Protecting The Healthy Spouse When The Other Has Dementia Community-Spouse Rules, Income Allowances, and Asset Protection

Dementia and Asset Protection When the Other Spouse Is Diagnosed

Managing dementia and asset protection can be challenging in many ways. The emotional and financial toll can be overwhelming for the healthy spouse. Long-term care is expensive and without planning in place, the healthy spouse may face financial hardship. Fortunately, Medicaid and elder law provide protections designed to prevent the healthy spouse, often called the community spouse, from becoming impoverished while ensuring the ill spouse receives necessary care.

Community-spouse Rules

The cornerstone of this protection comes in the form of community-spouse rules. Spouses and single individuals are treated differently under Medicaid. The spouse with dementia (the institutionalized spouse) must meet strict income and asset limits to get Medicaid long-term care benefits. Then, the community spouse is allowed to retain a designated share of the couple’s assets. This is known as the Community Spouse Resource Allowance (CSRA). The CSRA enables the healthy spouse to keep a portion of savings, investments, and other countable resources rather than spending everything down on care.

Income Allowances

Further protection for the community spouse includes income allowances. For instance, if most of the couple’s income belongs to the spouse with dementia—such as Social Security or a pension—Medicaid allows part of that income to be diverted to the healthy spouse through the Monthly Maintenance Needs Allowance (MMNA). This ensures the healthy spouse has enough monthly income to cover basic living expenses like housing, food, and utilities.

Dementia and Asset Protection Strategies

When used appropriately and with professional guidance, asset protection strategies play a critical role in protecting the healthy spouse. For instance, Medicaid often exempts certain assets, such as a primary residence, one vehicle, and personal belongings. In addition, legal tools like Medicaid-compliant annuities, spousal transfers, or irrevocable trusts can help preserve resources for the healthy spouse while maintaining Medicaid eligibility.

Planning prior to any major health diagnosis is the best approach. However, once a diagnosis has been made immediate planning is essential. Dementia is progressive, and decisions made before cognitive decline sets in offer more flexibility and better outcomes. Consulting an estate planning or elder law attorney can help couples understand their options, comply with Medicaid rules, and protect the financial security and dignity of the healthy spouse during exceptionally challenging times.

Whether a loved one has recently been diagnosed with dementia or you want to begin planning for the eventuality of any adverse health diagnosis, call my office today at (470) 235-7868.

Looking to find an experienced estate lawyer in the Georgia area who is skilled in asset protection and estate plan preparation? Shannon Pawley is an attorney in Georgia with expertise in estate planning and asset protection. Shannon can provide assistance with creating an estate plan to include making a will and how to establish a trust properly. If you have questions about asset protection or questions about making an estate plan, reach out to Shannon and she will be glad to help answer all the estate planning questions you might have!