So Long to the Sole Benefit Trust in Michigan?
A Michigan policy change on Sole Benefit Trusts alters the planning necessary for a married couple to qualify for nursing home Medicaid
Policy ChangeThe Michigan Department of Human Services has suddenly changed its policy with respect to trusts for the sole benefit of a spouse of a Medicaid applicant. Prior to this change, a nursing home resident who was applying for Medicaid could transfer any excess assets into a trust for the sole benefit of a spouse living at home, get immediate Medicaid qualification and avoid the need to spend down assets on nursing home care. DHS will now be treating these trusts as countable.
No Change in LawThere was no law change that precipitated this change in policy. DHS simply decided to apply existing law differently. The legal reasoning behind the policy change is highly questionable. DHS is essentially claiming that the nursing home resident has access to the trust assets even though, by definition, the sole beneficiary of the trust is the spouse of the nursing home resident. Therefore, there is a possibility that the new policy will eventually be overturned as contrary to current law. However, those married couples who are currently facing a long term care admission will want to avoid the use of a Sole Benefit Trust until this mess is sorted out in litigation.
Other Planning AlternativesFortunately, there are other planning alternatives. A married couple facing an immediate need for nursing home care can still obtain immediate Medicaid qualification for the ill spouse by using Medicaid compliant annuities or promissory notes. It also remains important to use a ladybird deed for the family home to avoid a Medicaid estate recovery claim after death. The spouse living at home will also probably want to amend his or her estate plan to either disinherit the nursing home spouse or to provide for an exempt trust for the nursing home spouse in the event the at-home spouse dies first.