is usually around $2,000.
Prior to DOMA, states were prohibited from giving a same-sex spouse “community spouse” status and the asset protections that came with it.
Before the SCOTUS’s opinion, the same-sex spousal relationship was ignored completely for benefit purposes. Each person in the same-sex marriage would have been treated as a single person, having to spend down his or her assets to the paltry personal limit known as the individual countable resource allowance (ICRA).
Unlimited transfers between spouses
Because married couples’ assets are considered available regardless of ownership, the SCOTUS decision now exposes the assets of the same-sex community spouse to the Medicaid spend down, not a positive from a Medicaid planning point of view).
While the CSRA will help protect a great deal more than would have otherwise been considered exempt, the door is now open to advance planning concepts that are highly beneficial to married couples and would now include same-sex couples.
When planning for eligibility, it is helpful to convert excess resources into an income for the community spouse through the use of a spousal annuity trust or the popular Medicaid compliant annuity. In most states, the income of the community spouse does not factor into the patient’s liability (i.e., co-pay for care at the nursing home or assisted living facility).
Spousal income allowance
Without DOMA, the states will now be able to recognize same-sex spouses for the purpose of transferring income. A patient’s income can now be legally shifted to his or her same-sex spouse. Same-sex spouses will not have to worry about having their needs met if the higher income earner is in a nursing home.
States are prohibited from recovering against a patient’s assets if there is a spouse living at the time of the patient’s death. In a same-sex marriage situation, DOMA prevented estate recovery against a partner/spouse, which was a good thing for the surviving spouse).
Prior to DOMA’s repeal, a same-sex spouse could not claim the home like a traditional spouse would claim it to prevent the house from being sold at death of the other spouse. With DOMA’s repeal, the estate recovery exclusions will become automatic for same-sex spouses.
Separate but unequal?
Prior to DOMA’s repeal, all same-sex couples — regardless of whether they were married or not — were treated the same under Medicaid. After DOMA’s repeal, the disparity in treatment will be huge.
Only those who are lawfully married in one of the dozen states that allow for such unions and only those who seek Medicaid benefits in states that recognize the union will be treated as married couples. So, if you don’t live in one of those states, you and your same-sex partner are still out of luck.
This unequal treatment may provide significant financial incentive for same-sex couples to relocate to a state that will give them spousal benefit protections, especially later in life. In those states that don’t recognize same-sex marriage, it places a huge priority on spousal equivalency planning, so that same-sex partners can still provide for their loved ones.
For Medicaid planners, the SCOTUS decision opens up a whole new range of options to help same-sex couples in states that will now be forced to grant community spouse status to the same-sex spouse. The ability to use the spousal annuity and spousal trust provisions of the federal Medicaid rules will add more options for Medicaid planners to assist their same-sex clients.
In states that do not allow for same-sex marriage, there will need to be an emphasis on early pre-planning.
The end of DOMA changes the law and expands the coverage and protections for same-sex couples. This will undoubtedly bring more financial security to same-sex couples facing the long-term care Medicaid system. It will also expand the number of people who will need help with spousal Medicaid planning.
Are you prepared to take advantage of new planning opportunities for your clients? If not, you should allocate time to learn more about this vitally important subject matter.
The views expressed here are those of the author and not necessarily those of ProducersWEB.
Reprinting or reposting this article without prior consent of Producersweb.com is strictly prohibited.
If you have questions, please visit our terms and conditions