When one spouse is in a nursing home and applying for Medicaid, planning has to take into account the possibility that the spouse who is not in the nursing home (called the “community spouse”) may pass away first. This is because the community spouse’s death may make the spouse in the nursing home ineligible for Medicaid.
In order to qualify for Medicaid, a nursing home resident can have only a limited number of assets. Careful planning can allow the resident’s spouse to maintain some assets. However, if that community spouse passes away first and leaves those assets to the nursing home resident, the resident suddenly would be over Medicaid’s asset limit.
While the community spouse can write a will that disinherits the Medicaid resident, most states have laws that allow spouses to claim a portion of their deceased spouse’s estate regardless of what the will says. This is called the elective or statutory share. The amount the spouse can claim varies from state to state.
A spouse can disclaim his or her elective share, but if a Medicaid recipient disclaims the inheritance, it is considered an uncompensated transfer of assets and the recipient may receive a period of Medicaid ineligibility. To avoid this, the community spouse will most likely need a will that addresses this issue. One option is for the community spouse to create a will that leaves the nursing home spouse exactly the amount of the elective share. Another option may be to create a special trust that contains the elective share. You should talk to your elder law attorney to determine the best course of action for you and your spouse.
For more information about Medicaid, including a FREE GUIDE to Medicaid’s Asset Transfer Rules, click here.
This month we are offering AARP members discounted rates and free initial phone consultation to help determine if you can benefit from medicaid planning. Email: medicaid@RaphanLaw.com
Many people, especially seniors, see joint ownership of investment and bank accounts as a cheap and easy way to avoid probate since joint property passes automatically to the joint owner at death. Joint ownership can also be an easy way to plan for incapacity since the joint owner of accounts can pay bills and manage investments if the primary owner falls ill or suffers from dementia. These are all true benefits of joint ownership, but three potential drawbacks exist as well:
Risk. Joint owners of accounts have complete access and the ability to use the funds for their own purposes. Many elder law attorneys have seen children who are caring for their parents take money in payment without first making sure the amount is accepted by all the children. In addition, the funds are available to the creditors of all joint owners and could be considered as belonging to all joint owners should they apply for public benefits or financial aid.
Inequity. If a senior has one or more children on certain accounts, but not all children, at her death some children may end up inheriting more than the others. While the senior may expect that all of the children will share equally, and often they do in such circumstances, there’s no guarantee. People with several children can maintain accounts with each, but they will have to constantly work to make sure the accounts are all at the same level, and there are no guarantees that this constant attention will work, especially if funds need to be drawn down to pay for care.
The Unexpected. A system based on joint accounts can really fail if a child passes away before the parent. Then it may be necessary to seek conservatorship to manage the funds or they may ultimately pass to the surviving siblings with nothing or only a small portion going to the deceased child’s family. For example, a mother put her house in joint ownership with her son to avoid probate and Medicaid’s estate recovery claim. When the son died unexpectedly, the daughter-in-law was left high and dry despite having devoted the prior six years to caring for her husband’s mother.
Joint accounts do work well in two situations. First, when a senior has just one child and wants everything to go to him or her, joint accounts can be a simple way to provide for succession and asset management. It has some of the risks described above, but for many clients the risks are outweighed by the convenience of joint accounts.
Second, it can be useful to put one or more children on one’s checking account to pay customary bills and to have access to funds in the event of incapacity or death. Since these working accounts usually do not consist of the bulk of a client’s estate, the risks listed above are relatively minor.
For the rest of a senior’s assets, wills, trusts and durable powers of attorney are much better planning tools. They do not put the senior’s assets at risk. They provide that the estate will be distributed as the senior wishes without constantly rejiggering account values or in the event of a child’s incapacity or death. And they provide for asset management in the event of the senior’s incapacity.
They provide that the estate will be distributed as the senior wishes without constantly rejiggering account values or in the event of a child’s incapacity or death. And they provide for asset management in the event of the senior’s incapacity. To download a FREE GUIDE TO ESTATE PLANNINGclick here.
For more information about this article feel free to email me at firstname.lastname@example.org
Why should the elderly that aren’t as mobile as they used to be, or live in an assisted living facility or are even at home wheelchair bound, not have easy access to the same professional legal care as others?Well, they should. And now they do.
Visiting Lawyer Services (VLS) is now available to New Yorkers that are homebound or unable to travel to a lawyer. With VLS our lawyers come to you. There’s no longer a need to coordinate aides, transfers or transportation as you won’t need it The same practice areas of elder law firm are the same available with VLS. Most of the services that we handle in our office can be handled at your place. For example; signing of your Will, Living Will, Health Care Proxy, revising a Will, Estate Planning, Medicaid Planning or setting up a Trust. If witnesses are needed for signing documents we also arrange them to be with us as well. Other family members or loved ones may be present as well.
You remain in the comfort of your home, apartment or nursing facility and we’ll bring all the necessary documents. This has been very helpful for elder couples–as is often the case with elders, one spouse may be healthy and agile yet the other quite limited.
‘Not being burdened by travel time or hindered by physical ability also allows seniors to focus better on their legal needs. We’ve taken our hands-on approach, compassion and legal prowess to the next level’
All trusts should be reviewed every few years to make sure that they are up-to-date with the law and meet your goals today. Following is a checklist of trust features you can review yourself. But be aware that these only refer to revocable “living” trusts, not to irrevocable trusts.
Do you have the right successor trustees? Typically you will be the trustee of your own revocable trust with your spouse as co-trustee (if you’re married). Trusts should name one or more successors in the event the original trustee or trustees are unable to serve. Make sure that you still want the successors you originally named. Also, do you want them to come on and begin acting as trustee now? And if you and your spouse are co-trustees, do you want the successor or successors to step in when the first of you becomes incapacitated or passes away, or not until neither of you can serve?
Who can remove trustees? You can always change the trustees of your revocable trust. But do you want your heirs to have this right after you pass away? This can often avoid problems if there are communication problems or disagreements with the trustee. On the other hand, you might want to limit this to some extent to make sure heirs aren’t just looking for a trustee to do whatever they say.
Can your spouse change the ultimate distribution of trust assets after you have passed away? Many trusts give surviving spouses a so-called power of appointment to redirect trust assets at their death. This can be important to provide for flexibility to respond to changes in family circumstances. However, this usually doesn’t make sense in second marriages. In a Massachusetts court case, the second wife used her power to give everything to her children instead of to the original beneficiaries: her deceased husband’s children. Even in the case of a first marriage, removing this provision from the trust can provide protection for children and grandchildren in case the surviving spouse remarries and becomes estranged from his family.
Does your trust protect your children and grandchildren from lawsuits and divorce? You have the option of drafting your trust to continue for your children’s lives to provide creditor and divorce protection.
Have you funded your trust? We often see great trust documents that don’t do all that’s intended because the clients’ assets are still titled in their names. You can avoid probate and make sure that the estate tax protections in your trust operate as planned through retitling assets in the name of the trust.
Who is named as beneficiary of your retirement plans and other investments? Often clients spend hours with their attorneys crafting an estate plan to match their goals and then circumvent it through naming individuals as beneficiaries of retirement plans and investment accounts. Make sure these are all coordinated.
At what age will children and grandchildren receive their inheritance? Most trusts provide that funds will remain in trust until those inheriting reach a certain age, often 21 or 25. But you can set any age you choose and even permit them to withdraw a portion of the trust at set ages, say half at 25 and half at 30, or a third each at 25, 30 and 35. This doesn’t mean that they can’t benefit from the trust assets in the meantime, but that distribution decisions are made by the trustees until children and grandchildren have more financial experience.
Does your trust have provisions providing for maximum tax deferral if it is named the beneficiary of a retirement plan? While you may choose to have your retirement plans go directly to your heirs — and often this is the simplest approach — if they are going to your trust, it must have special provisions to stretch out the annual required distributions for as long as possible.
Is your trust up-to-date for estate tax purposes? Congress and many states have changed the estate tax laws several times in recent years. If your trust is more than five years old, or if you lived in a different state when it was drafted, it should be reviewed by an estate planning attorney to make certain it is still current.
You can check many of these questions on your own. In fact, it’s a useful exercise to make sure that you understand what is in your trust. Other issues, particularly those related to tax issues, will require consulting with an estate planning professional.