The Effect of Disinheritance of a Medicaid Recipient by a Community Spouse

As stressed in prior posts, Medicaid eligibility may not be permanent. If the requirements for eligibility are not met at the first moment of the first day of a given month, eligibility will be lost. A general discussion of that problem is set forth in Post 21, which discusses loss of eligibility upon the death of another.

The salient development with respect to the community spouse is that the regulations to OBRA '93 (which are still in effect) appear to disqualify an individual from eligibility due to the existing of elective share rights.

Planning considerations for the will of a spouse of an individual who is or may be entering a nursing home are broader than the issue of Medicaid disqualification. However, Medicaid planning must address the possibility that the "healthy spouse" might predecease the potential Medicaid applicant or Medicaid recipient. Lack of planning in this area could undo lifetime Medicaid planning. For purposes of this discussion, the wife is assumed to be the potential Medicaid applicant, and the will under discussion is that of the husband.

Supposed the husband desires to "disinherit" his wife and preserve assets for the next generation if he dies first. See the New Jersey elective share provisions. N.J.S.A. 3B:8-1 et. seq. The regulations and comments would appear to treat the failure of the wife to exercise her elective share rights as a transfer, the amount of which would presumably be one-third the augmented estate of the husband (N.J.S.A. 3B:8-1,3).

Example 1: Husband predeceases wife (nursing home resident, not yet eligible for Medicaid) devising his estate to their children. Assuming elective share rights of $90,000, failure to exercise these rights would result in a period of ineligibility ( see post 15).

Such interpretation violates the federal statute and raises numerous preemption issues.

For a further analysis and the general estate planning issues if a community spouse predeceases The Final Medicaid Regulations (Finally!), 2001, "Estate Planning Issues", by Levin, Mark.

Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.