TESTAMENTARY SPECIAL NEEDS TRUST - FAQ
Shelter assets from long term care
costs
IF I PUT MY ASSETS IN A REVOCABLE LIVING
TRUST, WILL THE ASSETS BE PROTECTED FROM BEING USED TO PAY MY NURSING HOME
COSTS?
No
CAN I USE A TRUST TO PROTECT MY ASSETS FROM BEING COUNTED BY MEDICAID IF
MY SPOUSE NEEDS TO APPLY FOR MEDICAID?
Yes, but only if you embed a Special Needs Trust for the benefit of your
spouse in your will. The trust stays dormant until you pass away. But after
your death all assets you own can be protected for your spouse’s benefit.
This is called a Testamentary Special Needs Trust.
WHAT THEN HAPPENS IF MY SPOUSE NEEDS TO APPLY FOR MEDICAID AFTER I DIE?
Since your spouse will then be single, we need to look at Medicaid’s rules
for single people.
A single person is allowed $2,000, plus one car, no matter how much it is
worth, if it is used for transportation for the Medicaid recipient; a $1,500
burial fund or life insurance with a face value of $1,500 (or various
combinations thereof) or an irrevocable prepaid burial plan; a burial plot;
a home, if the equity interest is not greater than $500,000 (however, the
home will be subject to a Medicaid lien) and household furnishings and
personal effects.
Your spouse will only have to deal with Medicaid regarding the assets he or
she owns. All of the assets you own on death will be protected for your
spouse in the Special Needs Testamentary Trust you create in your will. Your
spouse is not considered, according to the Medicaid rules, to own the assets
in your Testamentary Special Needs Trust. Your trustee can use the assets in
the trust to pay for things for your spouse which Medicaid does not pay for.
WHO CAN BE THE TRUSTEE OF MY TESTAMENTARY SPECIAL NEEDS TRUST?
Anyone but your spouse.
WHO GETS THE ASSETS IN MY TESTAMENTARY SPECIAL NEEDS TRUST AFTER BOTH MY
SPOUSE AND I DIE?
Whoever you name in your Will.
WHAT IF I HAVE A COMMUNITY PROPERTY AGREEMENT?
Community Property Agreements are helpful for married couples to avoid
probate on the death of the first spouse. However, probate in Washington
often costs less than one month in a nursing home. Therefore, if you sign a
Will with a Testamentary Special Needs Trust, you will want to revoke your
Community Property Agreement so your assets will not go outright to your
surviving spouse to add to the assets which will disqualify your spouse from
Medicaid paying for his or her long term care.
SO, HOW DO I KNOW IF I SHOULD DO A WILL WITH A TESTAMENTARY SPECIAL NEEDS
TRUST?
The best thing to do is to review your goals, your assets and your family’s
situation with an attorney who specializes in keeping up with the
ever-changing Medicaid rules. He or she can help you identify the legal
techniques to achieve your goals.
WHAT IF MY SPOUSE OR I NEED TO APPLY FOR MEDICAID WHILE WE ARE BOTH
ALIVE?
Under today’s rules, a knowledgeable Medicaid attorney can usually help
either you or your spouse qualify for Medicaid no matter what the amount of
your assets, if you are both alive. However, Medicaid rules are constantly
changing and if your need for Medicaid is likely to be far into the future,
you should make a careful evaluation as to the appropriateness of long term
care insurance as part of your planning.
Elizabeth A. Perry has been helping Clark County residents with their estate
planning and probate needs since 1976. She is a frequent seminar speaker.
Her practice emphasizes probate, Medicaid issues, wills, trusts, incapacity
issues, durable powers of attorney and guardianships. Phone: (360) 816-2485
Fax: (360) 816-2486 E-mail: liz.perry@landerholm.com
(The above should not be construed as specific legal advice and is intended
for general information purposes only.)
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