Planning Your Estate When One Spouse Becomes Disabled

While you may have a traditional estate plan that includes joint bank accounts and joint property ownership, this estate plan will need to change if one of you has recently become disabled. You need to protect the disabled spouse financially, in case the other spouse dies and is no longer able to care for them. This means you should take all jointly held marital property and transfer it to the healthy spouse's name only. 

Transfer Assets When You Learn of a Serious, Disabling Diagnosis

The reason you should transfer assets from the disabled spouse's name to the healthy spouse's only, is so that the disabled spouse can qualify for Medicaid. Medicaid benefits pay for nursing home care, but to qualify for Medicaid you must have less than approximately $2,000 in assets. Transferring assets to the healthy spouse's name will help the disabled spouse qualify for Medicaid. 

Take the Disabled Spouse Off as the Beneficiary of Any Life Insurance Policies

While you will want life insurance money to pay for any supplemental care a disabled spouse might need in the event the other spouse dies, naming the disabled spouse as the beneficiary of a life insurance policy will kick them off of Medicaid when they receive the money.

If the disabled spouse is already in a nursing home, they will have to spend down the money inherited until they have less than $2,000 again. At the cost of roughly $10,000 a month for nursing home care, a life insurance policy will go quickly.

Place the Life Insurance Money in a Special Needs Trust

In the event the healthy spouse dies, a special needs trust for the disabled spouse should be established. The trust can be set up specifically for supplemental care of the disabled spouse, and the trust will be funded with life insurance benefits, property and other assets.

There is no limit to the amount of money that can sit in the trust, and Medicaid does not consider the trust as an asset when determining eligibility. Special needs trusts are only available for those that are disabled.

While it may feel strange to remove one spouse from all of the marital assets, it is a financially responsible decision. Protecting your estate from having to pay for nursing home costs, and preserving the money for your children or supplemental care for your spouse is worth it. When you have assets to protect and you have recently learned of a disabling illness, it's time to meet with a qualified attorney to discuss your options.

To learn more, contact a company like Mackevich, Burke & Stanicki with any questions you have.

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