Paying For Nursing Home Spouse May Impoverish Community Spouse Without Good Planning.

Question (by e-mail): After paying private pay nursing home rates for two years – nearly $100,000, I finally figured out that if I did not qualify my husband for Medicaid, I would lose everything and be totally dependent on our children. By getting him on Medicaid, I was able to keep my house, a car, some life insurance, and just over $70,000 in cash. And since my only income was Social Security and some small interest payments, I now receive most of my husband’s Social Security. But I am still struggling financially. Our two children are concerned about me and want to give me $10,000 each year as gifts. I am afraid that if they give me money and I go over the limits, my husband will lose his Medicaid, and I will be back where I started. How can they help me without disqualifying him?

Answer: According to federal law passed in 1988, once your husband (“the nursing home spouse”) has qualified for Medicaid, you (“the community spouse”) are “split off” from him, and your assets are no longer considered available to him. This meansthat under the current state of the law, you could now win the lottery and your assets would not be available to pay for your husband’s nursing home care. However, if your income increases, the amount you receive from your husband’s Social Security will decrease by that amount. If your children are thinking about helping you in a meaningful way, you and they should seek out the services of a qualified attorney who can assist you in preparing and implementing a plan.

Question: My wife is in a nursing home and is on Medicaid. I have terminal cancer and a life expectancy of six months. I own a house and have nearly $50,000 in cash which I want to go to my children because if it goes to my wife, she will be disqualified from Medicaid and the assets will be lost. I hired a lawyer to help me with my will, and he told me that under the law of our state, I must leave my wife at least one-third of my assets without exception. Is this correct?

Answer: No. By leaving all of your assets for the benefit of your wife in a special needs trust which can be established in your will, you can make sure your wife receives certain benefits during her lifetime without disqualifying her from Medicaid. You would name one of your children as trustee. At your wife’s death, the trustee would distribute the remaining assets to your children.

The advantages of this type of trust include (1) the ability to separate trust distributions from your wife’s actual income so she can receive additional benefits without disqualifying her from Medicaid, (2) the assets of the trust will not be subject to payment of medical bills and will not risk your wife’s medical coverage; (3) your wife will be able to receive things she may need but which are not covered by governmental programs; and (4) the cost of administration is not great if a child is trustee. On the other hand, (1) the trust must file tax returns and have it’s own federal identification number,; (2) the trustee must be schooled about how to distribute the funds and for what; and (3) the paperwork is complex and an attorney must prepare the documents and advise the trustee thoroughly. We recommend that all elderly persons consider wills with special needs trusts as part of their planning process. Because of the complexities involved, these trusts should be drafted only by attorneys who are competent in this field of law. Jan Collins is an award-winning writer and editor. Jan Warner is a matrimonial, elder law, and tax attorney. Both are based in Columbia, South Carolina.

Please send your questions to P.O.Box 11704, Columbia, S.C. 29211 or send your questions by email to janwarner@nextsteps.net.