Increasing the Community Spouse Resource Allowance

by Jerrold Bartholomew

When one spouse requires long-term care in Michigan, the Department of Human Services will do an assessment of the couple’s total resources. Without any planning or asset positioning, the spouse at home will be permitted to keep 1/2 of the couple’s assets as of the date the spouse needing long-term care entered either the hospital or long-term care, with a maximum of $104,400.00 and a minimum of $20,880.00 (in 2008). For example, a marital estate valued at $100,000.00 in non-exempt assets will be limited to $50,000.00 that the at-home spouse can keep. The remainder will have to spent on long-term care or converted to exempt assets before Medicaid will provide assistance with the cost of long-term care.

One simple estate planning technique to overcome this problem is to place the marital home in a revocable living trust before any health problems arise. Instead of being excluded from the total value of the estate, under Michigan law, the equity value of the home held in a living trust will be counted as an asset. So a couple with $100,000.00 in the bank and a home in a trust worth $150,000.00 will be treated as though they have $250,000.00 in assets when the asset declaration is completed. This couple will therefore be entitled to keep the full $104,400.00.

There are several cautions to using this technique. First of all, the home must be returned to the name of a natural person (not the trust) before applying for Medicaid. Failure to do so promptly can have horrific consequences. Second, relying on this technique can leave the home exposed to estate recovery. A more comprehensive asset protection plan is necessary well in advance of disability to be certain to avoid estate recovery. Third, this technique will not help with a home valued at more than $500,000.00. A variety of different asset protection techniques can be utilized in those circumstances. But for a married couple hoping to secure assets through retirement, placing a home in a revocable living trust can be quite helpful.

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