By Steven J. Gibbs, Esq.
Hello Friends & Colleagues!
At Health & Wellness, planning for long term medical care costs is an ongoing concern. Still, you may not know that even if you’ve taken the admirable step of setting up an estate plan, complete with Revocable Living Trust, Pour Over Wills, Durable Powers of Attorney, Medical Directives and a snazzy binder…your basic estate plan may offer adequate protection.
Long term medical care costs can drain your estate faster than a Florida sinkhole. If you’re over a certain age, this should factor into your estate planning equation and yet this aspect of planning is often ignored.
This is the focus of today’s fateful article…
Probably the most common “estate distribution” is “everything goes to my spouse”. However, in the world of long term medical care planning, this simplistic approach could lead to a disastrous result for the following reasons.
1. For couples, generally speaking, if one spouse needs long-term medical care, the marital assets can be transferred to the “well spouse” and a few other steps can be taken to qualify the “ill spouse” for Medicaid. If the well spouse passes away, this entire process will be undone without proper planning.
Under the Medicaid rules, it is currently acceptable for an ill spouse who is destined to need long term medical care to apply for medicaid after transferring his/her assets to the other spouse without any penalty or “look back” period. While the well spouse may not necessarily be able to keep all of the assets depending upon the jurisdiction, he or she can use the other spouse’s portion toward exempt marital assets such as the home and vehicles. When the Medicaid application is made, there is no additional need for disclosure of the assets in order to keep the ill spouse qualified, that is, unless the well spouse dies and leaves the estate to the ill spouse either “intentionally” or by “default”.
2. In most states, spouses cannot be “disinherited” so even if the well spouse attempts to disinherit the ill spouse in order to keep them qualified, this can be challenged.
Many states give a surviving spouse an “elective share” option or some variation of it…this means that if one spouse tries to disinherit the other, the surviving spouse can disregard the will and elect to receive a portion of the deceased spouse’s estate. By this same logic, Medicaid may not allow the ill spouse to be deemed “disinherited” for qualification purposes and this could threaten to disqualify the ill spouse’s benefits.
3. Spousal planning through proper use of the “elective share” and a “special needs trust” can eliminate the uncertainty and provide an effective approach to allow the ill spouse ongoing qualification for benefits.
A preferable planning approach, in my humble opinion, as opposed to the debacle described in #2 above, is to create an “elective share trust” (in Florida) either as part of a Living Trust or a Last Will in order to effectively limit the ill spouse’s share of the marital estate. Better yet, the “elective share” amount can be placed in a “special needs trust” to act as a “supplemental fund” for the ill spouse and this approach has been deemed effective to allow the ill spouse to remain qualified for long term medical care benefits such as Medicaid or SSI. For more information about a variety of estate planning issues, including Elder Law, Medicaid and Special Needs planning, visit our blog at: http://www.gibbslawfl.com/blog/
The proactive approach described above is, of course, a general recommendation and is not an all-inclusive solution. The key “take away” today is that a clear and intentional plan is necessary to address the need for long term medical assistance and this approach should be carefully considered as part of your overall estate planning. I recommend that you seek a review asap if you’ve never discussed this part of your estate plan.
As always, I hope this is helpful and…Until next time.
Steven J. Gibbs, Esq.
Steven Gibbs founded the Gibbs Law Office in January 2009,
committed to providing client-centered legal services.
You will be delighted with Steve’s unpretentious approach to educating and then assisting his client. Instead of giving you his complacent and lofty ideas, he would rather pursue your expectations with professional conversation about resolving your concerns under the Law. It’s your life and it’s his job to make your legal expectations come true while using years of his guidance and knowledge.
Steve was admitted to the Minnesota Bar in 1999, the Florida Bar in 2007 and was recently admitted to the California bar. Keeping abreast of law changes in these three States, as well as the United States, assists him in all aspects of the types of law the firm practices.
Along his career path, he was an associate attorney for an insurance defense law firm; an in-house real estate negotiator for Target Corporation; and corporate counsel for Civix, LLC and Vice President for North American Properties where he was responsible for various real estate transactions, including legal issues and negotiating unresolved business issues. Prior to opening Gibbs Law Office, PLLC, he was an associate with the firm of Roberts & Engvalson, P.A. where he gained his knowledge of trusts, estate planing and Wills. He opened his own firm in 2008 and now focuses on laws that will enrich the needs of his clients throughout their lives and those of their children. The firm has developed a practice dealing only with Trusts and Estate Planning, Wills, Medicaid Planning, Elder Law, Real Estate, Business Law and Probate.
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www.gibbslawfl.com . info@gibbslawfl.com