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Level 1
posted Sep 25, 2024 11:35:14 AM

Effect of MFS vs. MFJ on Medicaid trust (owned by one new spouse but not the other)

Context: Two years ago I married a woman who had (with her late husband of 63 years) set up a Medicaid trust so as to shield their assets from ultimately being eaten up by nursing-home expense (still hypothetical, but getting much less so). I myself do not have such a trust. My wife and I keep our finances separate (even keeping our checking accounts at different banks), but I fear that my unsheltered assets will now be counted against her and defeat the purpose of her trust, to the detriment of both of us.
Questions: Is my fear justified? Would filing as MFS provide some protection against that outcome?  (For us, the increase in total taxes would be tolerable as a price to pay for maintaining the benefits of the trust.  It was because of my uncertainty about which way to file [MFJ vs. MFS] that I ended up filing for an extension.)

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1 Replies
Employee Tax Expert
Sep 25, 2024 11:56:01 AM

Unfortunately, this question is outside of tax-related advice, and requires legal advice that we are unable to provide. It would be best to consult an attorney about this scenario.

These articles offer tax-related comparisons between Married Filing Jointly (MFJ) and Married Filing Separately (MFS) statuses: 
How Should You and Your Spouse File Taxes? Married Filing Jointly vs Separately 
When Married Filing Separately Will Save You Taxes