Medicaid Planning for the Community Spouse (Post Eligibility)
Often the practitioner is faced with a situation where the ill spouse has already been approved for Medicaid, and the well spouse wants to know if any more planning is needed. Frequently, the answer is yes.
The ill spouse is down below the $2,000.00 asset exemption amount, so (s)he has practically nothing to leave in a will, if one was made. However, if the well spouse dies first, a simple will leaving the well spouse’s assets to the sick spouse would result in the loss of Medicaid benefits, again because of the $2,000.00 asset exemption amount. If the well spouse writes a trust, (s)he avoid Probate, but not problems with the potential loss of Medicaid eligibility for the sick spouse. One issue involved here is the Medicaid program’s reporting requirements. If the sick spouse’s assets suddenly go over $2,000.00, that is a reportable event (within 5 days of when the inheritance was received). Another issue is the so-called “forced share”. So far Illinois does not say that the sick spouse has to demand the statutory share under the Probate statute (currently 1/3 or 1/2). However, our office has it on good authority that this may become commonplace within the Illinois Department of Human Services. It is even more clear that a disclaimer by the sick spouse will be treated as an impermissible transfer under the Medicaid penalty rules, thus removing the sick spouse from Medicaid eligibility for a period of months.
An issue with the use of trusts is the language in the Federal Medicaid statute (adopted in Illinois) that testamentary trusts appear not to face attack with near the degree of likelihood that inter vivos trusts face. Thus, a common planning tool involves having the well spouse’s trust pour into a will that contains special language that provides only the forced share goes to the sick spouse through special language contained in the will. In addition, special needs should appear in the well spouse’s will, stating that only items not covered by Medicaid are to be paid by the trustee out of this trust.
Another issue arises where the well spouse’s house is concerned. Although (s)he is permitted to stay in the house while the well spouse goes on Medicaid, if (s)he ever moves out, the house now becomes a target for the State filing a lien while (s)he is alive, and collecting its amount paid out in Medicaid benefits when the house gets sold or Probated.
Still another issue to consider is so-called “redeterminations”. The State periodically sends out notices that persons already on Medicaid will be “redetermined” regarding their continuing eligibility.
A myriad of factors figure into counseling the community spouse, only a few of which have been mentioned in this article. States tend to be moving toward a more, rather than less, restrictive view in many of these matters, and this apparent trend should be taken into account in any planning on behalf of well spouses, and their families. Although this discussion is limited to Illinois, it would appear that many of these same concerns translate into other jurisdictions.