Donna’s husband Phil is in a nursing home and receives Medicaid benefits to pay for his care (a.k.a. Medical Assistance or Title-19). Donna wants to make sure Phil’s Medicaid remains in place and is protected, so she wants to know “Is there anything else I need to do?”
As the spouse who is not receiving Medicaid benefits, Donna is referred to as the “community spouse.” A community spouse is allowed to have a certain amount of assets in addition to certain other “exempt assets.” There are many Medicaid exemptions available to the community spouse, such as the home, retirement accounts in the community spouse’s name, and one vehicle. Even though the community spouse is allowed to have these assets, Donna, as the community spouse, must complete two additional steps now that Phil is on Medicaid: (1) transfer assets (even exempt assets) into her sole name and (2) update her estate plan.
Step 1 – Transfer Assets: Phil is allowed to have no more than $2,000 of assets in his name to still qualify for Medicaid. In Wisconsin, the Medicaid rules require all but $2,000 of Phil and Donna’s assets be moved into Donna’s sole name within 12 months from the date Phil’s Medicaid benefits started.
Step 2 – Update Estate Plan: Donna should also update her estate plan. Generally speaking, estate plans of most married couples leave everything to the surviving spouse. In this case, if Donna passes away first and leaves everything to Phil, it is very likely that Phil’s Medicaid benefits will be lost because he will have more than the allowed $2,000. To avoid this result and to preserve assets, Donna should update her estate plan so all assets are left in a special trust for Phil’s benefit. After Phil’s death, assets in the special trust can be distributed to children or other beneficiaries. By Donna properly updating her estate plan, she can accomplish three objectives: (1) preserve assets for Phil’s benefit during his lifetime, (2) allow remaining assets to be distributed to children or other beneficiaries upon Phil’s death, and (3) avoid Wisconsin estate recovery for Medicaid benefits paid for Phil’s care during his lifetime.
