By: Justin M. Kennedy, Attorney
Law Office of Roy W. Litherland
While at an estate planning conference in November, one of the speakers discussed a planning strategy that may benefit many married couples. The planning strategy involves adding Advanced Medi-Cal Triggers to a married couple’s estate plan, specifically a Spousal Election to the Living Trust and testamentary special needs trust language within the Pour-Over-Will. For a married couple, upon the first death, the Spousal Election could be exercised to create a Special Needs Trust for the benefit of the Surviving Spouse and funded with the Deceased Spouse’s assets.
An example may highlight the advantages that the Spousal Election may provide.
Ricky and Lucy are a married couple who have done a comprehensive estate plan with our office. Their assets consist of a home worth one million dollars ($1,000,000) and two hundred thousand dollars ($200,000) in brokerage accounts. Unfortunately, Lucy gets diagnosed with dementia and Ricky, as the loving spouse he is, becomes her full-time caregiver. As time passes, Lucy requires more and more care and this care takes a physical and mental toll on Ricky.
After Lucy had a fall and Ricky threw out his back trying to help her get up, Ricky realized that he could no longer safely provide the care that Lucy needed. Lucy was moved into a Skilled Nursing Facility costing $9,000 a month. Ricky was concerned that he would need to sell their home in order to continue paying the facility. At this point Ricky contacted our office.
We suggested Medi-Cal as an option to pay for the Skilled Nursing Facility. In order for Lucy to qualify for Medi-Cal she could only have the home and $2,000 in her name. We activated the Medi-Cal Triggers within their estate plan to restructure their assets into Ricky’s name. This allowed Lucy to qualify for Medi-Cal while leaving their assets available for Ricky to live comfortably in their home.
What happens if Ricky dies first? This is actually very common as the spouse at home is usually burning the candle on both ends, while the spouse in the facility is being taken care of by trained health providers.
Without the Spousal Election, upon the first death, 100% of the Trust is there to take care of the survivor. This means that despite our previous Medi-Cal planning, all of the assets would be in Lucy’s name and she would no longer be eligible for Medi-Cal to pay her $9,000 a month expense. She would either spend through all of her assets down to $2,000 or we would need to use the Medi-Cal Triggers a second time.
With the Spousal Election, the assets still pass to Lucy, but in the form of a Special Needs Trust. This allows Lucy to continue to be eligible for Medi-Cal while leaving the assets there to provide her with a higher quality of life and leaving the assets protected from the Medi-Cal Estate Recovery claim.
While this may have been a novel concept to the speaker at the conference, our office has included the Advanced Medi-Cal Trigger (Spousal Election) language in our married estate plans since 2008. If you are interested in determining whether you have the Advanced Medi-Cal Trigger within your estate plan or if you want to add the Advanced Medi-Cal Trigger, please contact our office at (408) 356-9200 or (831) 476-2400.