Most married couples have what are commonly referred to as reciprocal wills. These wills say give all to wife if husband dies first, and give all to husband if wife dies first, and when both are gone, then to the children. What if the husband is in the nursing home on Medicaid and the wife is healthy at home? They have reciprocal wills, and then, the wife dies first. Who inherits with reciprocal wills? The husband does. What does Medicaid do? It stops paying for the husband’s nursing home care until he has exhausted the money inherited from his wife. The wife, as the community spouse, was able to keep half of their assets up to a certain amount plus the exempt assets such as the house and the car. Now the husband in the nursing home owns all of those assets, and they will have to be spent down to nothing before he can qualify for Medicaid to pay for his care again.

This unexpected and potentially devastating result could have—and should have—been avoided with the use of bypass planning. While several options exist for bypass planning, such as disinheriting the husband and passing those assets to the next generation, one excellent option is the supplemental needs trust.

The supplemental needs trust is part of the wife’s estate planning documents and is formally established on her death for the benefit of the nursing home husband. The supplemental needs trust does two very important things. First, it maintains the nursing home husband’s eligibility for governmental benefits such as Medicaid. Second, the supplemental needs trust makes the money in the trust available on behalf of the husband to pay for all the things Medicaid does not pay for such as eyeglasses, hearing aids, dentures, and so on. The wife would choose a trustee for the supplemental needs trust (often an adult child) who would be in charge of using the money for the husband’s benefit according to the guidelines set forth in the trust. In this way, eligibility for benefits is preserved, while the wife has the peace of mind of knowing that she has provided for her husband if she dies first, without all of the money going to nursing home care. The nursing home husband’s quality of life is improved and, often, an inheritance is still available to the couple’s children or grandchildren, since the money is not being spent on nursing home care at a monthly cost often exceeding $5,000.

Additional Information on North Carolina Medicaid Assistance for Nursing Home Care:

Download a free copy of Jackie Bedard’s book, The Ultimate Guide to Paying for Nursing Home Care in North Carolina, to learn the nursing home and Medicaid secrets you need to know to avoid going broke in a nursing home and leaving your family penniless.

Jackie Bedard
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Attorney, Author, and Founder of Carolina Family Estate Planning