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Using A Florida Medicaid Will for Elder Law Planning

Florida Medicaid Will

The topic of how “good estate planning” may be “bad Medicaid planning” has merited some serious attention, and this concern seems to be gaining traction in the uncertain world of elder law and Florida Medicaid planning. One example is where Florida revocable trusts and Florida asset protection techniques are implemented to safeguard estate assets, but little thought is given to the long term medical care costs that jeopardize these assets. One possible solution for married people is a Florida Medicaid Will for elder law planning.

Recently, I wrote about the importance of downsizing your estate” for Medicaid planning purposes and how this applies to proper spousal planning. Today’s topic is an extension of that discussion and focuses on the unique elder law planning tool known as the Florida Medicaid Will or more specifically, how to use a Florida Medicaid Will for elder law planning

Florida Medicaid Wills for Elder Law Spousal Planning

A “Medicaid Will”, can be a highly effective means to make sure that a spouse is not disqualified from Medicaid if the other spouse dies.

How a Medicaid Will can be a Helpful Planning Tool?

In a nutshell,  if things aren’t handled correctly, a spouse who has been qualified for long term skilled nursing care benefits (Medicaid) could be disqualified when the “well spouse” dies.

Why a Spouse may be Disqualified from Medicaid?

Because, an ill spouse can be qualified while allowing the well spouse to retain a certain amount of assets and this savings can be significant if proper steps are taken to prevent an unnecessary “spend down” for the care of the ill spouse.  However even under a best case scenario, if the well spouses passes away, the assets may be deemed to pass to the ill spouse, and Medicaid could then impose a penalty due to the assets now passing to the ill spouses estate.

Even if the well spouse attempts to disinherit the ill spouse, the Medicaid powers that be (DCF) may contend that the ill spouse is entitled to the Elective Share, resulting in an inheritance to the ill spouse that could threaten Medicaid benefits.

How a Florida Medicaid Will works

How a Medicaid Will Works?

So, we’ve set the stage for why a Medicaid Will can offer real benefits.  The function of a Medicaid Will is to take the “elective share” and direct it into a “supplemental fund” for the ill spouse.  To date, this has passed scrutiny under Medicaid’s standards because it is essentially a Florida special needs trust that is to be used for non-Medicaid services.  So, this accomplishes two things. First, the SNT addresses a claim by Medicaid that the spouse should be penalized due to the spousal elective share rights in Florida, and it also protects the ill spouse’s share by placing it into a supplemental or special trust that is designed to meet the standards for a special needs trust under the current rules.

Medicaid Will Drafting Options?

As I’ve often advised clients, this same strategy can be set forth in a Trust by including the same language directing that the elective share should be placed in a supplemental needs trust for the surviving spouse.  That said, the Medicaid rules and statutes require that this intention also be specified in the Will, and this is where the Medicaid Will becomes so important.

The future of Medicaid Wills and the standards that will be applied to them by the governmental policy makers remains to be seen.  That said, my belief is that the current policy has upheld them due to the importance of preserving an ill spouse’s means of support in addition to minimal support offered by Medicaid.

Medicaid Wills [as a Florida Estate Planning Add On]

Often times, a Medicaid Will is included in a Florida Estate Planning Package as a “Pre-Medicaid Planning” approach.

Even if there are significant assets in a Florida estate, the Medicaid Will is available if one of the spouse’s ever needs long term skilled nursing care and applies for Medicaid.  Of course, under this scenario, there are some additional steps such as transferring all assets to the well spouse, and possibly having the well spouse notify Medicaid of a refusal of support concerning the other spouse.  This kind of strategy should be carefully considered as a part of a customized plan and usually works best when the circumstances are a second marriage involving children from a first marriage.

Just as reminder, there is no “magic bullet” for Medicaid qualification purposes.  As I’ve mentioned in the past, Medicaid is a “need based”, “means tested” program that is akin to welfare for seniors.  So, all of this should be considered with your favorite elder law attorney with the goal of creating the maximum amount of options and preserving as much of the estate as is legally permissible.

Steve Gibbs, Esq.


4 comments… add one
  • Mands November 20, 2021, 1:42 am

    I’m curious about this line: “This kind of strategy should be carefully considered as a part of a customized plan and usually works best when the circumstances are a second marriage involving children from a first marriage.”

    How does that work best in this situation? If the ill spouse is the one with the children from a previous marriage and the one with the assets, and transfers all assets to the well spouse, the children are essentially disinherited, no? The well spouse now owns all of the assets.

  • gibbslawfl November 20, 2021, 8:32 pm

    Hello and thanks for your comment. Good thought and you caused me to look back at my example. However, in that scenario I was talking about what is deemed a refusal of support where 1 spouse holds the bulk of the assets and generally is a situation where both spouses maintained separate assets due to having kids from previous marriages and, as such, a refusal of support may be appropriate. You are correct in that if one spouse transfers assets from the other, that ill spouse’s heirs could be disinherited. Medicaid planning can quickly because problematic when it concerns passing assets to the children from earlier marriages and these are red flag concerns that we commonly look for.

    I hope this clarifies things a bit. As I mentioned, there are complicated case be case situations that need to be worked through considering all aspects prior to engaging in any planning.

    Best, Steve Gibbs, Esq.

  • Eduardo Mercado November 23, 2021, 8:04 am

    What if a husband and wife have joint non retirement assets and one requires an ALF? Can those assets be transferred to the other spouse and not be subjected to the lookback period?

  • gibbslawfl December 7, 2021, 12:27 pm

    Hello Eduardo, the short answer is that transfers to spouses are allowed outside of the lookback; however, the spouse is limited to how much in non-retirement assets they can have unless proper planning is done with those assets.

    Best, Steve Gibbs, Esq.