Spousal Impoverishment & Resource Allowance Planning
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MEDICAID PLANNING
Protecting the Spouse at Home in Kentucky
When one spouse enters a nursing home and the other stays at home, the fear is always the same: that paying for care will leave the healthy spouse with nothing. It is a reasonable fear, and it is the situation the spousal impoverishment rules were written to prevent.
Those rules protect a share of the couple resources for the spouse who remains at home, and where that spouse income is low, they can divert part of the income of the spouse receiving care to support them. The protections are real and they are substantial.
They are also not automatic in any practical sense. They have to be claimed, calculated correctly, and documented as at the right date. Couples who navigate this alone frequently end up with less protection than the rules entitled them to, and by then it is difficult to undo.
This is the most valuable planning available to a married couple facing care costs. Call (502) 348-2108.
What Spousal Impoverishment Protection Means
The spousal impoverishment rules apply where one member of a married couple needs long-term care Medicaid and the other does not. The spouse receiving care is generally referred to as the institutionalized spouse, and the one remaining at home as the community spouse.
Two distinct protections operate. The first concerns resources: a portion of the couple combined countable resources is protected for the community spouse rather than being required to be spent on care. The second concerns income: where the community spouse own income falls below a set level, part of the institutionalized spouse income may be diverted to make up the difference.
Both protections are subject to floors and ceilings that are adjusted annually. Because those figures change every year, we work from current numbers at the time of the application rather than quoting amounts that will shortly be wrong. What does not change is the structure, and understanding the structure is what allows a couple to plan.
The Resource Assessment and Why Its Date Matters
This is the most consequential technical point on the page, and the one couples most often miss entirely.
A snapshot, taken at a fixed moment
The protected resource amount for the community spouse is calculated from the couple combined countable resources as at a particular point, generally the beginning of the first continuous period of institutionalization. It is a snapshot. Resources are assessed as they stood on that date, not as they stand when the application is eventually filed.
Why couples lose money here
Because families do not know the snapshot exists, they often spend down substantially before applying, believing they must. The protected share is then calculated from a smaller pool, so the spouse at home is protected on a lower figure than they would have been had the assessment been done at the right time. Money that could have been preserved has been spent, and the calculation has been permanently worsened. This single misunderstanding costs Kentucky couples more than any other in the field.
The practical instruction follows directly. Where a spouse has entered hospital or a facility, get advice before spending anything and make sure the resource assessment is requested and documented properly. It is one of the few steps in elder law where a phone call in the first week is worth more than months of work later.
How the Protections Work Together
The community spouse resource allowance
A share of the couple combined countable resources, subject to an annually adjusted minimum and maximum, protected for the spouse at home rather than required to be spent on care.
Protected income for the spouse at home
Where the community spouse income falls below the applicable level, part of the institutionalized spouse income may be diverted to them, reducing what goes to the facility.
Unlimited transfers between spouses
Transfers between spouses are not subject to the transfer penalty. This is the single most powerful planning tool available in a married-couple case and opens options a single applicant does not have.
Exempt resources
Certain assets are treated differently, and converting countable resources into exempt ones is a legitimate and frequently used step where a spouse remains at home.
The home
The residence is treated differently while a spouse continues to live there. That does not remove the estate recovery question later, which has to be planned for separately.
Fair hearing to increase the allowance
Where the standard calculation leaves the community spouse without enough income to live on, it is possible in appropriate cases to seek an increased allowance.
Estate Recovery Still Has to Be Planned For
Protecting the spouse at home during their lifetime does not, by itself, deal with what happens afterwards, and this is where Kentucky differs sharply from what national guidance suggests.
Kentucky recovers from the estates of Medicaid recipients under 907 KAR 1:585, which defines estate to include not only probate property but all property in which the recipient held legal title or an interest at death, to the extent of that interest, whether it passed through joint tenancy, tenancy in common survivorship, life estate, living trust or other arrangement.
The consequence is that the familiar advice, that putting the house in joint names or into a living trust or transferring a remainder interest by life estate deed will keep it safe from recovery, does not hold here as the regulation is written. Kentucky adopted the expanded definition deliberately and named those arrangements.
For a married couple this matters because the home is usually the asset they most want to keep in the family. Planning that secures the community spouse during life but ignores recovery afterwards protects only half of what the family cares about. See estate recovery defense.
What Couples Should Do, and When
The sequence matters more here than almost anywhere else in elder law.
01
Before any spending, get the assessment right
The snapshot date fixes the calculation. Spending first and asking later reduces the protected share permanently. This is the highest-value step available to a married couple.
02
Do not accept spend-down advice from the facility
Admissions and discharge staff are not benefits lawyers, and the advice to exhaust savings before applying is both common and frequently wrong for a married couple.
03
Consider transfers between spouses
Interspousal transfers are not penalised. Restructuring how assets are held between the two of you is often the foundation of the plan.
04
Review the titling and the deed
How the home and accounts are held affects both the resource calculation and what happens on death. Kentucky has no automatic survivorship, so the deed wording matters. See deed preparation.
05
Check the power of attorney
If the spouse entering care can no longer sign, the agent needs the express KRS 457.245 powers to carry out any of this. Without them the plan stops before it starts.
If your husband or wife has just gone into hospital or a facility, call before you spend anything. (502) 348-2108.
What the Community Spouse Keeps
Couples arrive expecting to be told they will lose everything, and that is very rarely the outcome. The protections are meaningful, and they are supplemented by what careful planning can add.
The spouse at home retains a protected share of the couple resources, their own income in full, and potentially a diversion of income from the spouse in care where their own income is low. The home is treated differently while they live in it. And because interspousal transfers carry no penalty, there is real scope to restructure how things are held.
What the rules do not do is protect everything automatically. The gap between the statutory floor and what careful planning achieves is often considerable, and closing that gap is the work.
Because every figure involved is adjusted annually, and because the outcome depends heavily on the timing of the assessment, we will not put numbers on a web page. We will give you the current figures and a realistic estimate for your own circumstances at the consultation, which is free.
- A protected share of the couple combined countable resources
- The community spouse own income, in full
- Potentially a diversion of income from the spouse receiving care
- Different treatment of the home while the community spouse lives there
- Unpenalised transfers between spouses
- The ability to seek an increased allowance in appropriate cases
- Whatever additional protection proper planning secures beyond the statutory minimum
Married Couple Planning in Bardstown and Louisville
Thomas Hamilton has been admitted to the Kentucky bar since 2011 and has focused on elder law since 2014. He is a member of the Kentucky Bar Association Elder Law Section and the National Academy of Elder Law Attorneys.
We work with couples across Nelson, Bullitt, Washington, Marion, Larue, Hardin, Anderson, Spencer and Jefferson counties, from 117 E. Stephen Foster Avenue in Bardstown and the First Trust Centre, 200 S. 5th Street in Louisville.
Where one spouse is in hospital or a facility, we try to see the family quickly, because the first days genuinely matter. The initial consultation is free. Schedule a consultation.
Mistakes That Cost the Spouse at Home
Spending down before the resource assessment
The protected share is calculated from the resources as at the snapshot date. Spending first lowers the figure the calculation is based on, permanently, and it is the most expensive error in this area.
Following the facility advice to exhaust savings
Well meant and frequently wrong for a married couple, because it ignores every protection the rules provide.
Not knowing interspousal transfers are exempt
Couples restrict themselves unnecessarily because they assume the transfer penalty applies between spouses. It does not.
Ignoring estate recovery
A plan that secures the community spouse during life but leaves the house exposed under 907 KAR 1:585 protects only part of what the family cares about.
Assuming the deed carries survivorship
Kentucky abolished automatic survivorship under KRS 381.120. If the deed does not say so expressly, the deceased spouse half does not pass to the survivor.
Waiting until the application is due
Most of the valuable steps have to happen before filing, and several have to happen before any money is spent.
FREQUENTLY ASKED QUESTIONS
Common Questions About Protecting a Spouse
What protections are available for a spouse who remains at home?
The spousal impoverishment rules protect a share of the couple combined countable resources for the community spouse, and where that spouse income is low they may allow part of the institutionalized spouse income to be diverted to support them. The applicable minimums and maximums are adjusted annually, so the current figures should be applied to your own situation.
Will we lose our house if my husband goes into a nursing home?
The home is treated differently for eligibility purposes while a spouse continues to live there, so it is not generally required to be sold to qualify. What still needs planning is estate recovery afterwards, because Kentucky uses an expanded definition of estate under 907 KAR 1:585 that reaches interests passing through joint tenancy, life estates and living trusts as well as probate property.
Do we have to spend down our savings first?
Rarely to the extent couples are told. Doing so before the resource assessment is actually counterproductive, because the protected share for the spouse at home is calculated from the resources as they stood at the snapshot date. Spending first reduces the basis of that calculation permanently. Get advice before spending anything.
Can we transfer assets between us?
Yes. Transfers between spouses are not subject to the Medicaid transfer penalty, which makes restructuring how assets are held between the two of you one of the most useful tools available in a married-couple case. How and when it is done still matters, and it should be part of a considered plan rather than done in isolation.
What if the standard allowance is not enough to live on?
Where the calculated income allowance leaves the community spouse without enough to meet their needs, it is possible in appropriate cases to seek an increased allowance. This is one of several reasons it is worth having the calculation reviewed rather than accepting the first figure produced.
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Protect the Spouse Who Stays Home
The first weeks after an admission decide how much the spouse at home keeps. Call attorney Thomas Hamilton at (502) 348-2108 before you spend anything, or use the form below.
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Address:
117 E. Stephen Foster Avenue, Bardstown, KY 40004