If your spouse receives a diagnosis from a doctor that she or he has dementia or Alzheimer’s Disease, it is time to consider changing your estate plan. Why? Because if you die and your spouse needs Title 19 (Medicaid), your family could lose most of its wealth.
Let’s take an example. Assume you and your wife have a joint investment portfolio of $300,000 and together you own a home without a mortgage. You have a pension from work. You have a $100,000 life insurance policy naming your wife as beneficiary. Your current Will leaves everything to your wife and together you own most of your property jointly.
One day, you accompany your wife to the doctor and the doctor informs you that your wife has early onset of dementia. In the middle of the night you start thinking, “Who will take care of my wife if I am gone?” Your mind immediately thinks that your children will help. But then you recall they have their own lives. You decide that you must set things up so it is easier for them to help your wife after you are gone.
You set an appointment with your lawyer and ask questions about Title 19 and Medicaid. Your lawyer tells you that after you die your wife can only have $1,600 in assets if she needs to qualify for Title 19. Given the average cost of nursing home care in Connecticut is $11,851 per month, after you die your wife may have to spend down all of the family’s funds on her medical care to qualify for Medicaid.
There is a better way to set up your estate plan. We recommend that you no longer hold your property jointly and you do not name your wife as beneficiary of your life insurance policy. Instead, all of your joint assets are retitled in your name. Your wife signs a deed conveying the home to you. You meet with your financial advisor to put your investment portfolio in your name. You talk to your insurance agent to change the beneficiary to your estate, instead of your wife. Your pension will continue to provide some support to your wife after you are gone.
You sign a Will that does not give everything to your wife. Instead, the Will states that ½ of your property goes to an income-only trust for your wife and the other ½ goes to a trust for the benefit of your descendants (i.e. – your children and the children of a deceased child). We call it a Community Spouse Will. You name your most trusted child as Executor of your Will and Trustee of the trust for your descendants under the Will. If the trust for your wife does not provide enough funds for her living expenses, then the Trustee of the trust for your descendants can distribute those funds to your children and they can tap those funds for her care. When your wife passes away, any balance remaining in her trust goes to your descendants. Any balance left in the trust for descendants will go to your children.
What does a Community Spouse Will accomplish? If you pass away, your wife will qualify for Title 19 (Medicaid) because she does not own any property and your most trusted child will manage your property for the family’s benefit. You will rest assured that your wife can receive the care she needs and leave something for your children.
