While estate planning in general is a very broad topic, the most important thing to remember about estate planning in regards to Medicaid is that people sometimes die in the wrong order. What we mean by this is that it is often assumed the spouse in the nursing home will die first, when the reverse sometimes happens. In the case of the most common type of will, the reciprocal will, the nursing home patient would end up with all of the assets, which often exceeds the Medicaid limits, causing benefits to stop, and all of the assets would have to be spent down before Medicaid would resume paying for the nursing home care.
To prevent this devastating situation from happening, elder law attorneys use what is called bypass planning. Bypass planning protects the assets from falling into the hands of the spouse in the nursing home. Disinheriting the living spouse and passing the assets on to the adult children, or a Supplemental Needs Trust can accomplish this. The SNT makes sure the living spouse still qualifies for Medicaid while covering things that Medicaid doesn’t typically cover, such as eyeglasses, hearing aids and dentures.
An SNT trust would name a trustee, most commonly an adult child, who oversees the use of the money for the benefit of the spouse in the nursing home by the guidelines set forth in the trust. Often, there is still assets left to be passed along to children or grandchildren without the quality of life of the nursing home patient being sacrificed.
If you have a reciprocal will, it is very important that you seek the advice of an elder law attorney experienced with the Medicaid rules and guidelines for your state.
