People are living longer nowadays. That means some of us will spend long periods of time being cared for, often in nursing homes. Ordinary retirement income will not cover the cost of a retirement home. That may mean spending your capital – your savings, and the value of your house. Medicaid will pay for long term care, but only if all “countable” assets have been exhausted.
Medicaid counts all assets of both members of a couple. But there is one exception. If one spouse dies and leaves a will that lays out a trust for the benefit of the survivor, that money is not counted. This trust that is created with a will is called a Testamentary Trust.
The problem is, that most couples have their assets in joint ownership. Joint ownership passes outside the probate process, so it is not affected by a will.
The solution is – Life Trust planning. Your Life Trust is revocable during your life, so all the assets are available to you while you live, just as if you were sole owner. When couples do Life Trust planning with me, we divide the assets, with some being titled to each person’s Life Trust. By including a “power of appointment” in your Life Trust, and exercising that power in your will, you can be reasonably sure* that the assets titled to your trust will not prevent your spouse from obtaining care through the Medicaid Program.
*Whether or not an asset is “countable” is determined by a Medicaid caseworker. The decision is subject to appeal to a fair hearing and then to a court. The exception for a trust “established and funded” by a spouse’s will is laid out in federal law. I do not believe that funding such a trust through a power of appointment has been legally tested. In other words – it seems as if it should work, but I can’t absolutely guarantee it.