You should consider updating your will if your spouse is receiving long-term care at home or in a facility. “Long-term care” means the type of care you need if you have a prolonged physical illness, disability or severe cognitive impairment (such as Alzheimer’s disease) that keeps you from living independently. Here is why you should update your will: 

Many married couples have simple “I love you wills” that leave everything outright to the surviving spouse. This makes sense for a healthy couple whose primary goal is to provide for each other for the remainder of their lives. But a problem arises if one of the spouses needs long-term care. 

Few couples have long-term care insurance. Instead, they initially rely on personal funds to pay for their care. If they deplete their funds, the government Medicaid program can be there to help pay the bills, provided they have not made a disqualifying gift within the five years prior to application. Most individuals who receive nursing home care are on Medicaid. And Medicaid can help pay for care at home as well. But to qualify for Medicaid you must have limited available resources. And protections that exist for married couples no longer apply if one spouse dies. 

By leaving everything to your spouse, you may make it very difficult for them to qualify (or continue to qualify) for Medicaid.  

Suppose your husband needs long-term care. To qualify for Medicaid government benefits, she can own only very limited funds. Virtually all the financial resources must be held in your (healthy spouse’s) sole ownership. Once your husband meets the Medicaid qualification requirements the government program will help pay for his care. Let’s assume he is now on Medicaid and that under Medicaid’s spousal protection rules, you (the “community spouse”) have been allowed to keep $125,000 in financial assets. You are using these assets to provide not only for yourself but to get your husband things he needs that are not covered by Medicaid.  

If you die with a simple “I love you will” the entire $125,000 will go to your husband and cause him to lose his Medicaid benefits as he will be over resourced. He will have to spend down those assets again before he will qualify for Medicaid. Depending upon the circumstances, probably half of this money will be used to pay for your husband’s care, care which would have otherwise been covered by Medicaid. 

If you want to avoid this result you could update your will to limit the number of resources your husband will receive outright if you predecease him. For example, you might sign an “elective share will” that leaves your husband the minimum amount required by Pennsylvania law (typically 1/3) outright and places the rest of the inheritance in a protected trust created under your will. The funds held in trust won’t disqualify him from Medicaid and can be used to supplement your husband’s needs (not covered by Medicaid) during his remaining lifetime. Anything left at his death can pass to your children or other heirs.  

Bottom line: by updating your will if your spouse needs long-term care, you can better ensure that money will always be available to supplement your spouse’s care. Talk to us to get your will, beneficiary designations and other planning updated as well as possible Medicaid qualification. 

Related articles and videos of interest: 

What is the Medicaid Spend Down? 

What is a Medicaid Qualifying Annuity? 

Is Applying for Medicaid for Do-It-Yourselfers? 

[This is an update of an article that was originally published in December 2018 on the Marshall, Parker and Weber blog].