Massachusetts Attorney Hyman G. Darling describes it like this: A husband and wife, unable to care for themselves but expected to live for a long time, were sent to different nursing homes. The wife, who was much wealthier than her husband, was paying $9,000 a month for her own long-term care and $8,000 a month for her husband’s. 

She made the tough decision to get a divorce so she was only responsible for her own expenses. Medicaid would pick up the tab for him. For the World War II generation, divorce is often shameful and traumatic. In some cases, however, it is the only answer.  

Darling is familiar with a half-dozen cases in the last two years in Massachusetts alone. He says it’s the last resort when one of the partners needs nursing home care.  “It makes particular sense if it’s a second marriage, and there’s a pre-nuptial agreement,” he states. “Each partner may want their assets to go to children by an earlier marriage.”   

Why divorce? The lion’s share of the tab for nursing homes is picked up by Medicaid, the jointly funded, federal-state health insurance program for disabled or elderly people who don't have a lot of money. The elderly who qualify for Medicaid must have very few assets ($2,000 for an individual and $3000 for a couple, in most states).  So anyone with more than that in the bank must use it first before Medicaid can begin paying bills.   

A common financial planning strategy for older adults, according to Darling, has been to give most of their assets to their heirs as gifts in order to qualify for Medicaid. In February 2006, however, Congress passed the Deficit Reduction Act of 2005, which made it harder for individuals to qualify for Medicaid coverage. One of the provisions of the law extends the “look-back period,” which means the government can go back for five years looking for financial gifts. If money or property was transferred in that time, the government may impose a penalty of time in which the elderly person is not eligible for Medicaid.

With assets held jointly and gifting discouraged, married couples risk losing everything when one spouse needs long-term care, which can cost $110,000 a year, according to New Jersey Attorney Thomas D. Begley, Jr. Divorce, he says, can allow the “community spouse” — the one who’s not institutionalized — to retain the house and enough money to maintain a decent quality of life.
 
Is this just another tool to beat the system? “It’s a delicate balance — there are ethical issues,” says Karen Martin, community services director of the Greater Springfield Senior Services, Inc., a Massachusetts non-profit. “On the one hand, as a taxpayer, you’re saying, why should the government pay for people because they want to save money for their children? Or for a rainy day? The rainy day might be now.”