What is spousal refusal in Medicaid planning?

Attorney Tom Olsen: Robert, I'm always interested to hear about new cases that you're taking on to help people to protect their life savings from nursing homes. The one that we're doing this past week is a spousal refusal. Normally, a married couple, one of them goes into a nursing home, they're going to have to use their joint marital assets to pay for the nursing home, but there a workaround here.

Attorney Robert Hidock: There is. A lot of times you'll hear me talk about a personal services contract to protect assets. Well, you can't do that from spouse to spouse. If you're a married couple and one spouse is in the nursing home, one spouse is healthy in the community, they're allowed to have $137,000 in accountable assets, but what happens if they're over that? We can't do a personal service contract from spouse to spouse. For married couples, we use what's called a spousal refusal.

It is very detailed-oriented. We have to move every single asset into the healthy spouse's name and then we would do the assignment of rights, where the spouse that's in the community will say, "I refuse to support my spouse. I love them, but I refuse to support him financially." The spouse in the nursing home looks to the state and says, "I have no money to pay you." The state picks up the difference, and he goes on Medicaid. His spouse that's healthy keeps all the assets.

Attorney Tom Olsen: Wow, that's quite something, spousal refusal. That's not to be confused with another situation that requires that the husband and wife get divorced for the other spouse to qualify for Medicaid.

Attorney Robert Hidock: That's the next step. That's if you need to have all income and all assets. This way, they get a portion of the income, like their spousal allowance, and all assets. It's considerably cheaper than-- we call it a Medicaid divorce. Medicaid divorce entails two attorneys, a court date. It's a very long process.