When people marry for the second time (or more), losing assets to pay for their new spouse’s serious illness is probably the last thing on their minds when they say “I do.” But that could happen. Current costs for long-term care facilities in the St. Louis metro area can run between $60,000 – $140,000 annually. Studies show that 70% of Americans will need that kind of care, perhaps for three years or longer.
If one spouse in a marriage becomes ill, the assets of both spouses are, by and large, required to be spent on the ill spouse’s care before Medicaid benefits become available. This could be a big problem, especially if money that the well spouse had saved for his or her care and/or his or her children’s inheritances, goes to pay for the ill new spouse’s care instead.
With careful planning, this need not happen. Financial arrangements can be made to protect the estate of the well spouse and to ensure that the spouse who needs care will be responsible to pay his or her own way.
The benefits rules do provide that the spouse who does not need care yet may keep an allowance of a certain sum for that spouse’s benefit. This is known as the “Community Spouse Resource Allowance” (CSRA). But many find that the CSRA is too small to permit the well spouse to maintain his or her standard of living, pay for retirement, and still leave enough for children to inherit.
Any planning or shifting of assets must be done very carefully and only after consulting with experienced professionals like us. The Medicaid rules heavily penalize transfers of assets made without receiving value in return. Gifts, in other words.
Assets can be protected, though, by a number of strategies that are permitted by the Medicaid rules. Some or all of the well spouse’s assets could buy a Medicaid-compliant annuity. This would provide an income stream for the well spouse, without the assets being otherwise deemed available to pay for the ill spouse’s care.
In turn, the assets of the spouse needing care could be transferred to people whom that person especially trusts: a trustee, or an agent for financial affairs, or a family member or beneficiary. That kind of transfer would be subject to penalty, but planned-for, using the strategies permitted under the Medicaid rules. Some relief from penalties can be achieved using existing Medicaid rules.
There are also insurance products available to provide for long-term care coverage, which any newly married couple – or everybody, really – ought to consider.
Of course, Medicaid laws change frequently. So, if your plan encompasses Medicaid strategies, it is important to keep the plan up to date with changes in the Medicaid laws. At The Laiderman Law Firm, P.C. we focus on keeping our clients’ estate plans up to date with changes in the law and your family.
If you want more information, or have any questions, please contact the attorneys at The Laiderman Law Firm, P.C.