Q. My wife suffers from Parkinson’s and has been in a nursing home for some time. About a year ago, we put everything in my name so she could qualify for a Medi-Cal subsidy to help pay for her care. We currently have only simple wills which leave everything to the survivor of us, and then to our two children. Is this the best plan?
A. Probably not, and here’s why: if for some reason you predeceased her, then all of your assets would go to her. These assets would then put her over the $2,000 Medi-Cal resource ceiling for an unmarried individual, and she would be terminated from the program. She would then have to use these very assets to pay for her care, potentially depleting a lifetime of savings and leaving little or nothing as an inheritance for your children.
A better plan would be to change your own will and trust so that if you predeceased her, your assets would go into a Spousal Special Needs Trust (“S-SNT”) for her benefit. The S-SNT is a special trust which would hold these assets in the name of a “friendly” trustee, who would use them to pay for extra things for your wife not provided by Medi-Cal, such as a TV in her room, occasional outings, and perhaps companion visits. Because the assets would be owned by the trustee, they would not count as hers and would thus not undermine her continued eligibility for Medi-Cal. One of your children could serve as trustee.
Upon her later demise, the balance remaining would go to your children or other designated beneficiaries.
This spousal S-SNT requires that your plan be structured in a very special way. Because of a quirk in the law, it must be created by Will, and not by trust. In this sense the S-SNT created for a spouse is very different from the Special Needs Trust sometimes created for a child or grandchild on public benefits.
Your plan could still use a trust and companion will. They would be structured so they worked together but contained a kind of “toggle switch”: If your wife predeceased you, then upon your own later demise they would pass everything to your children by trust. But, if your wife survived you, the “switch” would trigger and trust assets would, instead, transfer to the Will to create the S-SNT for her.
Because the S-SNT for a spouse must be created by will, it requires some involvement by the probate court after your demise. Fortunately, this requirement does not necessarily mean that your estate would need to go through a full probate. It only requires that, after your demise, a petition be filed in the probate court seeking an order formally establishing the S-SNT and authorizing its funding from your probate estate. Once the order is granted, your estate assets would be so transferred, and the probate could then be closed.
This plan does require that it be in place before your demise and its design and implementation does require special skill. I recommend that you seek out a knowledgeable Elder Law or Special Needs attorney to assist you in creating it.
Note: A variation of this plan would be suitable for a couple, presently in good health, who wish to plan for the possible future long term care needs of the survivor of them.
Reference: 42 USC 1396p (d)(2)(A) [“Treatment of Trusts”]. Note the phrase “established … other than by will”.