Medicaid Divorce
Margaret and Thomas had been inseparable since their college years, sharing a life filled with love, family, and adventure for more than five decades. A few years ago, Thomas was diagnosed with Parkinson’s disease. Margaret has been his constant support, managing his care with unwavering dedication, but the illness is advancing, and the time is approaching when Thomas will need to transition into a specialized long-term care facility. Recently, Margaret’s aunt passed away, leaving her a substantial inheritance. She invested it prudently, but with the mounting expenses of specialized Parkinson’s care, those funds could be depleted within a few short years. After many sleepless nights and deep soul-searching, Margaret realized she faced an impossible choice. Her vow to remain by Thomas’s side “for better or for worse” weighed heavily on her heart. Yet, she came to the difficult conclusion that pursuing a legal divorce—solely on paper—was the only way to safeguard her financial security and ensure there would still be an inheritance for their children.
What Financial Rules Apply Before Considering a Medicaid Divorce?
In 2025, long-term care Medicaid applicants must meet strict income and asset limits that vary by state. Generally, a single applicant’s income limit is 300% of the Federal Benefit Rate ($2,901/month) and the asset limit is $2,000. For married couples where only one spouse applies for long-term care Medicaid (Nursing Home or HCBS Waiver), only the applicant’s income is counted—meaning the non-applicant spouse’s income is ignored.
Assets, however, are considered jointly owned. Even though the non-applicant spouse can keep more assets than the applicant, the couple may still need to “spend down” to qualify. Acceptable spend down methods include paying debts, making home safety modifications, covering care costs, or even taking a vacation.
Gifting assets or selling for less than fair market value within the 60-month Medicaid Look-Back Period can cause a penalty period of ineligibility. Note: New York currently has no look-back for community-based services, but plans to add a 30-month look-back in 2025.
What Are Spousal Impoverishment Rules?
Since 1988, Spousal Impoverishment Provisions have allowed non-applicant (community) spouses to keep more income and assets to avoid poverty when their partner needs long-term care Medicaid. Originally required only for nursing home Medicaid, these rules have applied to HCBS Waivers in all states since January 2014—although protections are scheduled to expire in September 2027 unless renewed.
How Much Can a Non-Applicant Spouse Keep?
- Community Spouse Resource Allowance (CSRA): In 2025, the non-applicant spouse can typically keep up to $157,920 in assets, while the applicant spouse is limited to $2,000.
- Minimum Monthly Maintenance Needs Allowance (MMMNA): Non-applicant spouses are entitled to at least $2,643.75/month (7/1/25–6/30/26), and potentially up to $3,948/month depending on shelter costs.
Why Would Someone Get a Medicaid Divorce?
Before 1988, Medicaid Divorce was common to prevent leaving the community spouse in poverty. Today, it’s less frequent but still used when couples have significant countable assets—often over $500,000—and want to protect them for the community spouse or for inheritance.
According to Genworth’s Cost of Care Calculator, the average monthly nursing home cost nationwide is $9,277. Assisted living averages $5,900/month, with memory care adding another $860–$1,290/month.
Which States Allow Medicaid Divorce?
Whether Medicaid Divorce is feasible depends on divorce laws and how property is divided:
- Community Property States: Assets acquired during marriage must be split 50/50, making Medicaid Divorce ineffective. These states are AZ, CA, ID, LA, NV, NM, TX, WA, WI.
- Equitable Distribution States: Assets are divided “fairly,” not necessarily equally—allowing one spouse to receive a larger share for protection purposes.
Another factor: whether the community spouse’s IRA is exempt from Medicaid’s asset limit. If it’s countable and high in value, Medicaid Divorce may be more relevant.
Medicaid Divorce Relevance by State (IRA Treatment) – Updated Jan. 2025
| IRAs Counted for Both Spouses | Only Applicant’s IRA Counted | No IRA Counted (If RMD Rules Met) |
|---|---|---|
| AL, AZ, AR, CO, CT, HI, IL, IN, IA, LA, ME, MD, MA, MI, MN, MO, MT, NE, NV, NH, NJ, NM, NC, OK, OR, SD, TN, UT, VA, WA | AK, DE, KS, PA, WV, WI, WY | FL‡, GA†, ID†, KY, MS‡, NY‡, ND‡, OH‡, RI‡, SC†, TX‡, VT‡, DC |
† Applicant must take RMD; non-applicant’s IRA is automatically exempt.
‡ Both spouses must take RMD for IRA exemption.
California not listed due to no asset limit effective 1/1/24.
What Are the Alternatives to Medicaid Divorce?
- Medicaid-Compliant Annuity: Converts a lump sum into income, removing it from countable assets.
- Irrevocable Funeral Trust: Pre-pays burial costs while sheltering funds.
- Spousal Refusal: Available in FL, NY, OH, RI—non-applicant spouse legally refuses to contribute to care costs.
Before pursuing divorce, consult with an experienced Medicaid Planning Professional to explore asset restructuring options that may preserve wealth without ending the marriage.
