Suze Orman
Photo: Marc Royce
Q: My husband is a disabled veteran with secondary progressive multiple sclerosis. At some point, he will likely need to go into a nursing home. The Veterans Administration and Medicare would cover most of his expenses, but not all of them. I've heard that nursing homes can take everything away from a spouse to cover what the resident owes. To prepare for retirement, we've fully funded our IRAs, and I put away 15 percent of my salary in a government retirement account. Our only debt is our mortgage; we both have life and health insurance, wills, living wills, and powers of attorney. One person said that before my husband is put in a home, I should divorce him to guard my assets. How do I protect myself?

A: You won't lose all your assets or have to divorce. Now let me explain how this may all play out.

First, you need to know that Medicare does not cover long-term "custodial" nursing home care; nor do most private health insurance plans. That's why I've long recommended that people who can handle the high premiums buy a long-term-care insurance policy.

I realize that's not in the cards for you. It looks as if you have two other options: having the nursing home paid for through either Medicaid or the Veterans Administration. To learn more about VA programs, contact your nearest VA office. (Start by calling 800-827-1000 or going to va.gov and clicking on Locations.) Since most of the elderly rely on Medicaid, let me explain that in more detail.

About 20 years ago, the Medicaid program was fixed so it would not impoverish a patient's spouse. The result is that certain assets—including your home, one car or truck, a burial plot, and prepaid, nonrefundable funeral costs—are protected from Medicaid. You can keep them no matter what. Unfortunately, many other assets—including retirement and bank accounts—are nonexempt. The Medicaid folks will add up all nonexempt assets belonging to you and your husband and split them in two. You will get to keep half of the assets, up to a maximum of $109,560, as well as $2,739 a month in income (these limits are adjusted annually).

I'd strongly urge you to get advice from a reputable lawyer experienced in elder law or Medicaid law in your state. Contact the National Academy of Elder Law Attorneys to find lawyers in your area ( naela.org/memberdirectory ). This is a very confusing system with huge financial repercussions—good luck!