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What are the advantages of including a Supplemental Care Trust for your spouse in your will?

Leaving your estate to your spouse who receives or is expected to need public benefits could have a significant, detrimental effect on their eligibility for those benefits. In fact, your good intention of making sure your spouse is financially taken care of after your passing may have the opposite effect – it may cause your spouse to lose those supports so desperately needed.

A Supplemental Care Trust is specifically drafted to help manage trust assets for a beneficiary who needs certain government benefits.

A perfect example of someone who could benefit from having such a trust is your spouse. One or both spouses may be elderly, have a debilitating illness, or dementia. This may mean that one or both of you might need the care of a skilled nurse at home or in a nursing home and may need Medicaid to pay for that long-term care.

The cost of care in a skilled nursing facility (nursing home) ranges from $5,000 to $10,000 per month. Medicare does not pay the cost of care in a nursing home beyond a limited time. If you do not have long-term care insurance, the only other ways to pay the cost of long-term care in a nursing home are with your own funds at the home’s private pay rate, or with Medicaid. Medicaid is a means-tested government benefit, which means that to be eligible, a person must apply, and their income and assets are evaluated against the eligibility criteria.

To be eligible for long-term care Medicaid in Texas, a person must be a U.S. citizen, or a qualified alien, and a Texas resident. The applicant must be 65 or older, blind, or disabled. A medical necessity for nursing home care is required, meaning the person needs the services of a registered or licensed vocation nurse on a regular basis. Custodial care by itself does not meet the requirement.

Income and assets are tested: Gross monthly income must be within the income cap, which is $2,523 in 2022. If the income is over the cap by $1 or more, a qualified income trust must be used to achieve income eligibility. Second, and most relevant to the benefits of a Supplemental Care Trust, a single person’s countable resources—for example, cash, investments, rental properties—cannot exceed $2,000.

A properly drafted Supplemental Care Trust will not count against the beneficiary’s eligibility for long-term care Medicaid. In other words, the trust itself is not a countable asset for purposes of eligibility and having one can be the difference between having many supports and services and having none. A Supplemental Care Trust is intended to enhance the quality of life by supplementing the basic support a person receives from government sources. Distributions from the trust can pay for specially equipped vehicles, personal care attendants, physical or other therapies, home furnishings and technology, medical and dental care not covered by insurance, recreational activities, and care manager services, without interfering with the Medicaid coverage.

How do spouses create Supplemental Care Trusts? They are placed in Wills, which are called “testamentary” trusts. Instead of leaving your estates to each other in what are referred to as “I Love You” Wills, each spouse leaves their half of the estate to a Supplemental Care Trust in favor of the surviving spouse. Thus, upon the death of the first spouse, half of the assets are preserved for the surviving spouse in the testamentary Supplemental Care Trust. The assets in the Supplemental Care Trust aren’t counted against the $2,000 resource limit for Medicaid.

You may visit our website at www.wrightabshire.com. Nothing contained in this publication should be considered as the rendering of legal advice to any person’s specific case but should be considered general information.