When does a Spousal Supplemental Needs Trust have to be created- by Will?

Temecula and Murrieta Estate and Elder law attorneys describe when a Spousal Supplemental Needs Trust has to be created by will.

In this example, the husband is extremely ill and disabled and has qualified for Medi-Cal Long Term Nursing Home care. The spouse (wife) is well and much older than the institutionalized husband so there is a probability that the wife may die first. 

The wife would like to leave her estate for the benefit of her ill husband so that the husband’s needs can be taken care of without the husband losing his Med-Cal eligibility.

After meeting with their attorney, the wife learns of Supplemental Needs Trusts and their ability to hold assets for an extremely ill and disabled individual. The assets held by the Supplemental Needs Trust would not be counted as available resources that could disqualify her husband from Medi-Cal benefits.

However, there are very specific Medi-Cal trust rules that apply to trusts established by the applicant, or the applicant’s spouse (42 USC §1396p(d)(2), (h)(1)).

If assets of the individual (husband) or the individual’s spouse (wife) are used to form all or part of the corpus of the Supplemental Needs Trust, and if the individual’s spouse (wife) establishes the trust other than by Will, (created by her Revocable Trust) then the individual (husband) will be deemed to have established a trust for Medicaid eligibility purposes, and eligibility may be lost. 

In other words, the law will look at the transaction as if the wife had established a trust with her/his assets to qualify for Medi-Cal benefits.

“The term ‘assets’, with respect to an individual, includes all income and resources of the individual and of the individual’s spouse….. (42 USC 1396p(h)(1).) emphasis added.

Therefore, the solution is for the wife to establish the Supplemental Needs Trust by Will for the benefit of her husband.

As a rule, a spousal supplemental needs trust must be created under the decedent’s Will.

If you are interested in learning more about these options, speak to our Temecula and Murrieta elder law or estate planning attorneys. To schedule an appointment at our Temecula office or one of our other offices located throughout the state of California, contact us at  (800) 244-8814

If you have any further questions about estate planning and strategies to shield your wealth, or if you’d like to have your current asset protection plan reviewed to make sure it still meets your needs, please contact us at one of our offices located throughout the state of California 800-244-8814 to set up a consultation.