Preserving Assets and Maximum Income for the Community Spouse in 2024 When the Institutionalized Spouse Enters a Nursing Home and Applies for MassHealth

When one spouse enters a nursing home and may be applying for MassHealth, the spouse who remains at home or in assisted living often has some important choices to make with an unbiased legal advisor. There are different layers in MassHealth law, and many persons only seem to know about the bottom layer, so let’s go over that one first. Under 2024 law, the community spouse can supposedly keep only the couple’s home and first $154,140.00 of the other assets owned by either or both of them. The calculation of the community spouse resource allowance includes any asset that has a value, including cash, bank accounts, certificates of deposit, stocks, bonds, mutual funds, ETFs, all types of other motor vehicles, motor homes, vacation properties, timeshares, land, life insurance policies with a cash value over $1,500.00, and (to the great surprise of many people) assets held in revocable trusts.

Unfortunately, this lower layer is where the knowledge of many persons ends, and two other upper layers of the law effectively override the lower layer. One upper layer is that the community spouse can enter into certain types of annuity or promissory note agreements with the spenddown (that is, excess) assets. Some community spouses can keep everything without needing an annuity or a promissory note, and can end up being in a much better financial position without an annuity or a promissory note, due to the other upper layer of MassHealth law that protects income for the community spouse.

At present, the community spouse has the absolute right to an income of at least 2,465.00 per month. This is known as the Minimum Monthly Maintenance Needs Allowance (“MMMNA”). If shelter expenses exceed 30% of this figure, or $739.50, or if a disabled child lives at home, the community spouse is often entitled to keep a higher MMMNA. If the Social Security and pension payable in the name of the community spouse is less than the $2,465.00 figure, at the end of the MassHealth application process the community spouse is allowed to keep some or all of the institutionalized spouse’s income to be brought up to the MMMNA.

If the needs of the community spouse are greater than $3,715.50 per month, a higher amount of income can sometimes be preserved for the community spouse via the fair hearing appeal process, where the need to keep the other assets has to be proved to maintain the financial ability to remain in the community.  A common situation where need can be fairly easily proved is where the community spouse is living in an assisted living facility and needs to be there due to frailty or a medical condition. Once the need to be in assisted living is established, the appeal is primarily about numbers and prevailing interest rates, so the elder law attorney can often handle it alone without the community spouse having to go to the hearing.

Another option to retain greater income for the community spouse is a Probate Court procedure known as separate support.  Since both spouses need legal representation in court, it is important that estate planning be done well in advance so that the institutionalized spouse has a thoroughly-drafted durable power of attorney that allows the appointed agent or attorney-in-fact (who should be somebody other than the person’s spouse) to hire a lawyer.

When spenddown and appeal options are determined by an elder law attorney as potentially unsuccessful, the community spouse can often purchase certain types of immediate annuities and promissory notes, where the assets used to make the purchase then change character from being assets and are treated as the community spouse’s protected income. Unfortunately, the Supreme Judicial Court (“SJC”) has ruled that the Commonwealth of Massachusetts must be the primary beneficiary if the community spouse dies before receiving all of the annuity payments, and the United States Supreme Court has not yet decided whether to take up our appeal.

One other option available to the community spouse, but not often done in Massachusetts, is known as spousal refusal, where the community spouse refuses to cooperate in the payment process. There is currently a case being considered by the SJC, Freiner v. Sudders, which could have an impact on this spousal planning option, which in the past has been successful for my clients.