NEED FOR UPDATED ESTATE PLANNING WHEN ONE SPOUSE GOES INTO NURSING HOME
When one spouse goes into a nursing home, there is a good chance that he/she is using to pay for their care. That means that the community spouse will have to live survive on certain income thresholds determined by Medicaid. There are also asset limits that are allowed under Medicaid. Estate planning can allow for a middle class family to have one spouse qualify for Medicaid through such legal mechanisms as spousal refusal, which is only allowed in a few states, New York being one of them. These asset and income thresholds presuppose that there is one spouse in a nursing home and the other in the community.
If the spouse in the nursing home passes away, there may be some legal effect on the community spouse, depending on what means based programs he/she qualifies for. They may also receive Medicaid but only receive community based care or any number of other programs, such as the veterans aid and attendance program. On the other hand, if the community spouse passes away first, there will be a much greater chance that the spouse in the nursing home will risk losing their Medicaid benefits or have that additional income provide for the medical care of the spouse in the nursing home and the assets liquidated. The retirement account, the family home any life insurance proceeds from the community spouse’s passing as well as any investments or valuable personal property owned by the community spouse. All of this may be quite contrary to the estate plans that both spouses had. They would have rather left their nest egg to their children and grandchildren rather than have it pay for a Medicaid lien.
Depending on the asset structure, a change in the will may do it, but that is risky and not likely to still allow for the passage of the assets and wealth as intended. In addition, it does not do anything to address the issue of income. There are ways of protecting the income and assets of both parties to plan for Medicaid eligibility, such as by purchasing non-countable assets, such as through the creation of a funeral trust, the purchase of a Medicaid eligible annuity. Neither spouse can simply give away their assets or income to continue to remain eligible for Medicaid as this will almost certainly disqualify him/her for some time if the transfer or gift was made during Medicaid’s lookback period. There may be additional problems with the institutionalized spouse if they are unable to make rational decisions or legally incompetent. This would call into question any transfer that they made. If the community spouse was acted as the decision maker under a power of attorney or some other document, that adds an additional layer of problems to the mix, as they are now left in a legal limbo of sorts.
For all of these reasons and countless other unforseen reasons when one spouse goes into a nursing home, the community spouse must at least revisit his/her estate plans.