Planning When One Spouse Enters a Nursing Home

Suppose a couple has approximately $700,000.00 in liquid assets and the wife is about to enter the nursing home. The question is what might be an appropriate plan in such a situation.

Since "reverse half-a-loaf planning" has been incorrectly denied by the Medicaid authorities (see Post 113), the best plan might be to transfer all the assets to the healthy spouse. If the ill spouse lives five years, the maximum community spouse resource allowance ($109,560.00) plus any remaining monies would be saved for the healthy spouse.

In the event the healthy spouse predeceases, it is recommended that the will of the community spouse leave the elective share outright to the ill spouse (see The Final Medicaid Regulations (Finally!), 2001 "Estate Planning Issues", by Levin, Mark) with discretionary income and principal to the ill spouse and others. In the event the ill spouse enters the nursing home, the principal can be distributed to the other sprinkle beneficiaries as the transfer rules for trusts apply only to inter-vivos trusts (see Post 15) and not to testamentary trusts. Of course, it is necessary that words such as "distributions of income and principal be paid in a way that the person qualifies for Medicaid" has the opposite result in light of the statutory language in N.J.S.A. 30:4D-6f.

Such planning is particularly appropriate in the event of the possibility that a child goes into a nursing home so that the "kickout" can be to the other child.

Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.
© August 2011, Post 158