What Happens if Well-Spouse Dies First?
Thank you for reading this post, don't forget to subscribe!Many of our clients have the situation of one spouse needs nursing home care, and the other “well” spouse sell lives at home. When we are able to work with families on financial planning, we often can have the “sick” spouse’s nursing home bill largely covered by Medicaid. The assumption on is that the sick spouse will die first. But it can happen the other way, especially when you consider that the well spouse will be psychologically exhausted and physically diminished after years of caring for an ailing partner. Stress and worry also undermine health for the well spouse. Assuming that the nursing-home spouse will die first can be financially reckless.
Limit on Medicaid Recipient’s Assets
For most people, receiving an inheritance is a welcome event. But if your spouse is in a nursing home and receiving Medicaid benefits, an inheritance from your estate could create a big problem. Here’s why: Under Florida law, a Medicaid recipient cannot have more than $2000 in assets at any one time. If the Medicaid recipient receives an inheritance from a deceased spouse (or from anyone else for that mater) and the inheritance pushes his or her assets about $2000, Medicaid benefits will terminate.
What Can be Done if the Sick Spouse Receives an Inheritance?
Spend down. You may pay the nursing home; pay for an irrevocable funeral contract; or enter into a personal services contract with a relative who will assist the Medicaid recipient. There are other specialty trusts that may provide benefit to the sick spouse without triggering the five-year lookback. You may think of other options, but not all options are wise or effective. A qualified and experienced Florida elder law attorney should always be consulted on the best strategies for spending down.
Two Approaches that Do Not Solve the Problem
You may be thinking, “I just won’t leave anything to my spouse who is in a nursing home and getting Medicaid benefits.” That sounds like a logical approach, but it won’t solve the problem. Florida’s elective share law says that a person is entitled to 30% of his or her deceased spouse’s estate, regardless of what the decedent’s will or trust provides.
Disclaiming the inheritance won’t solve the problem, either. An estate beneficiary has the right to refuse an inheritance, of course. But in the case of a nursing home resident getting Medicaid benefits, disclaiming an inheritance come with penalties. Under the Federal Omnibus Reconciliation Act of 1993, the disclaimed amount is considered to be funds received by the Medicaid recipient. Disclaiming the inheritance will create a period of ineligibility for benefits, the duration of which is based on the total amount disclaimed.
The Solution: Make Plans to Avoid the Problem
The best solution is to make sure an inheritance from the deceased spouse’s estate never goes directly to the Medicaid recipient. To accomplish this, you should consult an elder law or estate planning attorney who will analyze the well spouse’s estate plan. Our attorneys usually recommended that the well spouse leave the amount of the elective share in a Special Needs Trust that benefits the nursing home spouse. Under Florida law, it must be a testamentary special needs trust-in other words, created within the Last Will and Testament of the deceased spouse.
The assets of the special needs trust are deemed unavailable the Medicaid recipient, and the funds must be used to supplement Medicaid, not to supplant it. For example, funds from the trust may be used to provide the nursing home spouse with a private room, or with private aides. When the spouse on Medicaid passes away, any funds that remain in the trust will pass to the ultimate beneficiaries, without any Medicaid recovery.
If your family is facing a possible nursing home stay, you should contact us at 239-434-8557. Earlier planning is better, but we can provide access and guidance to Medicaid complying asset protection strategies.
Call to get you appointment today!