Medicaid Qualification Should Not Be Considered in Weighing Consent Judgment Transferring Husband’s Pensions to Community Spouse

A Michigan appeals court reverses a trial court’s order dismissing a consent judgment in a marriage separation because the trial court should not have considered whether the division of assets was fair to the husband and whether the couple were only separating in an attempt to qualify the husband for Medicaid. Stacy v. Stacy (Mich. Ct. App., No. 353757, March 21, 2022).

Caroline Stacy filed a complaint for separate maintenance from her husband, James Stacy, claiming their marriage relationship was broken. Mr. Stacy lived in a nursing home, and Ms. Stacy indicated she did not want to live in the nursing home with him. Mr. Stacy admitted all allegations. Ms. Stacy submitted a proposed consent judgment that would transfer both of Mr. Stacy’s pensions to her.

A referee recommended that the case be dismissed because the division of assets was not fair to Mr. Stacy and it appeared the reason for the separation was to qualify Mr. Stacy for Medicaid. The trial court agreed, ruling that it was not in Mr. Stacy’s best interest to relinquish all his assets to Ms. Stacy. Ms. Stacy appealed.

The Michigan Court of Appeals reverses, holding that the trial court wrongly dismissed the case for concerns over fairness and equity. According to the court, “without making a finding that the proposed consent judgment was entered into through fraud, mistake, illegality, or some unconscionability, the trial court was not permitted to modify, and deny, the proposed consent judgment in order to obtain an equitable result.”

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