In this Warner Medicaid Moments vlog, attorney Catherine Jacobs addresses a common misconception about whether prenuptial agreements can protect assets when one spouse applies for long-term care Medicaid in Michigan.
A prenuptial agreement is a private contract that defines which assets belong to each spouse, which assets are jointly owned and how property will be divided if the marriage ends through divorce or death. These agreements can be especially important in second marriages, where they may help preserve assets for children from prior relationships and prevent unintended disinheritance.
However, Catherine explains that a prenuptial agreement does not determine Medicaid eligibility. Because Medicaid is not a party to the agreement, the program is not required to follow its terms when evaluating a married applicant’s finances.
When one spouse applies for long-term care Medicaid, the state generally considers the couple one economic unit. Medicaid reviews countable assets owned by either spouse, jointly held property, income and certain transfers made by both spouses during the five-year lookback period. As a result, assets identified as separate property in a prenuptial agreement may still be considered when determining eligibility.
Catherine also cautions that gifts made by the spouse who is not applying for Medicaid may affect the applicant. For example, if that spouse transferred separate assets to children during the lookback period, the transfer could potentially result in a divestment penalty for the spouse seeking Medicaid benefits.
Although prenuptial agreements do not shield assets from Medicaid, they remain valuable estate planning tools. The challenge is coordinating the agreement with any Medicaid planning measures that become necessary. Depending on the couple’s circumstances, a comprehensive strategy may include spend-down planning, properly timed trusts, spousal benefit trusts or long-term care partnership policies. Without careful coordination, steps taken to qualify for Medicaid could unintentionally disrupt how the couple intended assets to pass after death.
Catherine encourages couples, particularly those in second marriages, to review their prenuptial agreements and estate plans through the lens of potential long-term care needs. View the episode for practical guidance on aligning prenuptial agreements, estate plans and Medicaid strategies while preserving a couple’s broader financial goals.
