Elective Share and Medicaid
The problem
In
Florida, the surviving spouse has the right to an elective share of the
deceased spouse’s estate. The elective share amount is 30 percent of the
decedent’s elective estate. This share is a right to a dollar amount, not a
right to any specific property. Some of the assets included in the value of
the elective estate are:
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The decedent’s
probate estate.
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The decedent’s ownership interest in accounts or securities registered
as payable on death, transfer on death, in trust for or joint tenants
with rights of survivorship.
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The decedent’s fractional interest in property other than as described
above.
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The decedent’s revocable trust(s).
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The decedent’s interest in any irrevocable transfers in which the
decedent retained the right of the possession and use of the property.
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The net cash surrender value on life insurance policies on the
decedent’s life.
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The value of death benefits received under any public or private
pension, retirement or deferred compensation plan, other than from the
Railroad Retirement Act or from Social Security.
-
The value of all property gifted or transferred within one-year of the
decedent’s death, except for property that was sold for full market
value.
-
The value of any property transferred in satisfaction of the elective
share.
If
the surviving spouse is receiving Medicaid benefits and does not make an
election to receive his or her elective share amount, the Department of
Children and Families may consider that a transfer has been made. This will
result in the surviving spouse being disqualified from receiving Medicaid
benefits for a time period calculated by dividing the value of the unclaimed
elective share amount by $5,000, which is the state determined monthly cost
of nursing home care.
However if the surviving spouse claims the elective share, he or she will
be over the Medicaid asset limit and will be disqualified from further
Medicaid benefits until the elective share funds have been spent down to
under $2,000.
The
solution
Florida
law allows for the elective share to be satisfied by the creation of a trust
by the Medicaid applicant’s spouse in his or her Last Will and Testament. In
order to maintain the surviving spouse’s Medicaid benefits, the trust should
be a special needs trust. The trustee of a special needs trust has the
discretion to pay for any items or services not covered by Medicaid.
A
Qualifying Special Needs Trust (QSNT) must be funded with at least the
value of the elective share amount or greater. Some of the QSNT requirements
are:
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A QSNT funded with greater than $100,000 requires court approval.
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The surviving spouse must be ill or disabled.
-
The QSNT trustee has the discretion to distribute income or principal of
the trust to or for the benefit of the surviving spouse.
-
More than half of the QSNT trustees must be eligible family trustees,
which means that they must be related to the decedent’s grandparents and
related to the surviving spouse.
An
Elective Share Trust (EST) is an alternative to the QSNT which would be
created if the surviving spouse is not ill or disabled or if the court does
not approve the creation of a QSNT. There are three types of ESTs and I
recommend the following type as the best solution if the surviving spouse
needs Medicaid benefits:
-
The value of this trust must equal to or exceed 125% of the amount of
the elective share.
-
At least annually, the trustee must pay to the surviving spouse all the
trust’s net income. Additionally, the surviving spouse must have the
right to either require the trustee to make the trust’s assets produce
income or to convert the assets to produce income within a reasonable
time.
-
The trustee has the discretion to distribute principal from the trust
for the surviving spouse’s health, support and maintenance taking into
account the spouse’s other income and resources.
The
advantage of an EST is there are no restrictions on who can serve as the
trustee. The disadvantage is all income from the EST is paid to the
surviving spouse, which means that these funds must be paid to the nursing
home as part of the spouse’s patient responsibility if the spouse is
receiving Medicaid benefits.
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