Top 10 Estate Planning Tips For Middle-class Couple Who Have a Risk of Long Term Care

Clifton A. Dennis,Elder Law Attorney

September 2013

1.      Provide as broad Power of Attorney authority as appropriate to permit transfer of assets between spouses and investment in Medicaid-exempt assets, such as income-producing real estate or Medicaid Compliant Annuities. 

2.      Assure you have an appropriate legal backup for the caregiver spouse.  Multiple challenges and high stresses face the caregiver.  Many nursing home placements occur when a health crisis overtakes the caregiver.  Who is prepared to respond in that circumstance? 

3.      The caregiver spouse can, and generally should, have a testamentary special needs trust to provide for a surviving disabled spouse.  Moving assets to name of caregiver spouse can facilitate Medicaid qualification planning and provide special needs protection for the disabled spouse if the caregiver spouse dies first.  In some cases, wills with trusts for each spouse and appropriate division of assets provides best protection for uncertain order of death. 

4.      Timing and strategic use of non-exempt assets is critical to maximizing protection of assets and income under Medicaid Spousal Impoverishment protections.   Early evaluation of assets, effect on Medicaid qualification permits the planner to identify of probable course action for Medicaid qualification even though execution of the plan will often be delayed until the point of need.

5.      Begin early to plan for non-exempt assets that are difficult or expensive to liquidate.  Examples:  tax-deferred retirement accounts, annuities and other assets with early withdrawal penalties, non-income-producing real estate.  

6.      A Retirement Community or Assisted Living for the Community Spouse may prevent her/him from also becoming an institutionalized spouse.  Planning with the Spousal Impoverishment protections in Medicaid law can help make this possible through the “excess shelter allowance,” and maximizing the assets protected for the Community Spouse. 

7.      Since assets must generally be moved to name of non-recipient spouse after Medicaid is established, second marriages, his, her and/or our children situations, and differing legacy plans present special challenges for legacy planning in relation to Medicaid-wise planning.  Consider family agreement or other devices that will permit fidelity to each spouse’s legacy plan despite Medicaid requirements.

8.      Caution clients against simplistic solutions.  Doing what the neighbor did, transferring the house to the children or buying what the “single-solution” annuity salesperson offers can be disastrous. 

9.      Assure that clients understand that gifts by the well spouse can disqualify the disabled spouse for up to five years. 

10.  Protect the well spouse with long term care insurance or a Medicaid contingency plan.