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Should you REVOKE your COMMUNITY PROPERTY
AGREEMENT and use a special needs trust?
Many of my clients who are in their late 60’s or older are revoking their Community Property Agreements and using a Testamentary Special Needs Trust to protect their assets from being wiped out if their surviving spouse needs nursing home care.
This is especially true of my clients who cannot qualify for long term care insurance.
A testamentary special needs trust is a very powerful Medicaid planning technique but you can only do it while your spouse is alive and your are competent.
If you are at this point in your life, contact me for an appointment to review your estate planning.
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TESTAMENTARY SPECIAL NEEDS TRUST –
FREQUENTLY ASKED QUESTIONS
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, guardianships and durable powers of attorney. Phone: (360) 816-2485 Fax: (360) 816-2486
(The above should not be construed as specific legal advice and is intended for general information purposes only.) |
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