The news from our office has been quite dismal in recent months. All the talk about the Deficit Reduction Act of 2005 and its negative impact on planning for the elderly and disabled is enough to leave seniors feeling bleak about their planning options. Fortunately, this article will focus on a recent court decision that will cast a more positive light on protecting the assets of a community spouse.
Under current rules, an individual applying for Medicaid (institutional spouse) can own no more than $4,150 in assets. In the nursing home Medicaid context, however, the spouse at home (community spouse) is allowed to maintain a minimum of $74,820 in assets and, in certain instances depending on a couple’s total resources, a maximum of $99,540 (the community spouse resource allowance or CSRA). In addition, the community spouse is entitled to retain $2,489 in monthly income. This amount is referred to as the minimum monthly maintenance needs allowance (MMMNA).
If a community spouse receives less than $2,489 in monthly income, she can take the position that she needs to maintain assets in excess of the CSRA in order to generate sufficient allowable income. As an example, a community spouse who receives $1,000 in monthly income may take the position that she must retain $500,000 in resources so that the income earned on such amount can bring her up to the threshold of $2,489 per month.
Under New York State law, the “income-first” policy is typically applied to these cases. Under the income first rule, if the income generated by a community spouse’s assets is insufficient to reach the MMMNA, the community spouse must first look to the institutionalized spouse’s income to bring her income up to the MMMNA. As an illustration, if the institutional spouse in the earlier example receives $1,489 in a monthly pension, such amount would be transferred to the community spouse (who already receives $1,000) and she would not be able to maintain extra resources because she would already have the allowable monthly income of $2,489 by reason of her spouse’s income being attributed to her.
In the case of Robbins v. DeBuono, the Court held that applying New York’s income first rule to Social Security benefits violates federal law. In other words, Social Security income cannot be allocated from an institutionalized spouse to a community spouse when determining Medicaid eligibility. The Court in Robbins stated that attribution of Social Security benefits from an institutionalized spouse to a community spouse for purposes of determining the community spouse’s total income constituted “legal process” in violation of the federal anti-alienation provision that protects benefits from the “execution, levy, attachment, garnishment or other legal process.”
Cases argued after Robbins, however, undermined its holding by ruling that Social Security payments could in fact be transferred to the community spouse and such transfer would not be in violation of Federal law. In the recent case of the Matter of the Estate of Margaret M. Tomack, the Court essentially reaffirmed Robbins, by ruling that it was improper for the Department of Social Services to allocate Social Security income from the institutional spouse to his wife to raise her income level to the MMMNA. The Tomack holding is good news for spouses of institutionalized Medicaid applicants/recipients.
As a final illustration, assume a community spouse receives $1,489 in monthly income and the institutional spouse receives $1,000 in monthly Social Security. Based on the holding in Tomack, the institutional spouse’s Social Security can be applied towards the cost of his care and not transferred to the community spouse. The community spouse would then be able to retain more than $74,820 in resources in order to generate enough income to bring her up to the MMMNA which is currently $2,489. This can protect the community spouse from the possibility of future claims or lawsuits by Medicaid.
We will keep you apprised of future developments.
Ronald A. Fatoullah, Esq. is the principal of Ronald Fatoullah & Associates, a law firm that concentrates in elder law, estate planning, Medicaid planning, guardianships, estate administration, trusts, wills and special needs planning. The firm has offices in Forest Hills, Great Neck, and Brooklyn, NY. Mr. Fatoullah has been named a “fellow” of the National Academy of Elder Law Attorneys and is a former member of its Board of Directors. He also serves on the Executive Committee of the Elder Law Section of the New York State Bar Association. Mr. Fatoullah has been Certified as an Elder Law Attorney by the National Elder Law Foundation. Mr. Fatoullah is a co-founder of Senior Umbrella Network of Queens. This article was written with the assistance of Debby Rosenfeld, Esq., a senior staff attorney at the firm. The firm can be reached by calling (718) 261-1700 or toll free at 1-877-ELDER-LAW or 1-877-ESTATES.
*Certified as an elder law attorney by the National Elder Law Foundation.
