Property Rules

Separate Property

Generally, separate property is:

Property acquired by the Institutionalized or Community Spouse prior to marriage.
Property obtained during the marriage in a state where separate property rules apply. (NOTE: California is not a separate property state; any Californian property obtained in marriage is considered community property).
Property obtained by the Institutionalized or Community Spouse separately during the marriage as a gift or an inheritance.
Property acquired during marriage if purchased with funds which are the separate property of the owner (i.e. from income obtained before marriage, sale of property owned before marriage, gift or inheritance).

Community Property

Any property obtained during marriage (with the exception of property purchased in a separate property state) is considered Community Property.

Property purchased with community funds (may include earnings of the Institutionalized or Community Spouse while married and living together)
Income derived from community property
Funds received from the sale of community property

Note: Property purchased with funds that cannot be identified as separate must be counted as community property, unless the client can provide documentation which shows the property is separate.

Inter-spousal Agreements

An inter-spousal agreement is necessary in order to separate the community property of couples who are informally separated due to any circumstances other than admission to a medical facility.

If a couple separated and completed a valid inter spousal agreement prior to an admission to a medical facility, the separation of property is effective as of the date of the agreement, not the admission.

An inter-spousal agreement is only effective when the Institutionalized Spouse and Community Spouse are in separate MFBUs.

Inter-spousal Agreement Requirements

A valid inter-spousal agreement must meet the following requirements:

Be in writing and signed by both parties.
1. The agreement does not need to be prepared by an attorney.
2. If one member of the couple is incompetent or otherwise incapable of giving his/her consent, one of the following third parties (not including the person's spouse/same-sex spouse/RDP) can act on his/her behalf in completing the agreement:
  1. A public guardian
  2. A court-appointed conservator
  3. A person who has durable power of attorney
    1. Note: The durable power of attorney paperwork must specifically state that the person is empowered to enter into an agreement to separate community property.
Provide a summary of the value of each asset divided. (A spouse/same-sex spouse/RDP's share of community property is always 1/2 of the total community property.)
Specify how the assets are divided (i.e., the actual divided amounts must be indicated or a fifty percent division of the amounts identified must be specified).
Provide a clear division of non-exempt property into equal shares.
1. Important: If the inter-spousal agreement does not divide the couple's non-exempt community property into equal shares, then the EW must evaluate the “transfer of property” to determine if the transfer was not for adequate consideration. The applicant's spouse/same-sex spouse/RDP then has the option of allocating property to his/her spouse/same-sex spouse/RDP to provide him/her with an equal share, or a period of ineligibility may be imposed.
2. Spouse/same-sex spouse/RDPs may choose to divide some or all of their community property.
3. Exempt property may be included in the inter spousal agreement; however, it does not get divided into equal shares.
4. An actual physical division of community property is not required as long as the legal division is documented in the agreement.

Limitations of the Inter-spousal Agreement

Individual members of a couple who have completed a valid inter-spousal agreement will have their eligibility for MC determined using only their share of community property, as stipulated in the agreement, and any separate property they may have.
This law provides for the division of community property only. Any transfer of nonexempt separate property by one spouse/same-sex spouse/RDP to the other must be evaluated for adequate consideration.
An inter-spousal agreement executed after the date of entry into LTC, which replaces an existing automatic division of community property calculated by the county must be accepted, even if it appears to be an unequal division because the Institutionalized Spouse has already spent down all or a portion of his/her share of the community property. Which only applies to individuals who entered LTC prior to 9/30/89 and applied on or after 1/1/90.
The property given to the Community Spouse through an inter-spousal agreement which replaces the county's automatic division must be treated as his/her separate property. Which only applies to individuals who entered LTC prior to 9/30/89 and applied on or after 1/1/90.
Any interest income that accumulates on the separate property of the Community Spouse must be considered the separate income of the Community Spouse and must not be considered in computing the share of cost of the Institutionalized Spouse.
A copy of the inter-spousal agreement must be scanned into IDM.

Advising Applicants/Recipients

Eligibility workers are responsible for issuing MC Information Notice 005 at intake and Redetermination to all clients who are subject to the division of community property rules.

Note: Inter spousal agreements do not affect income, they only affect property.

Division of Community Property

Division of community property rules were established as of 9/1/85 to protect the Community Spouse from impoverishment when the other spouse/same-sex spouse/RDP enters LTC. An automatic division of all nonexempt community property takes place as of the date one spouse/same-sex spouse/RDP enters any medical facility.

Division of community property rules only apply to cases when:

The Institutionalized Spouse was admitted to LTC before 9/30/89, regardless of when they actually apply.
The Institutionalized Spouse is already on MC prior to 9/30/89, the division of community property rules continue to apply.
The Institutionalized Spouse was admitted to LTC, applied for MC, and was determined eligible for MC between 9/30/89 and 12/31/89.
Document the detailed information regarding the division of community property in the Journal section.

Automatic Division Rules

Important: These rules only apply to couples when one spouse/same-sex spouse/RDP entered LTC before 9/30/89 and applied before 1/1/90.

The nonexempt community property (both real and personal) of a married couple, is automatically divided into equal shares as of the date one spouse/same-sex spouse/RDP enters any medical (either acute or non-acute care) facility.

Note: Evidence can be provided by the applicant/recipient to oppose the automatic division rule (e.g., proof of separate ownership prior to marriage, inheritance, etc.).

The division will only affect the eligibility of those spouse/same-sex spouse/RDPs who are in their own MFBUs. As long as spouse/same-sex spouse/RDPs remain in the same MFBU, all their separate and community property must be taken into account in any Medi-Cal eligibility determination.
Individual members of a couple with one spouse/same-sex spouse/RDP residing in a medical facility will have their property eligibility determined for Medi-Cal according to the automatic division of property, unless they are both MI or AFDC-MN.
Any part of this separate share of property which is made available to the other spouse/same-sex spouse/RDP must be considered in determining each spouse/same-sex spouse/RDP's eligibility.
The division of community property upon entry to medical facility is automatic and meets the requirements of adequate consideration. The transfer of nonexempt separate property must be evaluated.
If one spouse/same-sex spouse/RDP's share of property, and their own separate property exceeds the property limit, any resulting spenddown must be done solely for that spouse/same-sex spouse/RDP's benefit. This includes all medical expenses.
- Important: There is no “own benefit” requirement after 1/1/90, although a period of ineligibility may result if property has been inappropriately transferred. The LTC Spouse may only spenddown property up to his/her “proportionate share” of an expense.
- ExampleExampleAn Institutionalized Spouse owns 1/2 of the interest in his home with his Community Spouse. Therefore, he may opt to spenddown his excess property by paying up to 1/2 of the remaining mortgage. He may also choose to pay up to 1/2 of the balance owing on an exempt car that he owns jointly with his spouse/same-sex spouse/RDP.
As soon as the Institutionalized Spouse is discharged from the medical facility to return home, “separate property” reverts back to community property effective the first day of the following month.
A transfer from one medical facility to another does not affect this division of property.

The LTC Spouse must receive 1/2 of any interest income which accumulates on the Community Spouse’s share of community property which is subject to the “automatic division”, unless there is an inter-spousal agreement.