Unfortunately, neither health insurance nor Medicare covers long-term care. Medicaid could become your only option, so do what you can to plan ahead.
Let’s say, for example, your spouse is living in a nursing home because of advanced Parkinson’s. Your spouse is currently receiving Medicaid benefits to pay for the high cost of that care. If you were to pass before your spouse, you wouldn’t want your spouse to inherit all your life savings, no matter how much you love your spouse. Inheriting all of your life savings would jeopardize your spouse’s Medicaid benefits, and that is not what you want to see happen.
Hold the Medicaid or Supplemental Security Income (SSI) benefit-programs next to the high cost of health care. Those programs are “means-tested.” In other words, to be eligible, recipients must own practically nothing. If your spouse or any disabled person is receiving those kinds of benefits, and if they were suddenly to inherit, they would lose their benefits and they would end up having to pay for their care themselves until the inheritance was used up. That could involve a lot of money!
Rather, it’s best if the disabled person were to keep the benefits coming in, and have assets from your estate be used to pay for “extras” that benefits don’t cover. These extras might include payment of real estate taxes, upkeep of a residence, or vacations or a flat-screen television.
In the case of Medicaid, that is accomplished by creating a Will that includes provisions for a “supplemental needs trust” (SNT). When you pass, and if your disabled spouse or other beneficiaries were to be on benefits at that time, your assets would be moved into this trust. The money would be managed by a trusted person other than your beneficiaries. The trust would pay for “extras” only, and the disabled person would continue to receive the crucially important benefits.
This arrangement must be done by Will, though, as the Medicaid rules require (there are other possibilities for other benefits programs). As to Medicaid, your estate would go through a simplified probate process in which a judge would approve the transfer of the estate into the SNT.
Even if everybody inheriting were well and able-bodied – as, of course, we would hope – and there was no need for benefits, an SNT would still be important. It could be made “contingent.” In other words, it would be unnecessary if all your beneficiaries were able-bodied, but, if anybody did happen to be disabled and on benefits, the terms of the Will would require the creation of the SNT.
Or, if your beneficiaries might become disabled in the future – and unfortunately, none of us has a crystal ball – the SNT could be “forced.” A forced SNT would require that the assets be placed into an SNT regardless of whether anybody was disabled. In that situation, though, as long as your beneficiaries were well, there would be no concern about restricting distributions to only the “extras,” and the trustee would be free to distribute money as beneficiaries needed it for any worthy purpose. Then, later, if disability were to occur, the distributions could be made to conform to relevant government-program restrictions. Estate assets would be protected by the SNT and benefits eligibility would be preserved.
This is a win-win proposition and one that we would be happy to discuss further with you. Give us a call and let’s get your planning started! If you have questions or would like to discuss your personal situation, please don’t hesitate to contact us at 513-771-2444.