The Illusion of Prenuptial Agreements with Medicaid

The Illusion of Prenuptial Agreements with Medicaid

Couples who remarry often sign prenuptial agreements. Good reasons for them are to preserve an inheritance for their children by a prior marriage and to protect themselves from claims of maintenance and property division should they later divorce. The agreements typically provide that the surviving spouse may not make a claim against the estate of the deceased spouse for their statutory rights, allowances for exempt property, for family support and for the spousal elective share.

The prenuptial agreements, however, do not and cannot waive a spouse’s duty to support the other spouse. Support includes the basics of food, shelter and medical care. If the ill spouse has exhausted his or her assets and his or her income is not sufficient to pay for care, then the spouse who is well must then use his or her income and assets for the care of the ill spouse. In Colorado, the family support doctrine is part of our statutes. I tell clients that this is legally what it means to be married: the duty of support.

Courts also recognize this support notion in determining whether to enforce a prenuptial agreement. If, at the time of divorce, a spouse may not be able to support himself or herself with sufficient property or employment, then a court will not enforce the agreement. Courts say that it is “unconscionable” to do so. Of course, with the elderly population, they frequently face this situation because of the high cost of long term care.

Medicaid does not recognize prenuptial agreements. All of the couple’s assets are counted in determining eligibility for Medicaid: his, hers and both.

What should you do?

Your options include:

• First, the wealthy spouse should consider buying long term care insurance for the spouse with little property.
• Second, consider a Medicaid strategy of converting assets into income for the at-home spouse with the use of Medicaid single premium immediate annuities.
• Third, if you are not willing to support your partner either do not get married or get a dissolution of marriage or legal separation (division of property only) before a spouse becomes ill.