Many people have a vague idea what a prenuptial agreement (or prenup) is and what it is designed to accomplish. While they can be necessary for younger first marriages, they are often indispensable for 2nd marriages. Here are some of the reasons why they are important:
• People are now living longer and are healthier than at any other time in our history.
• The divorce rate has leveled off in all age groups except for seniors, where it continues to climb. The divorce rate for people over age 65 has doubled since 1980!
• The remarriage rate for both widowed and divorced couples is high- people aged 55-64 have a 67% chance of remarrying and people over age 65 have a 50% chance of remarriage.
• A common reason prenups are used is to protect the separate property of each partner in the event of divorce or death.
• Another common reason is to provide for the separate children that each partner had in their first marriage.
• When people remarry in their 50s, 60s and 70s, they often enter the marriage with significant assets (IRA, 401-k, real estate, bank accounts and personal property) as well as children from first marriages.
While a properly drafted prenup will protect each partner in the event of death or divorce and may also provide some assurance that each partner’s separate children will receive something, there is one thing a prenup will NOT do!
A PRENUP OFFERS NO PROTECTION AT ALL TO EITHER SPOUSE SHOULD EITHER OF THEM HAVE TO MOVE TO A NURSING HOME AND MEDICAID GETS INVOLVED!
Let that sink in a moment.
Each of you have spent hours and good money drafting your prenup so that your separate estate, your IRA, investments, real estate and so on are not considered “property” of the other spouse.
Now when one of you has to move to a nursing home, where it costs $10,000 every month you are there, you learn that Medicaid might be available BUT the healthy spouse’s assets are also considered part of what Medicaid wants in addition to the spouse needing care.
In other words, your own IRA has to be spent-down on your spouse’s care, along with everything else, before Medicaid will start paying for care. Your lake house, your stock portfolio, your separate CDs all have to be spent down in order to qualify for Medicaid!
Here in Alabama, the well spouse has an allowance of $137,400 of assets they can keep but all assets over that amount must be used to privately pay for nursing home care BEFORE Medicaid will start paying the bill. And even then, Medicaid will place a lien on your home to ensure eventual repayment of all they have loaned you for care.
I am guessing that you were thinking that your prenup would allow you to protect all those assets you brought into the marriage from your spouse’s nursing home expenses. Sorry to be the bearer of bad news!
The Good News? The good news is that there are still planning opportunities to consider to protect your assets and qualify for Medicaid much sooner than otherwise. These are perfectly legal options but they must be put in place five years before nursing home care is needed. When is the right time to explore these options? We can’t predict tomorrow much less five years from now. We therefore recommend putting these plans in place as soon as possible to maximize the benefits of your prenup while minimizing the bite that Medicaid would otherwise take from your estate. In this case time is definitely money- $10,000 every month!
Call us to learn more.
William G. Nolan
Elder Law Attorney
The Alabama Elder Care Law Firm, LLC
205/390-0101