Happy Holidays 2023

On the first day of Christmas, my true love established a Will with a Spousal Supplemental Needs Trust provision for me! Estate planning is a gesture of love for the benefit of one’s spouse and children. It is a process that puts in place a plan for who will settle your estate and for the transfer of assets to your beneficiaries, when and how you intend. That is the Partridge in a Pear Tree.

The default design for a married couple is that the Will transfers all solely owned assets to the surviving spouse, then to the children at the second death. This design carries out the intent of most couples but does not address an important issue. What if the surviving spouse is a disabled person and requires very expensive care? Is there a way to protect the assets inherited by a disabled spouse so that they can qualify financially for Medicaid?

The answer is “yes” if the Will authorizes the executor to set up a Supplemental Needs Trust for the sole benefit of the disabled spouse. The federal Medicaid statute sets out a specific exception to the general financial qualification rules to allow for this. If the language in the Trust provision is drafted properly, the disabled spouse is permitted to use the Trust assets to meet their financial needs and still qualify for Medicaid benefits to pay for their care.

Under the Trust provisions, the Trustee is someone other than the disabled spouse. The disabled spouse is the only named beneficiary and only has access to the Trust assets through the Trustee. Distributions from the Trust account are for the sole benefit of the beneficiary. They can only supplement, not replace, any government benefits that the beneficiary otherwise qualifies for. And, best of all, at the disabled spouse’s death, their stated beneficiaries can inherit the remaining Trust assets, not Medicaid.