Important Court decision that could drastically lower the standard of living for the at-home spouse

March 28, 2011

This edition of the Koldin Report E-Newsletter reviews an important Court decision that could drastically lower the standard of living for the at-home spouse.

Under the Medicaid law, when the ill spouse is in a Nursing Home receiving Medicaid coverage, the at-home spouse is allowed a monthly income allowance in 2011 of $2,739.

Let's assume, for example, that the husband is in a nursing home and the wife is at home. The wife has a monthly income from Social Security of $1,000 and the husband has a monthly income from Social Security and Pension of $3,000.

Under the law, since the wife's income is $1,000, she is entitled to receive $1,739 of her husband's income to bring her up to the $2,739 allowance level. The balance of the husband's income of $1,261 must be applied towards the cost of his nursing home bill.

If the wife could not meet her expenses with the $2,739 allowance, under New York and Federal law, she could ask for a Fair Hearing to request her income allowance be increased above $2,739. Under the law, she must demonstrate that she has "exceptional circumstances."

In a recent Court case titled "Balzarini v. Suffolk County," the highest Court in New York was asked to interpret the meaning of "exceptional circumstances." In this case, the wife did not have enough income to pay her mortgage payments and homeowners insurance along with her other living expenses. She went to a Fair Hearing to request that some of her husband's income be awarded to her so that she could pay these expenses so that she could remain in her family home.

The Court held that "exceptional circumstances" does not include "ordinary" expenses such as mortgage payments. The wife will now most likely have to sell the family home and downgrade the comfortable retirement lifestyle that she and her husband spent a lifetime planning.

The Medicaid law also limits the total life savings that an at-home spouse can keep to one-half of the couple's combined life savings, with a minimum of $74,820 and a maximum of $109,560.

This case demonstrates why it is critically important to plan in advance to protect your life savings. By protecting your life savings, the protected funds can be used to cover certain expenses to help you maintain your accustomed standard of living.

For example, in the Balzarini case, had the wife transferred her home and life savings to an Irrevocable Trust, the funds from the Trust could have been used to pay the mortgage, property taxes and homeowners insurance so that she could have been better able to maintain her standard of living and remain in her family home without reducing her monthly income of $2,739.

The Koldin Law Center, P.C. closely monitors the Medicaid laws and court cases to make certain our clients are well-informed of their options. The Koldin Law Center, P.C. reviews many different asset preservation options with our clients, including establishing an Irrevocable Family Trust. There is no fee for the initial consultation.