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What is a Medicaid divorce?

On Behalf of | Mar 4, 2024 | Elder Law |

The thought of getting divorced for purely financial reasons may be something you would never consider. However, the unfortunate reality is that this is exactly the situation some older Ohio married couples face.

This scenario has become so prevalent that there is a name for it: Medicaid divorce.

A Medicaid divorce is a divorce done solely to provide one spouse with a greater share of marital property, which allows the other spouse to file for Medicaid.

When a Medicaid divorce might be necessary

To qualify for Medicaid, your assets must be below a certain limit. Sometimes one spouse needs long-term care that Medicaid benefits can provide, but the total amount of marital assets is too high to qualify for Medicaid.

Divorcing and transferring most of the marital assets over to the spouse who does not need the long-term care could result in a Medicaid approval for the spouse who needs the care. The spouse needing long-term care may now be below the required asset threshold.

Without Medicaid, a married couple might be forced to use their own personal assets to pay for the long-term care, eventually leaving them with little to nothing.

How Indiana divorce law can work in your favor

Indiana law likely allows for a Medicaid divorce. Some states require that marital property be distributed equally or “50/50” in a divorce but Indiana is an equitable distribution state.

An equitable distribution state means that marital property must be divided equitably, or fairly, which does not necessarily mean equally. This means one spouse might receive a higher share of marital property which is the point of a Medicaid divorce.

However, be careful if you are applying for Medicaid and have an IRA. Under Indiana law, a Medicaid applicant’s IRA is still counted as an asset. Even with other assets transferred to your former spouse, you may need to spend down your IRA to meet Medicaid’s asset limit and qualify for benefits.

Therefore, obtaining a Medicaid divorce in Indiana is possible. Nevertheless, before you decide a Medicaid divorce is right for your situation, there are many factors that should be examined.

Additionally, both the divorce and Medicaid application processes are often complex with many legal requirements to meet. You should not start either of these processes without advice and guidance.