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  1. #1
    Join Date
    Dec 2015
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    2

    Default Protecting Assets from Being Considered As Countable Assest for Beneficiary Spouse

    My question involves estate planning in the state of: IL

    Older Parents are in 70s in IL and are in process of developing their estate plan. Assets are less than 500K. Currently they both are in relatively good health and not in nursing home. Their objective is if one of them passes, part of their estate is saved and is used for comfort of the second spouse without the assets being considered as countable asset or income for Medicaid or other government aid in case the second spouse needs to enter nursing home after the passing of the first spouse. How would you recommend the estate be configured?

    I am aware of third party funded Supplemental Trusts can be used for covering items not covered by Medicaid, but do not know if it could be funded by the assets of the first spouse after they pass from their living trust, and can the second spouse be a beneficiary from Supplemental Trusts even if they are not utilizing government benefits.

    Thank you

  2. #2
    Join Date
    Sep 2011
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    OH10
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    17,019

    Default Re: Protecting Assets from Being Considered As Countable Assest for Beneficiary Spous

    It would be foolish to take the advise of a message board concerning this much money. An estate lawyer can draw up correct plans and documents for a few thousand.

  3. #3
    Join Date
    Jan 2006
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    38,867

    Default Re: Protecting Assets from Being Considered As Countable Assest for Beneficiary Spous

    I'm not certain and as disagreeable stated the advice gleaned from an Internet forum should not be the basis of your actions but just a suggestion;

    i believe it is called an AB trust. Check it out.

  4. #4
    Join Date
    Oct 2014
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    8,238

    Default Re: Protecting Assets from Being Considered As Countable Assest for Beneficiary Spous

    Quote Quoting jk
    View Post
    I'm not certain and as disagreeable stated the advice gleaned from an Internet forum should not be the basis of your actions but just a suggestion;

    i believe it is called an AB trust. Check it out.
    The typical AB or credit shelter trust arrangement was largely used for federal estate tax planning, but due to a change in the law in 2008 Congress finally made it possible to achieve the same thing without the need to use trusts.

    There are special needs or medicare planning trusts that can be used for this but there is a caution here: most nursing facilities that will accept Medicaid are not all that great; some are truly terrible. I advise clients to take a good look at what’s available before deciding that you want to try to qualify for Medicaid while saving money to pass on to your kids (or whomever). They may instead want to use their money to pay for better care for as long as possible before having to go the Medicare route. I suggest that they consult an estate planning or elder law attorney for advice on this.

  5. #5
    Join Date
    Jan 2006
    Posts
    38,867

    Default Re: Protecting Assets from Being Considered As Countable Assest for Beneficiary Spous

    It wasn't the tax issue that i suggested researching an AB trust but the reasons stated (provide for the survivor with the remainder being paid out to a named beneficiary) seemed to fit what (little) I know of an AB trust

  6. #6
    Join Date
    Dec 2015
    Posts
    2

    Default Re: Protecting Assets from Being Considered As Countable Assest for Beneficiary Spous

    Thank you. The concern is not necessarily saving money to leave to others, major concern is to save some amount to cover items not covered by Medicaid (clothes, shoes, vitamins, dental care, food(organic) etc) if the second spouse needs to enter nursing home.

    As jk mentioned A-B trust can be utilized, with first spouse assets remaining in A trust, living spouse asset in B trust. Is "A" trust considered as countable asset for Medicaid purposes? It is understood and acceptable the surviving spouse "B" trust assets would be countable and would be quickly spent down if the surviving spouse needs to go to nursing home.

    Does "A" trust need to direct the "A" trustee to only utilize the "A" trust assets to cover items for the surviving spouse not covered by governmental aid, even if the second spouse is not getting government aid? Can the "A" trust direct "A" trustee to utilize the assets for the benefit of the second spouse as needed, and if the second spouse is going to enter nursing care to either restrict the distribution to cover items not covered by governmental aid, or to transfer the assets to Third-party funded special needs trust ? Would such a transaction be valid or would it result in disqualification period for Medicaid?

    I read somewhere that special needs trust can only be funded by a will, but do not know if this is true.

    Thank you

  7. #7
    Join Date
    Oct 2014
    Posts
    8,238

    Default Re: Protecting Assets from Being Considered As Countable Assest for Beneficiary Spous

    There doesn’t necessarily need to be two trusts done; it depends on what the goals are, what their current health is like, and what assets they have. Understand, too, that Medicaid is a joint federal and state program and the exact requirements will depend a bit on the rules that apply in their state. So they really need to seek advice from an estate planning/elder law attorney in their state to get it done right, including drafting the trust(s) to ensure all the needed restrictions are in there.

  8. #8
    Join Date
    Sep 2011
    Location
    OH10
    Posts
    17,019

    Default Re: Protecting Assets from Being Considered As Countable Assest for Beneficiary Spous

    Hence my brief but direct response. I am aware some members have some knowledge in the area and apologize if anyone felt my reply to be stepping on their toes.

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