May 13, 2025
By: Anthony B. Ferraro

2025 Medicaid Update

Modifying Your Estate Plan Before Seeking Long-Term Care for:

1. an Ailing Spouse; or

2. a Person Who is Single

Why might it be necessary to modify estate plan documents on the elder care journey?

Because most people’s estate plans provide for distribution on death. Most attorneys will draft these plans well and accomplish the goals of asset transferring upon death. However, when you are on the elder care journey and death is not imminent but, instead, you face the devastating costs of long-term care, the “traditional” estate planning documents that may serve you well at death may not be adequate and thus need to be modified. By “traditional” estate planning documents, I am referring to pour-over wills, revocable living trusts, powers of attorney for property, and powers of attorney for healthcare.

For example, consider a scenario where a healthy spouse may unexpectedly pass away before their ailing spouse, who may already be living in a nursing facility. In such a scenario, the ailing spouse will receive an inheritance precisely at the same time they may be seeking asset-based governmental benefits—such as Medicaid—to help pay the devastating costs of long-term care and that inheritance may jeopardize their eligibility.

“Senior” estate planning may not be necessary for everyone. However, with long-term care costs in the range of $10,000 to $15,000 a month in certain facilities in the Chicago metropolitan area, this planning may be beneficial to many families who do not have long-term care insurance.

How can you adjust your estate planning documents when you begin the elder care journey?

First, we make sure that, upon death, assets do not go directly from the predeceasing spouse to the surviving spouse. Rather, upon death, assets are transferred from the predeceasing spouse to what is commonly referred to as a supplemental needs trust (“SNT”) for the benefit of the surviving spouse.

Under federal and state law, a SNT for a surviving spouse must be found in the will of the predeceasing spouse if Medicaid eligibility for long-term care is being sought. So instead of doing pour-over wills, where assets controlled by the will pour-over to the revocable living trust, you may consider doing the reverse: that is, the assets controlled in the trust will pour-back to the will, where the SNT must be located for the benefit of the surviving spouse.

Did you know that single people have available to them Medicaid asset protection strategies, as do married people, by relying on well drafted Powers of Attorney and certain special types of Medicaid friendly trusts.

The importance of having well drafted powers of attorney for property cannot be overstated. These documents, when properly drafted, allow for the transfer or gifting of assets in ways that protect spouses and non-spouses when seeking Medicaid for long-term care.

While not everyone needs a revocable living trust, sometimes these documents, if used properly, can assist in protecting assets from Medicaid estate recovery after death in the case of single persons and sometimes also in the case of married persons. In addition to drafting trusts, other methods of holding assets such as pay on death accounts, transfer on death accounts and transfer on death instruments can also be helpful in avoiding Medicaid estate recovery after death.

Why is it advisable to do senior estate planning and Medicaid asset protection planning?

If, at the time of the death of the predeceasing spouse, the surviving spouse finds themselves either in a long-term care facility or soon to enter a long-term care facility, it may not be advisable to further enrich the surviving spouse directly, thereby causing more potential costly asset spenddown.

Rather, by leaving assets in a SNT, the surviving spouse can apply for governmental benefits (such as Medicaid for Long-Term Care) to cover the substantial cost of long-term care, while at the same time having the benefit of the asset inheritance left by the predeceasing spouse in the SNT.

Do not fall into 3 traps of erroneous thinking.

Do not fall into the trap of thinking that if one spouse becomes ill, the couple can leave assets directly to the children. This is a formula for disaster. This erroneous strategy may create immediate denial and ineligibility for any governmental benefits related to long-term care under the Medicaid rules.

Second, do not fall into the trap of thinking that if one spouse becomes ill, we must completely disinherit that spouse or watch a complete spenddown of assets. This is not true either. The reason is under the Medicaid rules, spouses are allowed to leave assets for each other in a SNT, as described above. Thus, there is no need to completely disinherit your loved one because you can leave assets for their supplemental needs, and at the same time allow them to remain eligible and qualify financially for Medicaid for long-term care because the assets that you left for them are not left directly in their ownership, but rather in a special needs trust.

Third, do not assume assets cannot be protected without the presence of a spouse. Single people have as many opportunities to protect assets for themselves, and their loved ones as married people. Some of the strategies may differ, but the objective is the same. The objective is to protect assets for loved ones and single people can do that through the reliance on properly drafted powers of attorney for property and properly drafted revocable living trusts.

Sounds complicated, but it’s not.

It’s not complicated. It’s just that “senior” estate planning is different from what clients have most likely done in their previous “traditional” estate planning. As we start approaching our senior years, in addition to looking into Social Security, Medicare, and other related topics for seniors, couples that are concerned about the potentially devastating cost of long-term care should consider modifying their estate documents, so that their assets are not left directly from one spouse to the other, but rather, transferred to a SNT, thereby avoiding unnecessary spousal impoverishment. Similar types of careful asset transferring are available to single people as well, so that they may provide and care for their loved ones.

Note: if you have any questions about your circumstances, please contact Mr. Ferraro for a free 15-minute telephone consultation.