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Not Your Grandmother's Will

If you happen to have a copy of your  parent’s  or grandparent’s Last will & Testament, it is likely that the estate plan was simple- everything to the spouse, then when the second spouse dies, everything to the children. We call these “sweetheart” or “I Love You” Wills.  While these were easy to understand, they did not give much protection to a surviving spouse that might need Medicaid to pay for homecare or nursing home care.  The problem, or maybe the benefit of living longer is that we are likely to live out our last days needing some care.  With the cost of care both at home and in a facility reaching astronomical amounts, putting together a plan to preserve assets is of paramount importance. 

It is advisable that even the simplest of Wills include a trigger supplemental needs trust.  This is a trust for the benefit to preserve the inheritance of any disabled beneficiary so that the disabled beneficiary can continue to receive their Medicaid or SSI benefits.  If no beneficiary is under any disability or receiving government benefits, the supplemental needs trust will not be triggered.  However, if a beneficiary is under a disability, the supplemental needs trust can provide an enormous benefit.  Typically, a last will and testament for senior with a surviving spouse will leave everything in trust with a supplemental needs provision.

The trust is a “testamentary trust” meaning it is created by the terms of the Will.  The trustee can use the trust assets to provide for the needs of the beneficiary which will supplement but not supplant, their government benefits.  This can be extremely useful in the case of two spouses when one spouse is receiving benefits under the Medicaid program. We have many clients that fall into this category: one spouse is enrolled in nursing home or homecare Medicaid, and all the assets are titled in the name of the other spouse, typically referred to as the “community spouse.”  If the community spouse dies first, then the assets are preserved for the surviving spouse receiving benefits.    With a typical “sweetheart will” all the assets would go to the surviving spouse who would no longer be eligible to receive Medicaid.  However, if the Will provided for a trust with a supplemental needs trust for the spouse, all the assets could transfer to the trust for the benefit of that spouse.  The surviving spouse could maintain his or her Medicaid.  There would be no 5 year look back for Medicaid transfers.   For the purposes of Medicaid eligibility, these assets will not be deemed an asset of the recipient.  Upon the death of the second spouse, the trust would be distributed according to the Will of the first to die spouse; there is no requirement to pay any of the money to the Medicaid program for the cost of services received.  Of course the surviving spouse would still have a right of election, which is the right to some inheritance from a deceased spouse.  Nevertheless, there are many strategies for dealing with these issues as well.

A supplemental needs trust may also be created for any non-spouse beneficiary that is under a disability and receiving government benefits.  For example, a child, grandchild or other family member that falls into this category can be protected, continue to receive  their Social Security Income or Medicaid and still have a trust which will supplement their non-medical needs..

The supplemental needs trust funds can pay for anything that the government benefits do not cover.  If the beneficiary is on Medicaid, the supplemental needs trust cannot pay for any covered medical expenses.  However, the trust could provide for clothing, travel, toiletries, etc.

The days of the simple, three page Will that your grandparents signed are gone.  A minimum level of protection includes a trigger supplemental needs which will protect your beneficiaries from losing important and necessary government benefits and preserve the assets for the eventual beneficiaries. 

By Nancy Burner & Britt Burner

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